G.R. No.
L-27897 December 2, 1927
WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC
COMPANY, INC., W. Z. SMITH and FELIX C. REYES, plaintiffs-appellees,
vs.
FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY
HERMAN, PETER O'BRIEN, MANUEL B. DIAZ, FELIPE MAPOY and ARTEMIO
ZAMORA, defendants-appellants.
J. W. Ferrier for appellants.
DeWitt, Perkins and Bradly for appellees.
STATEMENT
October 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following
complaint against the defendants:
Now come the plaintiffs in the above entitled case, by the undersigned their
attorneys, and to this Honorable Court respectfully show:
I. That the Western Equipment and Supply Company is a foreign corporation
organized under the laws of the State of Nevada, United States of America; that the
Western Electric Company, Inc., is likewise a foreign corporation organized under the
laws of the State of New York, United States of America; and that the plaintiffs W. Z.
Smith and Felix C. Reyes are both of lawful age and residents of the City of Manila,
Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director
of the Bureau of Commerce and Industry and as such Director is charged with the
duty of issuing and denying the issuance of certificates of incorporation to persons
filing articles of incorporation with the Bureau of Commerce and Industry.
III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe
Mapoy and Artemio Zamora are all of lawful age and are residents of the City of
Manila, Philippines Islands.
IV. That on or about May 4, 1925, the plaintiff the Western Equipment and
Supply Company applied to the defendant Director of the Bureau of Commerce and
Industry for the issuance of a license to engage in business in the Philippine Islands
and, accordingly, on May 20, 1926, a provisional license was by said defendant
issued in its favor, which license was made permanent on August 23, 1926.
V. That from and since the issuance of said provisional license of May 20,.
1926, said plaintiff Western Equipment and Supply Company has been and still is
engaged in importing and selling in the Philippine Islands the electrical and
telephone apparatus and supplies manufactured by the plaintiff Western Electric
Company, Inc., its offices in the City of Manila being at No. 600 Rizal Avenue, in the
charge and management of the plaintiff Felix C. Reyes, its resident agent in the
Philippine Islands.
VI. That the electric and telephone apparatus and supplies manufactured by the
plaintiff Western Electric Company, Inc., have been sold in foreign and interstate
commerce and have become well and thoroughly known to the trade in all countries
of the world for the past fifty years; that at present time the greater part of all
telephone equipment used in Manila and elsewhere in the Philippine Islands was
manufactured by the said Western Electric Company, Inc., and sold by it in
commerce between the United States and the Philippine Islands; that about three
fourths of such equipment in use throughout the world are of the manufacture of said
"Western Electric Company, Inc.," and bear its corporate name; and that these facts
are well known to the defendant Henry Herman who for many years up to May 20,
1926, has himself been buying said products from the plaintiff Western Electric
Company, Inc., and selling them in the Philippine Islands.
VII. That the name `Western Electric Company, Inc., has been registered as a
trade-mark under the provisions of the Act of Congress of February 20, 1905, in the
office of the Commissioner of Patents, at Washington, District of Columbia, and said
trade-mark remains in force to this date.
VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel
B. Diaz, Felipe Mapoy and Artemio Zamora filed articles of incorporation with the
defendant Director of the Bureau of Commerce and Industry with the intention of
organizing a domestic corporation to be known as the "Western Electric Company,
Inc.," for the purpose principally of manufacturing, buying, selling and generally
dealing in electrical and telephone apparatus and supplies.
IX. That the purpose of said defendant in attempting to incorporate under the
corporate name of plaintiff Western Electric Company, Inc., is to profit and trade upon
the plaintiff's business and reputation, by misleading and deceiving the public into
purchasing the goods manufactured or sold by them as those of plaintiff Western
Electric Company, Inc., in violation of the provisions of Act No. 666 of the Philippine
Commission, particularly section 4 thereof.

X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board
of Directors of the Western Electric Company, Inc., to take all necessary steps for the
issuance of a license to said company to engage in business in the Philippine Islands
and to accept service of summons and process in all legal proceedings against said
company, and on October 21, 1926, said plaintiff W. Z. Smith filed a written
application for the issuance of such license with the defendant Director of Bureau of
Commerce and Industry, which application, however, has not yet been acted upon by
said defendant.
XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the
defendant Director of the Bureau of Commerce and Industry his protest, and
opposed said attempted incorporation, by the defendants Henry Herman, Peter
O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, of the `Western Electric
Company, Inc.,' as a domestic corporation, upon the ground among others, that the
corporate name by which said defendants desire to be known, being identical with
that of the plaintiff Western Equipment and Supply Company, will deceive and
mislead the public purchasing electrical and telephone apparatus and supplies. A
copy of said protest is hereunto annexed, and hereby made a part hereof, marked
Exhibit A.
XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and
Industry has announced to these plaintiffs his intention to overrule the protest of
plaintiffs, and to issue to the other defendants a certificate of incorporation
constituting said defendants a body politic and corporate under the name "Western
Electric Company, Inc.," unless restrained by this Honorable Court.
XIII. That the issuance of a certificate of incorporation in favor of said defendants
under said name of "Western Electric Company, Inc.," would, under the
circumstances hereinbefore stated, constitute a gross abuse of the discretionary
powers conferred by law upon the defendant Director of the Bureau of Commerce
and Industry.
XIV. That the issuance of said certificate of incorporation would, if carried out, be
in violation of plaintiff's rights and would cause them irreparable injury which could
not be compensated in damages, and from which petitioner would have no appeal or
any plain, speedy and adequate remedy at law, other than that herein prayed for.
They prayed for a temporary injunction, pending the final decision of the court when
it should be made permanent, restraining the issuance of the certificate of
incorporation in favor of the defendants under the name of Western Electric
Company, Inc., or the use of that name for any purpose in the exploitation and sale
of electric apparatus and supplies. The preliminary writ was issued.
For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce
and Industry, admits the allegations of paragraphs 1, 2, 3 and 4 of the complaint, and
as to paragraphs 5, 6 and 7, he alleges that he has no information upon which to
form a belief, and therefore denies them. He admits the allegations of paragraph 8,
and denies paragraph 9. He denies the first part of paragraph 10, but admits that an
application for a license to do business was filed by the Western Electric Company,
Inc., as alleged. He admits paragraphs 11 and 12, and denies paragraphs 13 and 14,
and further alleges that the present action is prematurely brought, in that it is an
attempt to coerce his discretion, and that the mere registration of the articles of
incorporation of the locally organized Western Electric Company, Inc., cannot in any
way injure the plaintiffs, and prays that the complaint be dismissed.
For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the
allegations of paragraphs 1, 2, 3, 4 and 5 of the complaint, and deny paragraph 7,
but allege that on October 15, 1926, the articles of incorporation in question were
presented to the Director of the Bureau of Commerce and Industry for registration.
They deny paragraphs 9 and 10, except as to the filing of the application. They admit
the allegations made in paragraph 11, but alleged that W. Z. Smith was without any
right or authority. Admit the allegations of paragraph 12, but deny the allegations of
paragraphs 13 and 14, and allege that the Western Electric Company, Inc., has
never transacted business in the Philippine Islands; that its foreign business has
been turned over to the International Standard Electric Corporation; that the action is
prematurely brought; and that the registration of the articles of incorporation in
question cannot in any way injure plaintiffs.
Wherefore, such defendants pray that the preliminary injunction be dissolved, and
plaintiffs' cause of action be dismissed, with costs.
The case was tried and submitted upon the following stipulated facts:
Now come the parties plaintiff and defendants in the above entitled cause, by their
respective undersigned attorneys, and for the purpose of this action, agree that the
following facts are true:
I. That the Western Equipment and Supply Company is a foreign corporation,
organized under the laws of the State of Nevada, United States of America; that the
Western Electric Company, Inc., is likewise a foreign corporation organized under the
laws of the State of New York, United States of America; and that the plaintiff W. Z.
Smith and Felix C. Reyes, are both of lawful age and residents of the City of Manila,
Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director
of the Bureau of Commerce and Industry and as such Director is charge with the
duty of issuing and/or denying the issuance of certificates of incorporation to persons
filing articles of incorporation with the Bureau of Commerce and Industry.
III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe
Mapoy and Artemio Zamora are all of lawful age and all residents of the City of
Manila, Philippine Islands.
IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and
Supply Company, through its duly authorized agent, the plaintiff, Felix C. Reyes,
applied to the defendant Director of the Bureau of Commerce and Industry for the
issuance of a license to engage in business in the Philippine Islands and on May 20,
1926, said defendant issued in favor of said plaintiff a provisional license for that
purpose which was permanent on August 23, 1926.
V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to
engage in business in the Philippine Islands, and has never engaged in business
therein.
VI. That from and since the issuance of said provisional license of May 20, 1926,
to the plaintiff, Western Equipment and Supply Company, said plaintiff has been and
still is engaged in importing and selling in the Philippine Islands electrical and
telephone apparatus and supplies manufactured by the plaintiff Western Electric
Company, Inc. (as well as those manufactured by other factories), said Western
Equipment and Supply Company's offices in the City of Manila being at No. 600
Rizal Avenue, and at the time of the filing of the complaint herein was under the
charge and management of the plaintiff, Felix C. Reyes, its then resident agent in the
Philippine Islands.
VII. That the electrical and telephone apparatus and supplies manufactured by
the plaintiff, Western Electric Company, Inc., have been sold in foreign and interstate
commerce for the past fifty years, and have acquired high trade reputation
throughout the world; that at the present time the greater part of all telephone
equipment used in Manila, and elsewhere in the Philippine Islands, was
manufactured by the said plaintiff, Western Electric Company, Inc., and sold by it for
exportation to the Philippine Islands; that such equipment, manufactured by the said
Western Electric Company, Inc., and bearing its trade-mark "Western Electric" or its
corporate name is generally sold and used throughout the world; that a Philippine
Corporation known as the `Electric Supply Company, Inc.,' has been importing the
manufactures of the plaintiff, Western Electric Company, Inc., into the Philippine
Islands for the purpose of selling the same therein, and that the defendant Henry
Herman, is the President and General Manager of said corporation.
VIII. That the words `Western Electric' have been registered by the plaintiff,
Electric Company, Inc., as a trade-mark under the provisions of the Act of Congress
of February 20, 1905, in the office of the Commissioner of the Patents at
Washington, District of Columbia, and said trade-mark remains in force as the
property of said plaintiff to this date.
IX. That the plaintiff, Western Electric Company, Inc., is advertising its
manufacturers in its own name by means of advertising its manufactures in its own
name by means of advertisements inserted in periodicals which circulate generally
throughout the English and Spanish speaking portions of the world, and has never
abandoned its corporate name or trade-mark, but, on the contrary, all of its output
bears said corporate name and trade-mark, either directly upon the manufactured
article or upon its container, including that sold and used in the Philippine Islands.
X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien,
Manuel B. Diaz, Felipe Mapoy and Artemio Zamora signed and filed articles of
incorporation with the defendant, Fidel A. Reyes, as Director of the Bureau of
Commerce and Industry, with the intention of organizing a domestic corporation
under the Philippine Corporation Law to be known as the "Western Electric
Company, Inc.," for the purpose, among other things or manufacturing, buying,
selling and dealing generally in electrical and telephone apparatus and supplies; that
said defendants Peter O'Brien, Felipe Mapoy and Artemio Zamora are employees of
the said Electrical Supply Company, of which said defendant, Henry Herman, is and
has been, during the period covered by this stipulation, the president and principal
stockholder; and that they, together with the said defendant Herman, signed said
articles of incorporation for the incorporation of a domestic company to be known
and the "Western Electric Company, Inc.," with full knowledge of the existence of the
plaintiff Western Electric Company, Inc., of its corporate name, of its trade-mark,
"Western Electric," and of the fact that the manufactures of said plaintiff bearing its
trade-mark or corporate name are in general use in the Philippine Islands and in the
United States.

XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the
Board of Directors of the plaintiff, Western Electric Company, Inc., to take all
necessary steps for the issuance of a license to said company to engage in business
in the Philippine Islands, and to accept service of summons and process in all legal
proceedings against said company, and on October 21, 1926, said plaintiff, W. Z.
Smith, filed a written application for the issuance of such license with the defendant
Director of the Bureau of Commerce and Industry, which application, however, has
not yet been acted upon by said defendant.
XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its
general manager, the plaintiff W. Z. Smith. lodged with the defendant Director of the
registration of the proposed corporation by the defendants Henry Herman, Peter
O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, to be known as the
Western Electric Company, Inc., as a domestic corporation under the Philippine
Corporation Law. A copy of said protest, marked Exhibit A, hereunto attached and is
hereby made a part of this stipulation.
XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and
Industry, announced his intention of overrule said protest and will, unless judicially
restrained therefrom, issue to the other defendants herein a certificate of
incorporation, constituting said defendants a Philippine body politic and corporate
under the name of "Western Electric Company, Inc."
XIV. That the defendant, Henry Herman, acting in behalf of said corporation,
Electrical Supply Company, Inc., has written letters to Messrs. Fisher, DeWitt,
Perkins & Brady, acting as attorneys for plaintiff, Western Electric Company, Inc.,
copies of which are hereunto annexed and hereby made a part hereof, marked
Exhibits B, C and D.
XV. That the defendants, while admitting the facts set out in paragraph VII and IX
regarding the business done, merchandise sold and advertisements made
throughout the world by the plaintiff Western Electric Company, Inc., insist and
maintain that said allegations of fact are immaterial and irrelevant to the issues in the
present case, contending that such issued should be determined upon the facts as
they exist in the Philippine Islands alone.
To which were attached Exhibits A, B, C and D.
The lower court rendered judgment for the plaintiffs as prayed for in their complaint,
and made the temporary injunction permanent, from which the defendants appeal
and assign the following errors:
The lower court erred:
(1) When it granted the writ of preliminary injunction (pages 9 and 10, record; 12
to 14, B. of E.).
(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a
right to bring the present suit in courts of the Philippine Islands, wherein it is
unregistered and unlicensed, as was done in the decision upon the petition for a
preliminary injunction (pages 97 to 115 record), and in repeating such holding in the
final decision herein (pages 51 and 52, B. of E.), as well as in basing such holding
upon the decision of this Honorable Supreme Court in Marshall-Wells Co. vs. Henry
W. Elser & Co. (46 Phil., 70.)
(3) When it found that the plaintiff, the Western Electric Co., Inc., has any such
standing in the Philippine Islands or before the courts thereof as to authorize it to
maintain an action therein under the present case.
(4) When it found that the other plaintiffs herein have any rights in the present
controversy or any legal standing therein.lawphi1.net
(5) In ordering the issuance of a permanent injunction restraining the defendant
Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, from issuing a
certificate of incorporation in favor of the other defendants under the name of
"Western Electric Co., Inc.," or any similar name, and restraining the other
defendants from using the name "Western Electric Co., Inc.," or any like name, in the
manufacture of sale of electrical and telephone apparatus and supplies or as a
business name or style in the Philippine Islands.
(6) In finding that the purpose of the defendants, other than the defendant Fidel
A. Reyes, in seeking to secure the registration of a local corporation under the name
of "Western Electric Co., Inc.," was "certainly not an innocent one," thereby imputing
to said defendants a fraudulent and wrongful intent.
(7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.
(8) In overruling and denying defendants' motion for a new trial.

JOHNS, J.:
The appellants say that the two questions presented are:
Has a foreign corporation, which has never done business in the Philippine Islands,
and which is unlicensed and unregistered therein, any right to maintain an action to
restrain residents and inhabitants of the Philippine Islands from organizing a
corporation therein bearing the same name as such foreign corporation?
Has such foreign corporation a legal right to restrain an officer of the Government of
the Philippine Islands, i. e., the Director of the Bureau of Commerce and Industry
from exercising his discretion, and from registering a corporation so organized by
residents and inhabitants of the Philippine Islands?
As to the first question, the appellees say that it should be revised, so as to read as
follows:
Has a foreign corporation which has never done business in the Philippine Islands,
and which is unlicensed and unregistered therein, any right to maintain an action to
restrain residents and inhabitants of the Philippine Islands from organizing a
corporation therein bearing the same name as such foreign corporation, when said
residents and inhabitants have knowledge of the existence of such foreign
corporation, having dealt with it, and sold its manufactures, and when said foreign
corporation is widely and favorably known in the Philippine Islands through the use
therein of its products bearing its corporate and trade name, and when the purpose
of the proposed domestic corporation is to deal in precisely the same goods as those
of the foreign corporation?
As to the second, the appellees say that the question as propounded by the
appellants is not fully and fairly stated, in that it overlooks and disregards paragraphs
12 and 13 of the stipulation of facts, and that the second question should be revised
to read as follows:
Has an unregistered corporation which has not transacted business in the Philippine
Islands, but which has acquired a valuable goodwill and high reputation therein,
through the sale, by importers, and the extensive use within the Islands of products
bearing either its corporate name, or trade-mark consisting of its corporate name, a
legal right to restrain an officer of the Commerce and Industry, with knowledge of
those facts, from issuing a certificate of incorporation to residents of the Philippine
Islands who attempt to organize a corporation for the purpose of pirating the
corporate name of such foreign corporation, of engaging in the same business as
such foreign corporation, and of defrauding the public into thinking that its goods are
those of such foreign corporation, and of defrauding such foreign corporation and its
local dealers of their legitimate trade?
We agree with the revisions of both questions as made by the appellees, for the
reason that they are more in accord with the stipulated facts. First, it is stipulated that
the Western Electric Company, Inc., "has never engaged in business in the
Philippine Islands."
In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this
court held:
The noncompliance of a foreign corporation with the statute may be pleaded as an
affirmative defense. Thereafter, it must appear from the evidence, first, that the
plaintiff is a foreign corporation, second, that it is doing business in the Philippines,
and third, that it has not obtained the proper license as provided by the statute.
If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been
doing business in the Philippine Islands without first obtaining a license, another and
a very different question would be presented. That company is not here seeking to
enforce any legal or contract rights arising from, or growing out of, any business
which it has transacted in the Philippine Islands. The sole purpose of the action:
"Is to protect its reputation, its corporate name, its goodwill, whenever that
reputation, corporate name or goodwill have, through the natural development of its
trade, established themselves." And it contends that its rights to the use of its
corporate and trade name:
Is a property right, a right in rem, which may assert and protect against all the world,
in any of the courts of the world even in jurisdictions where it does not transact
business just the same as it may protect its tangible property, real or personal,
against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and
Trade-Marks and cases cited; secs. 21-22, Hopkins on Trade-Marks, Trade Names
and Unfair Competition and cases cited." That point is sustained by the authorities,
and is well stated in Hanover Star Milling Co. vs. Allen and Wheeler Co. (208 Fed.,
513), in which they syllabus says:
Since it is the trade and not the mark that is to be protect, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but
extends to every market where the trader's goods have become known and identified
by the use of the mark.
In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:
In order that competition in business should be unfair in the sense necessary to
justify the granting of an injunction to restrain such competition it must appear that
there has been, or is likely to be, a diversion of trade from the business of the
complainant to that of the wrongdoer, or methods generally recognized as unfair; . . .
In most, if not all, of the cases in which relief has hitherto been granted against unfair
competition the means and methods adopted by the wrongdoer in order to divert the
coveted trade from his rival have been such as were calculated to deceive and
mislead the public into thinking that the goods or business of the wrongdoer are the
goods or business of the rival. Diversion of trade is really the fundamental thing here,
and if diversion of trade be accomplished by any means which according to accepted
legal canons are unfair, the aggrieved party is entitled to relief.
In Shaver vs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,.
881), it is said:
The contention of counsel for the appellants here is a confusion of the bases of two
classes of suits, those for infringements of trade-marks, and those for unfair
competition in trade. . . . In the former, title to the trade-marks is indispensable to a
good cause of action; in the latter, no proprietary interest in the words, names, or
means by which the fraud is perpetrated is requisite to maintain a suit to enjoin it. It is
sufficient that the complainant is entitled to the custom the goodwill of a
business, and that this goodwill is injured, or is about to be injured, by the palming off
of the goods of another as his.
The remaining question as to the jurisdiction of the courts over the defendant Reyes,
as Director of the Bureau of Commerce and Industry, has been adversely decided to
his contention in the case of Asuncion vs. De Yriarte (28 Phil., 67), in which, among
other things, it is said:
If, therefore, the defendant erred in determining the question presented when the
articles were offered for registration, then that error will be corrected by this court in
this action and he will be compelled to register the articles as offered. If, however, he
did not commit an error, but decided that question correctly, then, of course, his
action will be affirmed to the extent that we will deny the relief prayed for.
It is very apparent that the purpose and intent of Herman and his associates in
seeking to incorporate under the name of Western Electric Company, Inc., was to
unfairly and unjustly compete in the Philippine Islands with the Western Electric
Company, Inc., in articles which are manufactured by, and bear the name of, that
company, all of which is prohibited by Act No. 666, and was made known to the
defendant Reyes by the letter known in the record to the defendant Reyes by the
letter known in the record as Exhibit A.
As appellees say:
These defendant, Herman and his associates, are actually asking the Government of
the Philippine Island to permit them to pirate the name of the Western Electric
Company, Inc., by incorporating thereunder, so that they may deceive the people of
the Philippine Islands into thinking that the goods they propose to sell are goods of
the manufacture of the real Western Electric Company. It would be a gross
prostitution of the powers of government to utilize those powers in such a way as to
authorize such a fraud upon the people governed. It would be the grossest abuse of
discretion to permit these defendants to usurp the corporate mane of the plaintiff,
and to trade thereupon in these Islands, in fraud of the Philippine public and of the
true owners of the name and the goodwill incidental thereto.
The plaintiff, Western Electric Company, Inc., has been in existence as a corporation
for over fifty years, during which time it has established a reputation all over the
world including the Philippine Islands, for the kind and quality of its manufactured
articles, and it is very apparent that the whole purpose and intent of Herman and his
associates in seeking to incorporate another corporation under the identical name of
Western Electric Company, Inc., and for the same identical purpose as that of the
plaintiff, is to trespass upon and profit by its good name and business reputation. The
very fact that Herman and his associates have sought the use of that particular name
for that identical purpose is conclusive evidence of the fraudulent intent with which it
is done.
The judgment of the lower court is affirmed, with costs. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand and Villa-Real, JJ.,
concur.
G.R. No. L-19906 April 30, 1969
STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant,
vs.
FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED
MANUFACTURING AND TRADING CO., INC., defendant-appellants.
SANCHEZ, J.:
In this, a case for trademark infringement and unfair competition, each of the
principal suitors, namely, plaintiff Sterling Products International, Inc.,1 and
defendant Farbenfabriken Bayer Aktiengesellschaft,2 seeks to exclude the other
from use in the Philippines of the trademarks BAYER and BAYER CROSS IN
CIRCLE. SPI asks this Court to strike down FBA's registration of BAYER CROSS IN
CIRCLE covering industrial and agricultural products insecticides and other
chemicals, not medicines from the supplemental register. FBA, for its part, prays
for the cancellation from the principal register of SPI's certificates of registration of
the trademarks aforesaid for medicines.
Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin,
Aspirin for Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE
are being used by SPI in the Philippines only for said products Bayer Aspirin,
Cafiaspirina and Bayer Aspirin for Children. On the containers (bottles or printed
celophane strips, which, in turn, are placed in cardboard boxes) of Bayer Aspirin,
Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and
BAYER CROSS IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc.3
distributes "Folidol" and other industrial and agricultural chemicals. FBA's "Folidol" (in
steel or fiber drums or aluminum containers) displays a replica of SPI's trademark
BAYER CROSS IN CIRCLE; on the tin cap and label of the container.
The conflict apparent, suit followed.
The trial court declared itself "in favor of the solution that favors division of the
market rather than monopoly." But to avoid confusion, it directed defendants "to add
a distinctive word, or words in their mark to indicate that their products come from
Germany." The judgment below reads:
IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs;
the Court sustains plaintiff's right to use the Bayer trademark for its medicines, and
defendants' right to use it for chemicals, insecticides, and other products not
medicines, but the Court orders defendants to add a distinctive word or words in their
mark to indicate that their products come from Germany.4
Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's
complaint and sustains defendants' right to use the BAYER trademark for their
chemicals, insecticides, and other products not medicines";5 and defendants, from
the portions of the aforementioned decision particularly those which dismiss the
counterclaim of the defendants for the cancellation of the registrations by the plaintiff
of the trademarks Bayer and Bayer Cross and which allow the plaintiff "to continue
using the Bayer trademarks for medicines."6
And now to the facts.
The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1,
1868, organized a drug company bearing his name Friedr Bayer et comp. at
Barmen, Germany. The company was at first engaged in the manufacture and sale
of chemicals. At about the year 1888 it started to manufacture pharmaceutical
preparations also. A change of name from Friedr Bayer to Farbenfabriken vorm.
Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was followed in 1912 by a
change of principal place of business from Elberfeld to Luverkusen, Germany.7 Its
products came to be known outside Germany. With the discovery in 1899 of the
Bayer Aspirin, the mark BAYER acquired prestige. The time was ripe to register the
trademarks. The record, however, does not clearly show when the word BAYER was
registered as a trademark in Germany. The BAYER CROSS IN CIRCLE trademark
was registered in Germany on January 6, 1904 No. 65777.8 It was intended to be
used on "medicines for human beings and animals, disinfectants preservatives, tar
dyestuffs and chemical preparations for dyes and for photographic purposes."9 This
registered trademark consists of the BAYER CROSS encircled by the company's
name Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld.
When the company was merged with other German companies in 1925 to form the
I.G. Farbenindustrie, the name of the former company was deleted from the
trademark and what remained was the present BAYER CROSS IN CIRCLE. A new
registration was effected on June 17, 1929 in Germany and for which it was issued a
certificate with serial no. 404341. The trademark BAYER CROSS IN CIRCLE was
registered by FFB and its subsidiaries in other parts of the world, viz, in Norway,
England, Denmark, and Argentina in 1904; in Japan and the United States in 1908;
in Spain in 1911; in Peru in 1913.
Sometime in 1895, FFB established a subsidiary in New York, United States. It was
named Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the
United States and Canada. It was this subsidiary that registered the trademarks
BAYER and BAYER CROSS IN CIRCLE in the United States between the years
1907-1908.
Sometime in 1913, FFB organized another subsidiary The Bayer Co., Inc. of New
York. This new subsidiary was authorized by FFB to negotiate for and acquire the
trademarks, goodwill, assets and property of Farbenfabriken of Elberfeld Co. By an
agreement dated June 12, 1913 (Exh. 106) Bayer of New York purchased for the
sum of US $750,000.00 Farbenfabriken of Elberfeld Co.'s "right for the sale in the
United States and Canada of the drugs, chemicals, pharmaceuticals and any and all
other products and articles manufactured and (or) controlled by Leverkusen" (FFB)
and its "trademarks, good will and other assets and property."
On April 6, 1917,10 the United States declared war on Germany. Pursuant to the
provisions of the Trading with the Enemy Act, the Alien Property Custodian classified
The Bayer Co., Inc. of New York as an enemy-controlled corporation. Hence, the
Alien Property Custodian seized its assets about the early part of 1918. Between
December 1918 and January 1919, all the assets of The Bayer Co., Inc. of New York
were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US
$5,310,000.00. The Bayer Co., Inc. of New York then became a subsidiary of Sterling
Drug, Inc. Winthrop Chemical Co., Inc. was later organized as a new subsidiary of
Sterling Drug, Inc. to manufacture and sell the physicians' drugs which had been
acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was evidently
hampered because 'the Germans had kept manufacturing processes secret, so that
the manufacture of physicians' drugs on a commercial scale became an almost
insoluble problem.11
Sterling Drug, Inc. secured registrations of the BAYER trademarks in different
countries of the world.12
It would appear that the trademark BAYER for medicines was known in the
Philippines about the close of the 19th century. This appears on page 88 of the
Revista Farmaceutica de Filipinos Ao I, Numero 7, 3 de Julio de 1893. Before World
War I, BAYER products entering the Philippines came from Germany.
In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm.
Friedrich Bayer & Co. and The Bayer Co., Inc. of New York, in reference to the
trademarks BAYER and BAYER CROSS IN CIRCLE as they were applied to various
products.
Two agreements resolved this conflict, both executed on April 9, 1923 in London,
England: one, between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the
other between FFB and Bayer New York (Exh. WWW). Under the terms of the
agreement with Winthrop Chemical Co., Inc., FFB stipulated, amongst others: (1) not
to contest anymore Winthrop's right over the trademarks BAYER and BAYER
CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United
States which was understood to include the Philippines under par. 16 of said
agreement; and (3) to disclose all secrets of other processes relating to the
manufacture of pharmaceuticals.
Paragraph 26 of the FFB Bayer New York agreement reads
26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell
or offer for sale any goods other than hereunder or those they may market for
Winthrop as hereinbefore provided and other than Aspirin and compounds of Aspirin
which New York shall continue to market for their own account in the United States of
America, Puerto Rico, the Philippines and Hawaiian Islands and the Panama
Zone.13
In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie,
AG. This necessitated a new agreement incorporating Exh. 66 with modifications.
Said new agreement was signed on November 15, 1926 between I.G.
Farbenindustrie and Winthrop.
On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop
Chemicals Co. and The Bayer Co., of New York, two consent decrees [Exh. 68 (No.
15-363) and Exh. 69: (No. 15-364)] were promulgated by the U.S. District Court for
Southern New York. Said consent decrees declared the April 9 1923, cartel
agreements violative of the U.S. anti-trust laws. One reason given is that the German
company, FFB (later I.G. Farbenindustrie) FBA's predecessors was excluded
from the U.S. pharmaceutical market. The sentence, however, contains a saving
clause, thus
The Bayer contract of 1923, the Bayer contract of 1926, and any and all
amendments or supplements thereto are declared and adjudged to be unlawful
under the Anti-Trust Laws of the United States, and the defendants Bayer and
Sterling, and their respective successors an subsidiaries, or any of them, be and they
are hereby enjoined and restrained from carrying out or enforcing any of the
aforesaid contracts, or any supplements, amendments or modifications thereof, or
from paying to I.G. Farben, its subsidiaries, successors, or assigns, any royalties or
share of profits pursuant to said contracts with respect to sales following the effective
date of this decree.
Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.nt
xxx xxx xxx
Affect in any way the rights or title of the defendant Bayer, its successors,
subsidiaries or assigns, in or to the name "Bayer" and the "Bayer Cross" mark or
registrations thereof, or
Affect or diminish any right, title or interest of said defendants, their successor
subsidiaries or assigns, in or to or under any heretofore acquired and presently
existing patents, patent applications, patent licenses, trade-marks, trade-names
(such as the name "Bayer" and the "Bayer Cross" mark and registrations thereof),
processes or formulae relating to the manufacturing, processing, use or sale of
aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or
impair any rights or remedies of said defendants, their successors, subsidiaries or
assigns, provided by statute or convention, and by suits for damages, injunction or
other remedy with respect to any such patents, patent applications, patent licenses
or trademarks....14
Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware
corporation, a subsidiary of Sterling Drug, Inc. of New York, was issued a license to
do business in the Philippines.15 The trademarks BAYER and BAYER CROSS IN
CIRCLE were then registered in the Philippines under the old Trademark Law (Act
666) by The Bayer Co., Inc.; the BAYER CROSS IN CIRCLE trademark on April 18,
1939 for which it was issued Certificate of Registration No. 13081; the BAYER
trademark on April 22, 1939 for which it was issued Registration Certificate No.
13089. These trademark rights were assigned to SPI on December 30, 1942 and the
assignment was recorded in the Philippines Patent Office on March 5, 1947. With the
passage of Republic Act 166 repealing the old Trademark Law (Act 666), SPI was
issued by the Philippines Patent Office on June 18, 1948 two new certificates of
registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The
registration of these trademarks was only for "Medicines".
Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In
1945, after World War II, I.G. Farbenindustrie AG. was decartelized by the Allied High
Commission. The unit known as Farbenfabriken Bayer was transferred in 1953 to
Farbenfabriken Bayer Aktiengesellschaft (FBA), one of the defendants in this case,
which was organized in 1951.
Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO)
started selling FBA's products especially "Folidol" a chemical insecticide which bears
the BAYER CROSS IN CIRCLE trademark.16
On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN
CIRCLE trademark with the Philippines Patent Office for animal and plant destroying
agents. The examiner's report dated December 17, 1959 stated that the subject
mark appears to be similar to SPI's registered BAYER trademarks as covered by
Certificates of Registration Nos. 1260-S and 1262-S. He concluded that
"[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because
it would cause confusion or mistake or [to] deceive purchasers."17 This action of the
Philippines Patent Office drew a reply from FBA. In its letter dated February 1, 1960
applicant FBA, thru counsel, said that it "offers no question or objection to the
assertion of the Examiner that the registrant's mark and that of the applicant are
similar to each other. It emphasized the fact that it was seeking registration in the
Supplemental Register. Its concluding statement runs thus:.
Being aware of the duties and obligations of a trademark user in the Philippines and
the penalties provided for in the pertinent law on tradermarks and being aware also
that Supplemental Registration is not a prima facie evidence of ownership of mark
but merely a recordation of the use as in fact the mark is actually being used by the
applicant in the Philippines, it is respectfully urged that this [application] be given due
course.18
On February 25, 1960, FBA was issued a certificate of registration in the
Supplemental Register, SR-304.
We now grapple with the problems raised in the separate appeals.
1. A rule widely accepted and firmly entrenched because it has come down through
the years is that actual use in commerce or business is a prerequisite to the
acquisition of the right of ownership over a trademark. This rule is spelled out in our.
Trademark Law thus:
SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how
acquired. Anyone who lawfully produces or deals in merchandise of any kind or
who engages in any lawful business, or who renders any lawful service in commerce,
by actual use thereof in manufacture or trade, in business, and in the service
rendered, may appropriate to his, exclusive use a trademark, a trade-name, or a
service-mark not so appropriated by another, to distinguish his merchandise,
business, or service from the merchandise, business or service of others. The
ownership or possession of a trademark, trade-name, service mark, heretofore or
hereafter appropriated, as in this section provided, shall be recognized and protected
in the same manner and to the same extent as are other property rights known to the
law. (As inserted by Section 1 of Republic Act 638)
It would seem quite clear that adoption alone of a trademark would not give exclusive
right thereto. Such right grows out of their actual use."19 Adoption is not use. One
may make advertisements, issue circulars, give out price lists on certain goods; but
these alone would not give exclusive right of use. For trademark is a creation of use.
The underlying reason for all these is that Purchasers have come to understand the
mark as indicating the origin of the wares.20 Flowing from this is the trader's right to
protection in the trade he has built up and the goodwill he has accumulated from use
of the trademark. Registration of a trademark, of course, has value: it is an
administrative act declaratory of a pre-existing right. Registration does not, however,
perfect a trademark right.
The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay
claim, as correctly stated in the decision below, are those which cover medicines
only. For, it was on said goods that the BAYER trademarks were actually used by it in
the Philippines. Therefore, the certificates of registration for medicines issued by the
Director of Patents upon which the protection is enjoyed are only for medicines.
Nothing in those certificates recited would include chemical or insecticides.
But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its
registrations of the BAYER marks states that "the merchandise for which the
trademark is appropriated is d. Chemicals, Medicines and Pharmaceutical
Preparations." Plaintiff's position is that such statement determines the goods for
which said marks had been registered. Validity does not attach to this proposition.
First, the statement itself admits that "the particular description of the articles
comprised in said class (d) on which the trademark is used is Medicines."21 It is not
used for chemicals.
Then, Section 11 of the Trademark Law requires that the certificate of registration
state "the particular goods . . . for which it is registered." This is controlling. Under
Section 11 aforesaid, likewise to be entered in the certificate of registration is "the
date of the first use in commerce or business. SPI may not claim "first use" of the
trademarks prior to the registrations thereof on any product other than medicines.
Besides, Section 7 of the same Trademark Act directs that upon the filing of the
application and the payment of the required fee, the "Director [of Patents] shall cause
an examination of the application" for registration of the trademark "to be
made, and, if on such examination it shall appear that the applicant is entitled to
registration, the Director . . . shall cause the mark . . . to be published in the Official
Gazette." This examination, it would seem to us, is necessary in order that the
Director of Patents may be satisfied that the application conforms to the requirement
of actual use in commerce of the trademark in Section 2 and 2-A of the Trademark
Law; and that the statement in said application as to the "first use" thereof and
"the goods . . . in connection with which the mark . . . is used" (Section 5) is true.
Really, if the certificate of registration were to be deemed as including goods not
specified therein, then a situation may arise whereby an applicant may be tempted to
register a trademark on any and all goods which his mind may conceive even if he
had never intended to use the trademark for the said goods. We believe that such
omnibus registration is not contemplated by our Trademark Law.
Because of this and of the fact that the Bayer trademarks were never used in the
Philippines by plaintiff except for medicines Aspirin, Aspirin for Children and
Cafiaspirina we find ourselves unwilling to draw a hard and fast rule which would
absolutely and under all circumstances give unqualified protection to plaintiff against
the use of said trademarks by all others on goods other than medicines.
2. Neither will the 1927 registration in the United States of the BAYER trademark for
insecticides serve plaintiff any. The United States is not the Philippines. Registration
in the United States is not registration in the Philippines. At the time of the United
States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of
the Philippine Commission, which provided for registration here of trademarks owned
by persons domiciled in the United States.
What is to be secured from unfair competition in a given territory is the trade which
one has in that particular territory. There is where his business is carried on; where
the goodwill symbolized by the trademark has immediate value; where the infringer
may profit by infringement.

There is nothing new in what we now say. Plaintiff itself concedes22 that the principle
of territoriality of the Trademark Law has been recognized in the Philippines, citing
Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of
trademarks "rests upon the doctrine of nationality or territoriality."23
Accordingly, the 1927 registration in the United States of the BAYER trademark
would not of itself afford plaintiff protection for the use by defendants in the
Philippines of the same trademark for the same or different products.
3. A question basic in the field of trademarks and unfair competition is the extent to
which a registrant of a trademark covering one product may invoke the right to
protection against the use by other(s) of the same trademark to identify merchandise
different from those for which the trademark has been appropriated.
Plaintiff's trenchant claim is that it should not be turned away because its case
comes within the protection of the confusion of origin rule. Callmann notes two types
of confusion. The first is the confusion of goods "in which event the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was
purchasing the other." In which case, "defendant's goods are then bought as the
plaintiff's, and the poorer quality of the former reflects adversely on the plaintiff's
reputation." The other is the confusion of business: "Here though the goods of the
parties are different, the defendant's product is such as might reasonably be
assumed to originate with the plaintiff, and the public would then be deceived either
into that belief or into the belief that there is some connection between the plaintiff
and defendant which, in fact, does not exist."24
A judicial test giving the scope of the rule of confusion of origin is Ang vs. Teodoro
(December 14, 1942), 74 Phil. 50. Briefly, the facts of the just cited case are as
follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole
proprietor, had continuously used "Ang Tibay" both as trademark and as tradename
in the manufacture and sale of slippers, shoes and indoor baseballs since 1910. He
formally registered it as a trademark on September 29, 1915 and as a tradename on
January 3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants
and shirts on April 11, 1932 and established a factory for the manufacture of said
articles in 1937. Suit was lodged by Teodoro against Ang to cancel the latter's
registration of the trademark "Ang Tibay" and to perpetually enjoin her from using the
said trademark on goods manufactured and sold by her. The judgment of the trial
court absolved defendant (Ana L. Ang) from the complaint with costs against the
plaintiff. The Court of Appeals reversed. On appeal by certiorari, we affirmed the
judgment of the Court of Appeals. We there said:
"In the present state of development of the law on Trade-Marks, Unfair Competition,
and Unfair Trading, the test employed by the courts to determine whether
noncompeting goods are or are not of the same class is confusion as to the origin of
the goods of the second user. Although two noncompeting articles may be classified
under two different classes by the Patent Office because they are deemed not to
possess the same descriptive properties, they would, nevertheless, be held by the
courts to belong to the same class if the simultaneous use on them of identical or
closely similar trademarks would be likely to cause confusion as to the origin, or
personal source, of the second user's goods. They would be considered as not
falling under the same class only if they are so dissimilar or so foreign to each other
as to make it unlikely that the purchaser would think the first user made the second
user's goods.
Such construction of the law is induced by cogent reasons of equity and fair dealing.
The courts have come to realize that there can be unfair competition or unfair trading
even if the goods are noncompeting, and that such unfair trading can cause injury or
damage to the first user of a given trademark, first, by prevention of the natural
expansion of his business and, second, by having his business reputation confused
with and put at the mercy of the second user. When noncompetitive products are
sold under the mark, the gradual whittling away or dispersion of the identity and hold
upon the public mind of the mark created by its first user, inevitably results. The
original owner is entitled to the preservation of the vauable link between him and the
public that has been created by his ingenuity and the merit of his wares or services.
Experience has demonstrated that when a well-known trademark is adopted by
another even for a totally different class of goods, it is done to get the benefit of the
reputation and advertisements of the originator of said mark, to convey to the public
a false impression of some supposed connection between the manufacturer of the
article sold under the original mark and the new articles being tendered to the public
under the same or similar mark. As trade has developed and commercial changes
have come about, the law of unfair competition has expanded to keep pace with the
times and the element of strict competition in itself has ceased to be the determining
factor. The owner of a trademark or trade-name has a property right in which he is
entitled to protection, since there is damage to him from confusion of reputation or
goodwill in the mind of the public as well as from confusion of goods. The modern
trend is to give emphasis to the unfairness of the acts and to classify and treat the
issue as a fraud.25
The thoughts expressed in Ang Tibay command respect Conduct of business should
conform to ethical business standards. Unfairness is proscribed. The invocation of
equity is bottomed upon the injunction that no one should "reap where he has not
sown."26
Nonetheless, "[i]t has been emphasized that each case presents a unique problem
which must be answered by weighing the conflicting interests of the litigants."27 With
this in mind, we are convinced that the case before us is not to be analogized with
Ang Tibay. The factual setting is different. His Honor, Judge Magno S. Gatmaitan
(now Associate Justice of the Court of Appeals), the trial judge, so found. He reached
a conclusion likewise different. And the reasons, so well stated by His Honor, are
these:
1st). It was not plaintiff's predecessor but defendant's namely Farbenfabriken or
Bayer Germany that first introduced the medical products into the Philippine market
and household with the Bayer mark half a century ago; this is what the Court gathers
from the testimony of Frederick Umbreit and this is the implication even of Exhs. 48,
49, 66 and as already shown a few pages back;28
2nd). There is thus reason plausible enough for defendant' plea that as Sterling
was not the "originator" of the Bayer mark, the rule in Ang vs. Teodoro, supra, is not
applicable; and this is correct notwithstanding Exhs. 106 and 63 and even giving
unto these documents full force and virtue, because purchase of the assets of
Elberfeld, defendants' previous affiliate in New York, by Bayer of New York, even if
that were to be held to include purchase of the Bayer mark, did not make the
purchaser Bayer of New York the originator of the mark; especially since Bayer of
New York was only another subsidiary of Bayer Germany or Farbenfabriken which
was the real originator;
3rd). The Court is also impelled to believe that the evidence establishes that
among the common people of the Philippines the "Bayer" medicines come from
Germany; this the Court deduces from the testimony of witness Florisa Pestano who
only reproduced the belief of her grandmother; the Court might as well say that
plaintiff itself has not discouraged that belief because the drug and its literature that
came from the plaintiff and its affiliate would show that it represented its medicines to
have come from defendant29 and were manufactured in Germany with that Bayer
mark; thus Exh. 7030 which is the price list of 1928 of Botica de Sta. Cruz on page 6
indicates that Winthrop Chemical Company of New York, plaintiff's subsidiary
was a distributor of I.G. Farbenindustrie, A.G. Leverkusen Germany; Exh. 8031
which is a medical diary published by Winthrop for 1934 on page 148 manifested that
the journal, "Practical Therapeutics" was published by I.G. Farbenindustrie
Aktiengesellachaft for Winthrop Chemical Company, Inc.; "with particular reference to
the pharmacological products, sera and vaccines originated and prepared in the
laboratories of the I.G. Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are
prospectuses for the medicines, Mitigal, Afridol, Aspirins, Novalgina and My-
Salvarsan32 showed that these products were manufactured for Winthrop by I.G.
Farbenindustrie; and then Exh. 81 the Revista Boie of 1928 would show that
Winthrop represented itself as the distributor of the products of Bayer of Germany
otherwise known as I.G. Farbenindustrie, "segun la alta calidad de la marca
original";33 the Court being also impelled to add in this connection that it has to take
judicial notice of a belief of long standing common among the people in the
Philippines that German products are of very high quality and it is only natural for a
distributor or a retailer to take advantage of that, and as it is not debated that "Bayer"
is a German surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's
reply memorandum wherein it is said that this surname is a "pretty common one
among members of the Germany race") it is all so very easy to associate the Bayer
trademark with products that come from Germany and to believe that they are of
high quality;
4th). The rationale of the doctrine in Ang vs. Teodoro, supra being that:
The Courts have come to realize that there can be unfair competition or unfair
trading even if the goods are non-competing, and that such unfair trading can cause
injury or damage to the first user of a given trade mark, first, by prevention of the
natural expansion of his business, and second, by having his business reputation
confused with and put at the mercy of the second user. 74 Phil. 55-56;
and the Court having found out that the 'first user' was Bayer Germany and it was
this that had built up the Bayer mark and plaintiff apparently having itself encouraged
that belief even after it had acquired the Bayer mark in America, thru forced sale, of
defendant's subsidiary there in 1918, Exhs. 79, 80, 81, to apply the Ang Tibay rule in
the manner advocated by Sterling would, the Court fears, produce the reverse result
and the consequence would be not equity but injustice.34
It would seem to us that the fact that plaintiff rode on the German reputation in the
Bayer trademark has diluted the rationally of its exclusionary claim. Not that the free
ride in the name of defendant's German predecessor was sporadic. It is continuing.
Proof of this is the label on the box used by plaintiff (Exhibit U) in the distribution of
Bayer Aspirin. This box bears prominently on the front part the legend "Genuine" in
red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE, and the
second, to BAYER Aspirin. At the back thereof in big letters are the words "BAYER
ASPIRIN", followed in small letters "Used since 1900" and down below the small
words "Mfd. in the Phil. by Winthrop Stearns, Inc. for STERLING PRODUCTS
INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1) found in
the box of Bayer Aspirin tablets, children's size, there is the significant statement:
"GENUINE BAYER Each Children's Size Bayer Aspirin tablet is stamped with the
Bayer Cross, the trademark of the genuine Bayer product. This means that your child
is getting the same gentle-to-the-system Bayer Aspirin that has been used for over
50 years by millions of normal people without ill effect."
With the background of prior use in the Philippines of the word BAYER by FBA's
German predecessor and the prior representations that plaintiff's medicines sold in
the Philippines were manufactured in Germany, the facts just recited hammer on the
mind of the public that the Aspirin. Cafiaspirina and Aspirin for Children being
marketed for plaintiff in the Philippines come from the same source the German
source and in use since 1900. That this view is far from far-fetched, is illustrated
by the testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz:
Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a
company in Germany named Bayer?
A. Yes, sir.
Q. Since when have you heard of this pharmaceutical company in Germany with the
name Bayer, since when have you heard of that?
A. I have always taken the name Bayer as associated with Winthrop & Stearns.
Q. But, you said a while ago....
Witness.
.... Yes .....
xxx xxx xxx
Q. ... that you have heard of a pharmaceutical company with the name of Bayer in
Germany?
A. Yes, sir.
Q. Do you know if this Winthrop & Stearns you mentioned has ever been connected
with Bayer Company of Germany?
A. I have always understood that they were distributing drugs of Bayer &
Company.35
4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-
honored teaching that he who comes into equity must do so with clean hands.36
Plaintiff cannot now say that the present worth of its BAYER trademarks it owes
solely to its own efforts; it is not insulated from the charge that as it marketed its
medicines it did so with an eye to the goodwill as to quality that defendants'
predecessor had established.
There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the
first user thereof in the Philippines. The trademarks do not necessarily link plaintiff
with the public. Plaintiff must show injury; it has not. On the contrary, representations
as to the place of manufacture of plaintiff's medicines were untrue, misleading.
Plaintiff could still be tagged with the same deception "which (it) complains of in the
defendant(s)."37 Appropriate it is to recall here our observation in the Ang Tibay
opinion, viz: "On our part may we add, without meaning to be harsh, that a self-
respecting person does not remain in the shelter of another but builds one of his
own."38
Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus
forfeited its right to protection from the use of the same trademarks by defendants for
products different therefrom insecticides and other chemicals.
5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from
the Principal Register, claiming right thereto for said use. Said trademarks had been
registered since 1939 by plaintiff's predecessor. The Bayer Co., Inc.
Defendants' claim is stale; it suffers from the defect of non-use.39 While it is
conceded that FBA's predecessors first introduced medical products with the BAYER
trademarks in the Philippine market, it is equally true that, after World War I, no
definite evidence there is that defendants or their professors traded in the Philippines
in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its
objection. Lack of protest thereto connoted acquiescence. And this; notwithstanding
the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits.
Defendants did use the marks; but it was much later, i.e., in 1958 and on
chemicals and insecticides not on medicines. FBA only bestirred itself and
challenged plaintiff's right to the trademarks on medicines when this suit was filed.
Vigilantibus non dormientibus equitas subvenit.40
The net result is that, as the trial court aptly observed, plaintiff may hold on to its
BAYER trademarks for medicines. And defendants may continue using the same
trademarks for insecticides and other chemicals, not medicines.
6. Defendants balk at the ruling below which directs them "to add a distinctive word
or words in their mark to indicate that their products come from Germany."41
We are left under no doubt as to the reasonableness of the formula thus fashioned. It
avoids the mischief of confusion of origin defendant FBA's product would not be
mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to
defendants. The order does not visit defendant FBA with reprobation or
condemnation. Rather, said defendant would be enhancing the value of and would
be sponsoring its own products. Anyway, a statement that its products come from
Germany is but a statement of fact.
FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No
costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano,
Teehankee and Barredo, JJ., concur.
Castro, J., is on leave.
G.R. No. L-63796-97 May 2, 1984
LA CHEMISE LACOSTE, S. A., petitioner,
vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial
Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS,
respondents.
G.R. No. L-65659 May 2l, 1984
GOBINDRAM HEMANDAS SUJANANI, petitioner,
vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry,
and HON. CESAR SAN DIEGO, in his capacity as Director of Patents,
respondents.
Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.
Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.
GUTIERREZ, JR., J.:
It is among this Court's concerns that the Philippines should not acquire an
unbecoming reputation among the manufacturing and trading centers of the world as
a haven for intellectual pirates imitating and illegally profiting from trademarks and
tradenames which have established themselves in international or foreign trade.
Before this Court is a petition for certiorari with preliminary injunction filed by La
Chemise Lacoste, S.A., a well known European manufacturer of clothings and
sporting apparels sold in the international market and bearing the trademarks
"LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark
consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The
petitioner asks us to set aside as null and void, the order of judge Oscar C.
Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region,
granting the motion to quash the search warrants previously issued by him and
ordering the return of the seized items.
The facts are not seriously disputed. The petitioner is a foreign corporation,
organized and existing under the laws of France and not doing business in the
Philippines, It is undeniable from the records that it is the actual owner of the
abovementioned trademarks used on clothings and other goods specifically sporting
apparels sold in many parts of the world and which have been marketed in the
Philippines since 1964, The main basis of the private respondent's case is its claim
of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued
Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark
"CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for
use on T-shirts, sportswear and other garment products of the company. Two years
later, it applied for the registration of the same trademark under the Principal
Register. The Patent Office eventually issued an order dated March 3, 1977 which
states that:
xxx xxx xxx
... Considering that the mark was already registered in the Supplemental Register in
favor of herein applicant, the Office has no other recourse but to allow the
application, however, Reg. No. SR-2225 is now being contested in a Petition for
Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner
of the mark until after the registration is declared cancelled.
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all
rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the
trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste"
(Application Serial No. 43241).The former was approved for publication while the
latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982,
the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as
Inter Partes Case No. 1689. Both cases have now been considered by this Court in
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).
On March 21, 1983, the petitioner filed with the National Bureau of Investigation
(NBI) a letter-complaint alleging therein the acts of unfair competition being
committed by Hemandas and requesting their assistance in his apprehension and
prosecution. The NBI conducted an investigation and subsequently filed with the
respondent court two applications for the issuance of search warrants which would
authorize the search of the premises used and occupied by the Lacoste Sports
Center and Games and Garments both owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of
Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge
after examining under oath applicant and his witnesses that there are good and
sufficient reasons to believe that Gobindram Hemandas ... has in his control and
possession in his premises the ... properties subject of the offense," (Rollo, pp. 67
and 69) The NBI agents executed the two search warrants and as a result of the
search found and seized various goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark
used by him was different from petitioner's trademark and that pending the resolution
of IPC No. 1658 before the Patent Office, any criminal or civil action on the same
subject matter and between the same parties would be premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was
fatally defective as it cited no valid ground for the quashal of the search warrants and
that the grounds alleged in the motion were absolutely without merit. The State
Prosecutor likewise filed his opposition on the grounds that the goods seized were
instrument of a crime and necessary for the resolution of the case on preliminary
investigation and that the release of the said goods would be fatal to the case of the
People should prosecution follow in court.
The respondent court was, however, convinced that there was no probable cause to
justify the issuance of the search warrants. Thus, in its order dated March 22, 1983,
the search warrants were recalled and set aside and the NBI agents or officers in
custody of the seized items were ordered to return the same to Hemandas. (Rollo, p.
25)
The petitioner anchors the present petition on the following issues:
Did respondent judge act with grave abuse of discretion amounting to lack of
jurisdiction,
(i) in reversing the finding of probable cause which he himself had made in
issuing the search warrants, upon allegations which are matters of defense and as
such can be raised and resolved only upon trial on the merits; and
(ii) in finding that the issuance of the search warrants is premature in the face of
the fact that (a) Lacoste's registration of the subject trademarks is still pending with
the Patent Office with opposition from Hemandas; and (b) the subject trademarks
had been earlier registered by Hemandas in his name in the Supplemental Register
of the Philippine Patent Office?
Respondent, on the other hand, centers his arguments on the following issues:
I
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE
ORDER DATED APRIL 22, 1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner
being a foreign corporation failed to allege essential facts bearing upon its capacity
to sue before Philippine courts. He states that not only is the petitioner not doing
business in the Philippines but it also is not licensed to do business in the
Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420)
to support his contention The Leviton case, however, involved a complaint for unfair
competition under Section 21-A of Republic Act No. 166 which provides:
Sec. 21 A. Any foreign corporation or juristic person to which a mark or tradename
has been registered or assigned under this Act may bring an action hereunder for
infringement, for unfair competition, or false designation of origin and false
description, whether or not it has been licensed to do business in the Philippines
under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise
known as the Corporation Law, at the time it brings the complaint; Provided, That the
country of which the said foreign corporation or juristic person is a citizen, or in which
it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or
juristic persons of the Philippines.
We held that it was not enough for Leviton, a foreign corporation organized and
existing under the laws of the State of New York, United States of America, to merely
allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its
action was being filed under the provisions of Section 21-A of Republic Act No. 166,
as amended. Compliance with the requirements imposed by the abovecited provision
was necessary because Section 21-A of Republic Act No. 166 having explicitly laid
down certain conditions in a specific proviso, the same must be expressly averred
before a successful prosecution may ensue. It is therefore, necessary for the foreign
corporation to comply with these requirements or aver why it should be exempted
from them, if such was the case. The foreign corporation may have the right to sue
before Philippine courts, but our rules on pleadings require that the qualifying
circumstances necessary for the assertion of such right should first be affirmatively
pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189
of the Revised Penal Code. The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued
in his brief that the petitioner was doing business in the Philippines but was not
licensed to do so. To support this argument, he states that the applicable ruling is the
case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co.
Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive
distributing agent in the Philippines filed a complaint for infringement of trademark
and unfair competition against the Mangalimans.
The argument has no merit. The Mentholatum case is distinct from and inapplicable
to the case at bar. Philippine American Drug Co., Inc., was admittedly selling
products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's
account. Thus, this Court held that "whatever transactions the Philippine-American
Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself.
And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines
without the license required by Section 68 of the Corporation Law, it may not
prosecute this action for violation of trademark and unfair competition."
In the present case, however, the petitioner is a foreign corporation not doing
business in the Philippines. The marketing of its products in the Philippines is done
through an exclusive distributor, Rustan Commercial Corporation The latter is an
independent entity which buys and then markets not only products of the petitioner
but also many other products bearing equally well-known and established
trademarks and tradenames. in other words, Rustan is not a mere agent or conduit
of the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its
rule-making power under Presidential Decree No. 1789, otherwise known as the
Omnibus Investment Code, support a finding that the petitioner is not doing business
in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing
business" as one" which includes, inter alia:
(1) ... A foreign firm which does business through middlemen acting on their own
names, such as indentors, commercial brokers or commission merchants, shall not
be deemed doing business in the Philippines. But such indentors, commercial
brokers or commission merchants shall be the ones deemed to be doing business in
the Philippines.
(2) Appointing a representative or distributor who is domiciled in the Philippines,
unless said representative or distributor has an independent status, i.e., it transacts
business in its name and for its account, and not in the name or for the account of a
principal Thus, where a foreign firm is represented by a person or local company
which does not act in its name but in the name of the foreign firm the latter is doing
business in the Philippines.
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the
petitioner is not doing business in the Philippines. Rustan is actually a middleman
acting and transacting business in its own name and or its own account and not in
the name or for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner
failed to allege material facts in its petition relative to capacity to sue, the petitioner
may still maintain the present suit against respondent Hemandas. As early as 1927,
this Court was, and it still is, of the view that a foreign corporation not doing business
in the Philippines needs no license to sue before Philippine courts for infringement of
trademark and unfair competition. Thus, in Western Equipment and Supply Co. v.
Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done
any business in the Philippines and which is unlicensed and unregistered to do
business here, but is widely and favorably known in the Philippines through the use
therein of its products bearing its corporate and tradename, has a legal right to
maintain an action in the Philippines to restrain the residents and inhabitants thereof
from organizing a corporation therein bearing the same name as the foreign
corporation, when it appears that they have personal knowledge of the existence of
such a foreign corporation, and it is apparent that the purpose of the proposed
domestic corporation is to deal and trade in the same goods as those of the foreign
corporation.
We further held:
xxx xxx xxx
... That company is not here seeking to enforce any legal or control rights arising
from, or growing out of, any business which it has transacted in the Philippine
Islands. The sole purpose of the action:
Is to protect its reputation, its corporate name, its goodwill, whenever that reputation,
corporate name or goodwill have, through the natural development of its trade,
established themselves.' And it contends that its rights to the use of its corporate and
trade name:
Is a property right, a right in rem, which it may assert and protect against all the
world, in any of the courts of the world-even in jurisdictions where it does not transact
business-just the same as it may protect its tangible property, real or personal,
against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and
TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names
and Unfair Competition and cases cited.' That point is sustained by the authorities,
and is well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed.,
513). in which the syllabus says:
Since it is the trade and not the mark that is to be protected, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but
extends to every market where the trader's goods have become known and
Identified by the use of the mark.
Our recognizing the capacity of the petitioner to sue is not by any means novel or
precedent setting. Our jurisprudence is replete with cases illustrating instances when
foreign corporations not doing business in the Philippines may nonetheless sue in
our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we
recognized a right of foreign corporation to sue on isolated transactions. In General
Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of
Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing
business in the Philippines, to file a petition for cancellation of a trademark before the
Patent Office.
More important is the nature of the case which led to this petition. What preceded
this petition for certiorari was a letter complaint filed before the NBI charging
Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal
Code. If prosecution follows after the completion of the preliminary investigation
being conducted by the Special Prosecutor the information shall be in the name of
the People of the Philippines and no longer the petitioner which is only an aggrieved
party since a criminal offense is essentially an act against the State. It is the latter
which is principally the injured party although there is a private right violated.
Petitioner's capacity to sue would become, therefore, of not much significance in the
main case. We cannot snow a possible violator of our criminal statutes to escape
prosecution upon a far-fetched contention that the aggrieved party or victim of a
crime has no standing to sue.
In upholding the right of the petitioner to maintain the present suit before our courts
for unfair competition or infringement of trademarks of a foreign corporation, we are
moreover recognizing our duties and the rights of foreign states under the Paris also apply when the essential part of the mark constitutes a reproduction of any such
Convention for the Protection of Industrial Property to which the Philippines and well-known mark or an imitation liable to create confusion therewith.
France are parties. We are simply interpreting and enforcing a solemn international
commitment of the Philippines embodied in a multilateral treaty to which we are a xxx xxx xxx
party and which we entered into because it is in our national interest to do so.
ARTICLE 8
The Paris Convention provides in part that:
A trade name shall be protected in all the countries of the Union without the
ARTICLE 1 obligation of filing or registration, whether or not it forms part of a trademark.

(1) The countries to which the present Convention applies constitute themselves xxx xxx xxx
into a Union for the protection of industrial property.
ARTICLE 10bis
(2) The protection of industrial property is concerned with patents, utility models,
industrial designs, trademarks service marks, trade names, and indications of source (1) The countries of the Union are bound to assure to persons entitled to the
or appellations of origin, and the repression of unfair competition. benefits of the Union effective protection against unfair competition.

xxx xxx xxx xxx xxx xxx

ARTICLE 2 ARTICLE 10ter

(2) Nationals of each of the countries of the Union shall as regards the protection
of industrial property, enjoy in all the other countries of the Union the advantages that
their respective laws now grant, or may hereafter grant, to nationals, without
prejudice to the rights specially provided by the present Convention. Consequently,
they shall have the same protection as the latter, and the same legal remedy against
any infringement of their rights, provided they observe the conditions and formalities
imposed upon nationals.
xxx xxx xxx
ARTICLE 6
(1) The countries of the Union undertake to assure to nationals of the other
countries of the Union appropriate legal remedies to repress effectively all the acts
referred to in Articles 9, 10 and l0bis.
(2) They undertake, further, to provide measures to permit syndicates and
associations which represent the industrialists, producers or traders concerned and
the existence of which is not contrary to the laws of their countries, to take action in
the Courts or before the administrative authorities, with a view to the repression of
the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in
which protection is claimed allows such action by the syndicates and associations of
that country.

(1) The countries of the Union undertake, either administratively if their xxx xxx xxx
legislation so permits, or at the request of an interested party, to refuse or to cancel
the registration and to prohibit the use of a trademark which constitutes a ARTICLE 17
reproduction, imitation or translation, liable to create confusion, of a mark considered
by the competent authority of the country of registration or use to be well-known in Every country party to this Convention undertakes to adopt, in accordance with its
that country as being already the mark of a person entitled to the benefits of the constitution, the measures necessary to ensure the application of this Convention.
present Convention and used for Identical or similar goods. These provisions shall
It is understood that at the time an instrument of ratification or accession is deposited
on behalf of a country; such country will be in a position under its domestic law to
give effect to the provisions of this Convention. (61 O.G. 8010)
xxx xxx xxx
In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court
of Appeals had occasion to comment on the extraterritorial application of the Paris
Convention It said that:
[11] The International Convention is essentially a compact between the various
member countries to accord in their own countries to citizens of the other contracting
parties trademark and other rights comparable to those accorded their own citizens
by their domestic law. The underlying principle is that foreign nationals should be
given the same treatment in each of the member countries as that country makes
available to its own citizens. In addition, the Convention sought to create uniformity in
certain respects by obligating each member nation 'to assure to nationals of
countries of the Union an effective protection against unfair competition.'
[12] The Convention is not premised upon the Idea that the trade-mark and
related laws of each member nation shall be given extra-territorial application, but on
exactly the converse principle that each nation's law shall have only territorial
application. Thus a foreign national of a member nation using his trademark in
commerce in the United States is accorded extensive protection here against
infringement and other types of unfair competition by virtue of United States
membership in the Convention. But that protection has its source in, and is subject to
the limitations of, American law, not the law of the foreign national's own country. ...
By the same token, the petitioner should be given the same treatment in the
Philippines as we make available to our own citizens. We are obligated to assure to
nationals of "countries of the Union" an effective protection against unfair competition
in the same way that they are obligated to similarly protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a
memorandum addressed to the Director of the Patents Office directing the latter:
xxx xxx xxx
... to reject all pending applications for Philippine registration of signature and other
world famous trademarks by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name
brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey
Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine registrants of such
trademarks should be asked to surrender their certificates of registration, if any, to
avoid suits for damages and other legal action by the trademarks' foreign or local
owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of
cooperation and amity with all nations. It is not, as wrongly alleged by the private
respondent, a personal policy of Minister Luis Villafuerte which expires once he
leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation
to be enforced or not at the whims of an incumbent head of a Ministry. It creates a
legally binding obligation on the parties founded on the generally accepted principle
of international law of pacta sunt servanda which has been adopted as part of the
law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director
of Patents of his legal duty to obey both law and treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of
discretion in issuing the questioned order of April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search
warrants reveals the fact that they are not appropriate for quashing a warrant. They
are matters of defense which should be ventilated during the trial on the merits of the
case. For instance, on the basis of the facts before the Judge, we fail to understand
how he could treat a bare allegation that the respondent's trademark is different from
the petitioner's trademark as a sufficient basis to grant the motion to quash. We will
treat the issue of prejudicial question later. Granting that respondent Hemandas was
only trying to show the absence of probable cause, we, nonetheless, hold the
arguments to be untenable.
As a mandatory requirement for the issuance of a valid search warrant, the
Constitution requires in no uncertain terms the determination of probable cause by
the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce (Constitution, Art. IV, Sec. 3). Probable cause has
traditionally meant such facts and circumstances antecedent to the issuance of the
warrant that are in themselves sufficient to induce a cautious man to rely upon them
and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).
This concept of probable cause was amplified and modified by our ruling in Stonehill
v. Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of
competent proof that the party against whom it is sought has performed particular
acts, or committed specific omissions, violating a given provision of our criminal
laws."
The question of whether or not probable cause exists is one which must be decided
in the light of the conditions obtaining in given situations (Central Bank v. Morfe, 20
SCRA 507). We agree that there is no general formula or fixed rule for the
determination of the existence of probable cause since, as we have recognized in
Luna v. Plaza (26 SCRA 310), the existence depends to a large degree upon the
finding or opinion of the judge conducting the examination. However, the findings of
the judge should not disregard the facts before him nor run counter to the clear
dictates of reason. More so it is plain that our country's ability to abide by
international commitments is at stake.
The records show that the NBI agents at the hearing of the application for the
warrants before respondent court presented three witnesses under oath, sworn
statements, and various exhibits in the form of clothing apparels manufactured by
Hemandas but carrying the trademark Lacoste. The respondent court personally
interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of
searching questions. After hearing the testimonies and examining the documentary
evidence, the respondent court was convinced that there were good and sufficient
reasons for the issuance of the warrant. And it then issued the warrant.
The respondent court, therefore, complied with the constitutional and statutory
requirements for the issuance of a valid search warrant. At that point in time, it was
fully convinced that there existed probable cause. But after hearing the motion to
quash and the oppositions thereto, the respondent court executed a complete
turnabout and declared that there was no probable cause to justify its earlier
issuance of the warrants.
True, the lower court should be given the opportunity to correct its errors, if there be
any, but the rectification must, as earlier stated be based on sound and valid
grounds. In this case, there was no compelling justification for the about face. The
allegation that vital facts were deliberately suppressed or concealed by the petitioner
should have been assessed more carefully because the object of the quashal was
the return of items already seized and easily examined by the court. The items were
alleged to be fake and quite obviously would be needed as evidence in the criminal
prosecution. Moreover, an application for a search warrant is heard ex parte. It is
neither a trial nor a part of the trial. Action on these applications must be expedited
for time is of the essence. Great reliance has to be accorded by the judge to the
testimonies under oath of the complainant and the witnesses. The allegation of
Hemandas that the applicant withheld information from the respondent court was
clearly no basis to order the return of the seized items.
Hemandas relied heavily below and before us on the argument that it is the holder of
a certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE
DEVICE". Significantly, such registration is only in the Supplemental Register.
A certificate of registration in the Supplemental Register is not prima facie evidence
of the validity of registration, of the registrant's exclusive right to use the same in
connection with the goods, business, or services specified in the certificate. Such a
certificate of registration cannot be filed, with effect, with the Bureau of Customs in
order to exclude from the Philippines, foreign goods bearing infringement marks or
trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in
Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).
Section 19-A of Republic Act 166 as amended not only provides for the keeping of
the supplemental register in addition to the principal register but specifically directs
that:
xxx xxx xxx
The certificates of registration for marks and trade names registered on the
supplemental register shall be conspicuously different from certificates issued for
marks and trade names on the principal register.
xxx xxx xxx
The reason is explained by a leading commentator on Philippine Commercial Laws:
The registration of a mark upon the supplemental register is not, as in the case of the
principal register, prima facie evidence of (1) the validity of registration; (2)
registrant's ownership of the mark; and (3) registrant's exclusive right to use the
mark. It is not subject to opposition, although it may be cancelled after its issuance.
Neither may it be the subject of interference proceedings. Registration on the
supplemental register is not constructive notice of registrant's claim of ownership. A
supplemental register is provided for the registration of marks which are not
registrable on the principal register because of some defects (conversely, defects
which make a mark unregistrable on the principal register, yet do not bar them from
the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978,
p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents,
Apr. 30, 1963);
Registration in the Supplemental Register, therefore, serves as notice that the
registrant is using or has appropriated the trademark. By the very fact that the
trademark cannot as yet be entered in the Principal Register, all who deal with it
should be on guard that there are certain defects, some obstacles which the user
must Still overcome before he can claim legal ownership of the mark or ask the
courts to vindicate his claims of an exclusive right to the use of the same. It would be
deceptive for a party with nothing more than a registration in the Supplemental
Register to posture before courts of justice as if the registration is in the Principal
Register.
The reliance of the private respondent on the last sentence of the Patent office action
on application Serial No. 30954 that "registrant is presumed to be the owner of the
mark until after the registration is declared cancelled" is, therefore, misplaced and
grounded on shaky foundation, The supposed presumption not only runs counter to
the precept embodied in Rule 124 of the Revised Rules of Practice before the
Philippine Patent Office in Trademark Cases but considering all the facts ventilated
before us in the four interrelated petitions involving the petitioner and the respondent,
it is devoid of factual basis. And even in cases where presumption and precept may
factually be reconciled, we have held that the presumption is rebuttable, not
conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One
may be declared an unfair competitor even if his competing trademark is registered
(Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v. Chua
Seco & Co., 14 Phil. 534).
By the same token, the argument that the application was premature in view of the
pending case before the Patent Office is likewise without legal basis.
The proceedings pending before the Patent Office involving IPC Co. 1658 do not
partake of the nature of a prejudicial question which must first be definitely resolved.
Section 5 of Rule 111 of the Rules of Court provides that:
A petition for the suspension of the criminal action based upon the pendency of a
pre-judicial question in a civil case, may only be presented by any party before or
during the trial of the criminal action.
The case which suspends the criminal prosecution must be a civil case which is
determinative of the innocence or, subject to the availability of other defenses, the
guilt of the accused. The pending case before the Patent Office is an administrative
proceeding and not a civil case. The decision of the Patent Office cannot be finally
determinative of the private respondent's innocence of the charges against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:
As clearly delineated in the aforecited provisions of the new Civil Code and the Rules
of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v.
Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v.
Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482
(1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178;
Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In
Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question was
held inapplicable because no criminal case but merely an administrative case and a
civil suit were involved. The Court, however, held that, in view of the peculiar
circumstances of that case, the respondents' suit for damages in the lower court was
premature as it was filed during the pendency of an administrative case against the
respondents before the POLCOM. 'The possibility cannot be overlooked,' said the
Court, 'that the POLCOM may hand down a decision adverse to the respondents, in
which case the damage suit will become unfounded and baseless for wanting in
cause of action.') the doctrine of pre-judicial question comes into play generally in a
situation where a civil action and a criminal action both penned and there exists in
the former an issue which must be preemptively resolved before the criminal action
may proceed, because howsoever the issue raised in the civil action is resolved
would be determinative juris et de jure of the guilt or innocence of the accused in the
criminal case.
In the present case, no civil action pends nor has any been instituted. What was
pending was an administrative case before the Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or
special circumstances which render a criminal prosecution premature pending the
promulgation of the administrative decision, no such peculiar circumstances are
present in this case.

Moreover, we take note of the action taken by the Patents Office and the Minister of
Trade and affirmed by the Intermediate Appellate Court in the case of La Chemise
Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in
this decision was involved in the appellate court's decision. The Minister as the
"implementing authority" under Article 6bis of the Paris Convention for the protection
of Industrial Property instructed the Director of Patents to reject applications for
Philippine registration of signature and other world famous trademarks by applicants
other than its original owners or users. The brand "Lacoste" was specifically cited
together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey
Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to
require Philippine registrants of such trademarks to surrender their certificates of
registration. Compliance by the Director of Patents was challenged.
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani
decision which we cite with approval sustained the power of the Minister of Trade to
issue the implementing memorandum and, after going over the evidence in the
records, affirmed the decision of the Director of Patents declaring La Chemise
Lacoste &A. the owner of the disputed trademark and crocodile or alligator device.
The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza
stated:
In the case at bar, the Minister of Trade, as 'the competent authority of the country of
registration,' has found that among other well-known trademarks 'Lacoste' is the
subject of conflicting claims. For this reason, applications for its registration must be
rejected or refused, pursuant to the treaty obligation of the Philippines.
Apart from this finding, the annexes to the opposition, which La Chemise Lacoste
S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste'
and the device consisting of a representation of a crocodile or alligator by the prior
adoption and use of such mark and device on clothing, sports apparel and the like.
La Chemise Lacoste S.A, obtained registration of these mark and device and was in
fact issued renewal certificates by the French National Industry Property Office.
xxx xxx xxx
Indeed, due process is a rule of reason. In the case at bar the order of the Patent
Office is based not only on the undisputed fact of ownership of the trademark by the
appellee but on a prior determination by the Minister of Trade, as the competent
authority under the Paris Convention, that the trademark and device sought to be
registered by the appellant are well-known marks which the Philippines, as party to
the Convention, is bound to protect in favor of its owners. it would be to exalt form
over substance to say that under the circumstances, due process requires that a
hearing should be held before the application is acted upon.
The appellant cites section 9 of Republic Act No. 166, which requires notice and
hearing whenever an opposition to the registration of a trademark is made. This
provision does not apply, however, to situations covered by the Paris Convention,
where the appropriate authorities have determined that a well-known trademark is
already that of another person. In such cases, the countries signatories to the
Convention are obliged to refuse or to cancel the registration of the mark by any
other person or authority. In this case, it is not disputed that the trademark Lacoste is
such a well-known mark that a hearing, such as that provided in Republic Act No.
166, would be superfluous.
The issue of due process was raised and fully discussed in the appellate court's
decision. The court ruled that due process was not violated.
In the light of the foregoing it is quite plain that the prejudicial question argument is
without merit.
We have carefully gone over the records of all the cases filed in this Court and find
more than enough evidence to sustain a finding that the petitioner is the owner of the
trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device,
and the composite mark of LACOSTE and the representation of the crocodile or
alligator. Any pretensions of the private respondent that he is the owner are
absolutely without basis. Any further ventilation of the issue of ownership before the
Patent Office will be a superfluity and a dilatory tactic.
The issue of whether or not the trademark used by the private respondent is different
from the petitioner's trade mark is a matter of defense and will be better resolved in
the criminal proceedings before a court of justice instead of raising it as a preliminary
matter in an administrative proceeding.
The purpose of the law protecting a trademark cannot be overemphasized. They are
to point out distinctly the origin or ownership of the article to which it is affixed, to
secure to him, who has been instrumental in bringing into market a superior article of
merchandise, the fruit of his industry and skill, and to prevent fraud and imposition
(Etepha v. Director of Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for
the protection thereof. Modern trade and commerce demands that depredations on
legitimate trade marks of non-nationals including those who have not shown prior
registration thereof should not be countenanced. The law against such depredations
is not only for the protection of the owner of the trademark but also, and more
importantly, for the protection of purchasers from confusion, mistake, or deception as
to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General
Garments Corporation v. Director of Patents, 41 SCRA 50).
The law on trademarks and tradenames is based on the principle of business
integrity and common justice' This law, both in letter and spirit, is laid upon the
premise that, while it encourages fair trade in every way and aims to foster, and not
to hamper, competition, no one, especially a trader, is justified in damaging or
jeopardizing another's business by fraud, deceipt, trickery or unfair methods of any
sort. This necessarily precludes the trading by one dealer upon the good name and
reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).
The records show that the goodwill and reputation of the petitioner's products
bearing the trademark LACOSTE date back even before 1964 when LACOSTE
clothing apparels were first marketed in the Philippines. To allow Hemandas to
continue using the trademark Lacoste for the simple reason that he was the first
registrant in the Supplemental Register of a trademark used in international
commerce and not belonging to him is to render nugatory the very essence of the
law on trademarks and tradenames.
We now proceed to the consideration of the petition in Gobindram Hemandas
Suianani u. Hon. Roberto V Ongpin, et al. (G.R. No. 65659).
Actually, three other petitions involving the same trademark and device have been
filed with this Court.
In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the
petitioner asked for the following relief:
IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions
of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and
that the Decision of the same respondent Court of June 30, 1983 be declared to be
the law on the matter; (b) that the Director of Patents be directed to issue the
corresponding registration certificate in the Principal Register; and (c) granting upon
the petitioner such other legal and equitable remedies as are justified by the
premises.
On December 5, 1983, we issued the following resolution:
Considering the allegations contained, issues raised and the arguments adduced in
the petition for review, the respondent's comment thereon, and petitioner's reply to
said comment, the Court Resolved to DENY the petition for lack of merit.
The Court further Resolved to CALL the attention of the Philippine Patent Office to
the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A.
v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course
on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram
Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed
for lack of merit on September 12, 1983. Both petitions involve the same dispute
over the use of the trademark 'Chemise Lacoste'.
The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al.
(G.R. No. 63928-29) prayed for the following:
I. On the petition for issuance of writ of preliminary injunction, an order be
issued after due hearing:
l. Enjoining and restraining respondents Company, attorneys-in-fact, and
Estanislao Granados from further proceedings in the unfair competition charges
pending with the Ministry of Justice filed against petitioner;
2. Enjoining and restraining respondents Company and its attorneys-in-fact from
causing undue publication in newspapers of general circulation on their unwarranted
claim that petitioner's products are FAKE pending proceedings hereof; and
3. Enjoining and restraining respondents Company and its attorneys-in-fact from
sending further threatening letters to petitioner's customers unjustly stating that
petitioner's products they are dealing in are FAKE and threatening them with
confiscation and seizure thereof.
II. On the main petition, judgment be rendered:

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting,
stopping, and restraining respondents from further committing the acts complained
of;
2. Awarding and granting the issuance of the Writ of Mandamus, ordering and
compelling respondents National Bureau of Investigation, its aforenamed agents,
and State Prosecutor Estanislao Granados to immediately comply with the Order of
the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila,
dated April 22, 1983, which directs the immediate return of the seized items under
Search Warrants Nos. 83-128 and 83-129;
3. Making permanent any writ of injunction that may have been previously
issued by this Honorable Court in the petition at bar: and
4. Awarding such other and further relief as may be just and equitable in the
premises.
As earlier stated, this petition was dismissed for lack of merit on September 12,
1983. Acting on a motion for reconsideration, the Court on November 23, 1983
resolved to deny the motion for lack of merit and declared the denial to be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for
the prohibiting of the enforcement of the following memorandum of respondent
Minister Roberto Ongpin:
MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
xxx xxx xxx
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the
rule-making and adjudicatory powers of the Minister of Trade and Industry and
provides inter alia, that 'such rule-making and adjudicatory powers should be
revitalized in order that the Minister of Trade and Industry can ...apply more swift and
effective solutions and remedies to old and new problems ... such as the
infringement of internationally-known tradenames and trademarks ...'and in view of
the decision of the Intermediate Appellate Court in the case of LA CHEMISE
LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983]
which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte
dated 20 November 1980 confirming our obligations under the PARIS CONVENTION
FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the
Philippines is a signatory, you are hereby directed to implement measures necessary
to effect compliance with our obligations under said convention in general, and, more
specifically, to honor our commitment under Section 6 bis thereof, as follows:
1. Whether the trademark under consideration is well-known in the Philippines
or is a mark already belonging to a person entitled to the benefits of the
CONVENTION, this should be established, pursuant to Philippine Patent Office
procedures in inter partes and ex parte cases, according to any of the following
criteria or any combination thereof:
(a) a declaration by the Minister of Trade and Industry that' the trademark being
considered is already well-known in the Philippines such that permission for its use
by other than its original owner will constitute a reproduction, imitation, translation or
other infringement;
(b) that the trademark is used in commerce internationally, supported by proof
that goods bearing the trademark are sold on an international scale, advertisements,
the establishment of factories, sales offices, distributorships, and the like, in different
countries, including volume or other measure of international trade and commerce;
(c) that the trademark is duly registered in the industrial property office(s) of
another country or countries, taking into consideration the dates of such registration;
(d) that the trademark has been long established and obtained goodwill and
general international consumer recognition as belonging to one owner or source;
(e) that the trademark actually belongs to a party claiming ownership and has the
right to registration under the provisions of the aforestated PARIS CONVENTION.
2. The word trademark, as used in this MEMORANDUM, shall include
tradenames, service marks, logos, signs, emblems, insignia or other similar devices
used for Identification and recognition by consumers.
3. The Philippine Patent Office shall refuse all applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or imitation of
a trademark owned by a person, natural or corporate, who is a citizen of a country
signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL
PROPERTY.
4. The Philippine Patent Office shall give due course to the Opposition in cases
already or hereafter filed against the registration of trademarks entitled to protection
of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding
applications filed by one not entitled to such protection for final disallowance by the
Examination Division.
5. All pending applications for Philippine registration of signature and other
world famous trademarks filed by applicants other than their original owners or users
shall be rejected forthwith. Where such applicants have already obtained registration
contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they
shall be directed to surrender their Certificates of Registration to the Philippine
Patent Office for immediate cancellation proceedings.
6. Consistent with the foregoing, you are hereby directed to expedite the
hearing and to decide without delay the following cases pending before your Office:
1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A.
for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram
Hemandas, assignee of Hemandas and Company;
2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments
Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste,
S.A.;
3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste,
S.A. against the registration of trademark Crocodile Device and Skiva sought by one
Wilson Chua.
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No.
65659 to be patently without merit and accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the
memorandum, the Director of Patents shall limit himself to the ascertainment of facts
in issues not resolved by this decision and apply the law as expounded by this Court
to those facts.
One final point. It is essential that we stress our concern at the seeming inability of
law enforcement officials to stem the tide of fake and counterfeit consumer items
flooding the Philippine market or exported abroad from our country. The greater
victim is not so much the manufacturer whose product is being faked but the Filipino
consuming public and in the case of exportations, our image abroad. No less than
the President, in issuing Executive Order No. 913 dated October 7, 1983 to
strengthen the powers of the Minister of Trade and Industry for the protection of
consumers, stated that, among other acts, the dumping of substandard, imitated,
hazardous, and cheap goods, the infringement of internationally known tradenames
and trademarks, and the unfair trade practices of business firms has reached such
proportions as to constitute economic sabotage. We buy a kitchen appliance, a
household tool, perfume, face powder, other toilet articles, watches, brandy or
whisky, and items of clothing like jeans, T-shirts, neck, ties, etc. the list is quite
length and pay good money relying on the brand name as guarantee of its quality
and genuine nature only to explode in bitter frustration and genuine nature on
helpless anger because the purchased item turns out to be a shoddy imitation, albeit
a clever looking counterfeit, of the quality product. Judges all over the country are
well advised to remember that court processes should not be used as instruments to,
unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of
the law as it seeks to protect the Filipino consuming public and frustrate executive
and administrative implementation of solemn commitments pursuant to international
conventions and treaties.
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order
dated April 22, 1983 of the respondent regional trial court is REVERSED and SET
ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e.
PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of
merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and
SET ASIDE, effective immediately.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ.,
concur.
G.R. No. L-46720 June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for
appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava
as amici curi.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of
Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los
Angeles, California, the place of her alleged last residence and domicile. Among the
properties she left her one-half conjugal share in 70,000 shares of stock in the
Benguet Consolidated Mining Company, an anonymous partnership (sociedad
anonima), organized and existing under the laws of the Philippines, with is principal
office in the City of Manila. She left a will which was duly admitted to probate in
California where her estate was administered and settled. Petitioner-appellant, Wells
Fargo Bank & Union Trust Company, was duly appointed trustee of the created by
the said will. The Federal and State of California's inheritance taxes due on said
shares have been duly paid. Respondent Collector of Internal Revenue sought to
subject anew the aforesaid shares of stock to the Philippine inheritance tax, to which
petitioner-appellant objected. Wherefore, a petition for a declaratory judgment was
filed in the lower court, with the statement that, "if it should be held by a final
declaratory judgment that the transfer of the aforesaid shares of stock is legally
subject to the Philippine inheritance tax, the petitioner will pay such tax, interest and
penalties (saving error in computation) without protest and will not file to recover the
same; and the petitioner believes and t herefore alleges that it should be held that
such transfer is not subject to said tax, the respondent will not proceed to assess and
collect the same." The Court of First Instance of Manila rendered judgment, holding
that the transmission by will of the said 35,000 shares of stock is subject to Philippine
inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but
upon transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395),
and (2) that as to real and tangible personal property of a non-resident decedent,
located in the Philippines, the Philippine inheritance tax may be imposed upon their
transmission by death, for the self-evident reason that, being a property situated in
this country, its transfer is, in some way, defendant, for its effectiveness, upon
Philippine laws. It is contended, however, that, as to intangibles, like the shares of
stock in question, their situs is in the domicile of the owner thereof, and, therefore,
their transmission by death necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every
transmission by virtue of inheritance of any share issued by any corporation of
sociedad anonima organized or constituted in the Philippines, is subject to the tax
therein provided. This provision has already been applied to shares of stock in a
domestic corporation which were owned by a British subject residing and domiciled
in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See also Gibbs vs.
Government of P. I., G. R. No. 35694.) Petitioner, however, invokes the rule laid
down by the United States Supreme Court in four cases (Farmers Loan & Trust
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281
U.S., 586; 74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S.,
1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S.
Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the effect that an inheritance tax can
be imposed with respect to intangibles only by the State where the decedent was
domiciled at the time of his death, and that, under the due-process clause, the State
in which a corporation has been incorporated has no power to impose such tax if the
shares of stock in such corporation are owned by a non-resident decedent. It is to be
observed, however, that in a later case (Burnet vs. Brooks, 288 U. S., 378; 77 Law.
ed., 844), the United States Supreme Court upheld the authority of the Federal
Government to impose an inheritance tax on the transmission, by death of a non-
resident, of stock in a domestic (America) corporation, irrespective of the situs of the
corresponding certificates of stock. But it is contended that the doctrine in the
foregoing case is not applicable, because the due-process clause is directed at the
State and not at the Federal Government, and that the federal or national power of
the United States is to be determined in relation to other countries and their subjects
by applying the principles of jurisdiction recognized in international relations. Be that
as it may, the truth is that the due-process clause is "directed at the protection of the
individual and he is entitled to its immunity as much against the state as against the
national government." (Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339,
1349.) Indeed, the rule laid down in the four cases relied upon by the appellant was
predicated on a proper regard for the relation of the states of the American Union,
which requires that property should be taxed in only one state and that jurisdiction to
tax is restricted accordingly. In other words, the application to the states of the due-
process rule springs from a proper distribution of their powers and spheres of activity
as ordained by the United States Constitution, and such distribution is enforced and
protected by not allowing one state to reach out and tax property in another. And
these considerations do not apply to the Philippines. Our status rests upon a wholly
distinct basis and no analogy, however remote, cam be suggested in the relation of
one state of the Union with another or with the United States. The status of the
Philippines has been aptly defined as one which, though a part of the United States
in the international sense, is, nevertheless, foreign thereto in a domestic sense.
(Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the
operation and effect of the due-process clause as it applies to the individual states
and to the national government of the United States. The question here involved is
essentially not one of due-process, but of the power of the Philippine Government to
tax. If that power be conceded, the guaranty of due process cannot certainly be
invoked to frustrate it, unless the law involved is challenged, which is not, on
considerations repugnant to such guaranty of due process of that of the equal
protection of the laws, as, when the law is alleged to be arbitrary, oppressive or
discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs
for the purpose of inheritance tax, and that such situs is in the domicile of the
decedent at the time of his death. But this rule has, of late, been relaxed. The maxim
mobilia sequuntur personam, upon which the rule rests, has been described as a
mere "fiction of law having its origin in consideration of general convenience and
public policy, and cannot be applied to limit or control the right of the state to tax
property within its jurisdiction" (State Board of Assessors vs. Comptoir National
D'Escompte, 191 U. S., 388, 403, 404), and must "yield to established fact of legal
ownership, actual presence and control elsewhere, and cannot be applied if to do so
result in inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280
U. S., 83, 91-92) There is thus a marked shift from artificial postulates of law,
formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original
rule rests on either of two fundamental considerations: (1) upon the recognition of the
inherent power of each government to tax persons, properties and rights within its
jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle
that as o intangibles, a single location in space is hardly possible, considering the
multiple, distinct relationships which may be entered into with respect thereto. It is on
the basis of the first consideration that the case of Burnet vs. Brooks, supra, was
decided by the Federal Supreme Court, sustaining the power of the Government to
impose an inheritance tax upon transmission, by death of a non-resident, of shares
of stock in a domestic (America) corporation, regardless of the situs of their
corresponding certificates; and on the basis of the second consideration, the case of
Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of
the federal estate tax is precluded by the due-process clause of the Fifth
Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other
consideration raised by confiscatory or arbitrary legislation inconsistent with the
fundamental conceptions of justice which are embodied in the due-process clause
for the protection of life, liberty, and property of all persons citizens and friendly
aliens alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law
ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed.,
1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326;
76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government
had jurisdiction to impose the tax, there is manifestly no ground for assailing it.
Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747;
MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1
Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389,
414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R. Co.,
240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann.
Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439,
496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its
borders, wherever its owner may have been domiciled at the time of his death, the
court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of
international law, or hurtful to the polity of nations, in a State's taxing property
physically situated within its borders, wherever its owner may have been domiciled at
the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on
distinct grounds the citizenship of the owner, his domicile, the source of income,
the situs of the property efforts have been made to preclude multiple taxation
through the negotiation of appropriate international conventions. These endeavors,
however, have proceeded upon express or implied recognition, and not in denial, of
the sovereign taxing power as exerted by governments in the exercise of jurisdiction
upon any one of these grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the
States of Alabama and Tennessee may each constitutionally impose death taxes
upon the transfer of an interest in intangibles held in trust by an Alabama trustee but
passing under the will of a beneficiary decedent domiciles in Tennessee, sustained
the power of each State to impose the tax. In arriving at this conclusion, the court
made the following observations:
In cases where the owner of intangibles confines his activity to the place of his
domicile it has been found convenient to substitute a rule for a reason, cf. New York
ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466;
108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law.
ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are
taxed at their situs and not elsewhere, or perhaps less artificially, by invoking the
maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law.
ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056;
50 S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the identify owner
at his domicile which gives jurisdiction to tax. But when the taxpayer extends his
activities with respect to his intangibles, so as to avail himself of the protection and
benefit of the laws of another state, in such a way as to bring his person or properly
within the reach of the tax gatherer there, the reason for a single place of taxation no
longer obtains, and the rule even workable substitute for the reasons may exist in
any particular case to support the constitutional power of each state concerned to
tax. Whether we regard the right of a state to tax as founded on power over the
object taxed, as declared by Chief Justice Marshall in McCulloch vs. Maryland, 4
Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over
persons whose relationships are source of intangibles rights, or on the benefit and
protection conferred by the taxing sovereignty, or both, it is undeniable that the state
of domicile is not deprived, by the taxpayer's activities elsewhere, of its constitutional
jurisdiction to tax, and consequently that there are many circumstances in which
more than one state may have jurisdiction to impose a tax and measure it by some
or all of the taxpayer's intangibles. Shares or corporate stock be taxed at the
domicile of the shareholder and also at that of the corporation which the taxing state
has created and controls; and income may be taxed both by the state where it is
earned and by the state of the recipient's domicile. protection, benefit, and power
over the subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every
case to the mere mechanical operation of locating at a single place, and there taxing,
every legal interest growing out of all the complex legal relationships which may be
entered into between persons. This is the case because in point of actuality those
interests may be too diverse in their relationships to various taxing jurisdictions to
admit of unitary treatment without discarding modes of taxation long accepted and
applied before the Fourteen Amendment was adopted, and still recognized by this
Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold,
that the issue here involved is controlled by those doctrines. In the instant case, the
actual situs of the shares of stock is in the Philippines, the corporation being
domiciled therein. And besides, the certificates of stock have remained in this country
up to the time when the deceased died in California, and they were in possession of
one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to
whom they have been delivered and indorsed in blank. This indorsement gave
Syrena McKee the right to vote the certificates at the general meetings of the
stockholders, to collect dividends, and dispose of the shares in the manner she may
deem fit, without prejudice to her liability to the owner for violation of instructions. For
all practical purposes, then, Syrena McKee had the legal title to the certificates of
stock held in trust for the true owner thereof. In other words, the owner residing in
California has extended here her activities with respect to her intangibles so as to
avail herself of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
Avancea, C.J., Imperial, Diaz and Concepcion, JJ., concur.
[G.R. No. 154342. July 14, 2004]
MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC.
petitioners, vs. E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC.
respondents.
DECISION
CORONA, J.:
In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation
and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and
set aside: (a) the November 15, 2001 decision[1] of the Court of Appeals (CA) in CA-
G.R. CV No. 65175 affirming the November 26, 1998 decision,[2] as modified by the
June 24, 1999 order,[3] of the Regional Trial Court of Makati City, Branch 57 (Makati
RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently
enjoined them from, committing trademark infringement and unfair competition, and
which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo
Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA
resolution denying their motion for reconsideration[4] and (c) the aforesaid Makati
RTC decision itself.
I.
The Factual Background
Respondent Gallo Winery is a foreign corporation not doing business in the
Philippines but organized and existing under the laws of the State of California,
United States of America (U.S.), where all its wineries are located. Gallo Winery
produces different kinds of wines and brandy products and sells them in many
countries under different registered trademarks, including the GALLO and ERNEST
& JULIO GALLO wine trademarks.
Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive
wine importer and distributor in the Philippines since 1991, selling these products in
its own name and for its own account.[5]
Gallo Winerys GALLO wine trademark was registered in the principal register of the
Philippine Patent Office (now Intellectual Property Office) on November 16, 1971
under Certificate of Registration No. 17021 which was renewed on November 16,
1991 for another 20 years.[6] Gallo Winery also applied for registration of its
ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application
Serial No. 901011-00073599-PN but the records do not disclose if it was ever
approved by the Director of Patents.[7]
On the other hand, petitioners Mighty Corporation and La Campana and their sister
company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in
the cultivation, manufacture, distribution and sale of tobacco products for which they
have been using the GALLO cigarette trademark since 1973. [8]
The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO
100s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on
March 26, 1976, both for the manufacture and sale of its cigarette products. In 1976,
Tobacco Industries filed its manufacturers sworn statement as basis for BIRs
collection of specific tax on GALLO cigarettes.[9]
On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue,
the registration of the GALLO cigarette trademark in the principal register of the then
Philippine Patent Office.[10]
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La
Campana which, on July 16, 1985, applied for trademark registration in the Philippine
Patent Office.[11] On July 17, 1985, the National Library issued Certificate of
Copyright Registration No. 5834 for La Campanas lifetime copyright claim over
GALLO cigarette labels.[12]
Subsequently, La Campana authorized Mighty Corporation to manufacture and sell
cigarettes bearing the GALLO trademark.[13] BIR approved Mighty Corporations use
of GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries,
on May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3,
1989.[14]
Petitioners claim that GALLO cigarettes have been sold in the Philippines since
1973, initially by Tobacco Industries, then by La Campana and finally by Mighty
Corporation.[15]
On the other hand, although the GALLO wine trademark was registered in the
Philippines in 1971, respondents claim that they first introduced and sold the GALLO
and ERNEST & JULIO GALLO wines in the Philippines circa 1974 within the then
U.S. military facilities only. By 1979, they had expanded their Philippine market
through authorized distributors and independent outlets.[16]
Respondents claim that they first learned about the existence of GALLO cigarettes in
the latter part of 1992 when an Andresons employee saw such cigarettes on display
with GALLO wines in a Davao supermarket wine cellar section.[17] Forthwith,
respondents sent a demand letter to petitioners asking them to stop using the
GALLO trademark, to no avail.
II.
The Legal Dispute
On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark
and tradename infringement and unfair competition, with a prayer for damages and
preliminary injunction.
Respondents charged petitioners with violating Article 6bis of the Paris Convention
for the Protection of Industrial Property (Paris Convention)[18] and RA 166
(Trademark Law),[19] specifically, Sections 22 and 23 (for trademark infringement),
[20] 29 and 30[21] (for unfair competition and false designation of origin) and 37 (for
tradename infringement).[22] They claimed that petitioners adopted the GALLO
trademark to ride on Gallo Winerys GALLO and ERNEST & JULIO GALLO
trademarks established reputation and popularity, thus causing confusion, deception
and mistake on the part of the purchasing public who had always associated GALLO
and ERNEST & JULIO GALLO trademarks with Gallo Winerys wines. Respondents
prayed for the issuance of a writ of preliminary injunction and ex parte restraining
order, plus P2 million as actual and compensatory damages, at least P500,000 as
exemplary and moral damages, and at least P500,000 as attorneys fees and
litigation expenses.[23]
In their answer, petitioners alleged, among other affirmative defenses, that:
petitioners GALLO cigarettes and Gallo Winerys wines were totally unrelated
products; Gallo Winerys GALLO trademark registration certificate covered wines
only, not cigarettes; GALLO cigarettes and GALLO wines were sold through different
channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for
GALLO menthols, were low-cost items compared to Gallo Winerys high-priced luxury
wines which cost between P98 to P242.50; the target market of Gallo Winerys wines
was the middle or high-income bracket with at least P10,000 monthly income while
GALLO cigarette buyers were farmers, fishermen, laborers and other low-income
workers; the dominant feature of the GALLO cigarette mark was the rooster device
with the manufacturers name clearly indicated as MIGHTY CORPORATION while, in
the case of Gallo Winerys wines, it was the full names of the founders-owners
ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and
conduct, respondents were guilty of laches and estoppel; and petitioners acted with
honesty, justice and good faith in the exercise of their right to manufacture and sell
GALLO cigarettes.
In an order dated April 21, 1993,[24] the Makati RTC denied, for lack of merit,
respondents prayer for the issuance of a writ of preliminary injunction,[25] holding
that respondents GALLO trademark registration certificate covered wines only, that
respondents wines and petitioners cigarettes were not related goods and
respondents failed to prove material damage or great irreparable injury as required
by Section 5, Rule 58 of the Rules of Court.[26]
On August 19, 1993, the Makati RTC denied, for lack of merit, respondents motion
for reconsideration. The court reiterated that respondents wines and petitioners
cigarettes were not related goods since the likelihood of deception and confusion on
the part of the consuming public was very remote. The trial court emphasized that it
could not rely on foreign rulings cited by respondents because the[se] cases were
decided by foreign courts on the basis of unknown facts peculiar to each case or
upon factual surroundings which may exist only within their jurisdiction. Moreover,
there [was] no showing that [these cases had] been tested or found applicable in our
jurisdiction.[27]
On February 20, 1995, the CA likewise dismissed respondents petition for review on
certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTCs denial
of the application for issuance of a writ of preliminary injunction against petitioners.
[28]
After trial on the merits, however, the Makati RTC, on November 26, 1998, held
petitioners liable for, and permanently enjoined them from, committing trademark
infringement and unfair competition with respect to the GALLO trademark:
WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the
defendant (sic), to wit:
a. permanently restraining and enjoining defendants, their distributors, trade outlets,
and all persons acting for them or under their instructions, from (i) using E & Js
registered trademark GALLO or any other reproduction, counterfeit, copy or
colorable imitation of said trademark, either singly or in conjunction with other words,
designs or emblems and other acts of similar nature, and (ii) committing other acts of
unfair competition against plaintiffs by manufacturing and selling their cigarettes in
the domestic or export markets under the GALLO trademark.
b. ordering defendants to pay plaintiffs
(i) actual and compensatory damages for the injury and prejudice and impairment of
plaintiffs business and goodwill as a result of the acts and conduct pleaded as basis
for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO HUNDRED
THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the
complaint until fully paid;
(ii) exemplary damages in the amount of PHP100,000.00;
(iii) attorneys fees and expenses of litigation in the amount of PHP1,130,068.91;
(iv) the cost of suit.
SO ORDERED.[29]
On June 24, 1999, the Makati RTC granted respondents motion for partial
reconsideration and increased the award of actual and compensatory damages to
10% of P199,290,000 or P19,929,000.[30]
On appeal, the CA affirmed the Makati RTC decision and subsequently denied
petitioners motion for reconsideration.
III.
The Issues
Petitioners now seek relief from this Court contending that the CA did not follow
prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual Property
Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes
and GALLO wines were identical, similar or related goods for the reason alone that
they were purportedly forms of vice; [c] both goods passed through the same
channels of trade and [d] petitioners were liable for trademark infringement, unfair
competition and damages.[31]
Respondents, on the other hand, assert that this petition which invokes Rule 45 does
not involve pure questions of law, and hence, must be dismissed outright.
IV.
Discussion
THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CAS FACTUAL FINDINGS
As a general rule, a petition for review on certiorari under Rule 45 must raise only
questions of law[32] (that is, the doubt pertains to the application and interpretation
of law to a certain set of facts) and not questions of fact (where the doubt concerns
the truth or falsehood of alleged facts),[33] otherwise, the petition will be denied. We
are not a trier of facts and the Court of Appeals factual findings are generally
conclusive upon us.[34]
This case involves questions of fact which are directly related and intertwined with
questions of law. The resolution of the factual issues concerning the goods similarity,
identity, relation, channels of trade, and acts of trademark infringement and unfair
competition is greatly dependent on the interpretation of applicable laws. The
controversy here is not simply the identity or similarity of both parties trademarks but
whether or not infringement or unfair competition was committed, a conclusion based
on statutory interpretation. Furthermore, one or more of the following exceptional
circumstances oblige us to review the evidence on record:[35]
(1) the conclusion is grounded entirely on speculation, surmises, and conjectures;
(2) the inference of the Court of Appeals from its findings of fact is manifestly
mistaken, absurd and impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts;
(5) the appellate court, in making its findings, went beyond the issues of the case,
and the same are contrary to the admissions of both the appellant and the appellee;
(6) the findings are without citation of specific evidence on which they are based;
(7) the facts set forth in the petition as well as in the petitioner's main and reply briefs
are not disputed by the respondents; and
(8) the findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted [by the evidence] on record.[36]
In this light, after thoroughly examining the evidence on record, weighing, analyzing
and balancing all factors to determine whether trademark infringement and/or unfair
competition has been committed, we conclude that both the Court of Appeals and
the trial court veered away from the law and well-settled jurisprudence.
Thus, we give due course to the petition.
THE TRADEMARK LAW AND THE PARIS
CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE
We note that respondents sued petitioners on March 12, 1993 for trademark
infringement and unfair competition committed during the effectivity of the Paris
Convention and the Trademark Law.
Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable
not only under the aforesaid governing laws but also under the IP Code which took
effect only on January 1, 1998,[37] or about five years after the filing of the
complaint:
Defendants unauthorized use of the GALLO trademark constitutes trademark
infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the IP
Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS
Agreement as it causes confusion, deception and mistake on the part of the
purchasing public.[38] (Emphasis and underscoring supplied)
The CA apparently did not notice the error and affirmed the Makati RTC decision:
In the light of its finding that appellants use of the GALLO trademark on its cigarettes
is likely to create confusion with the GALLO trademark on wines previously
registered and used in the Philippines by appellee E & J Gallo Winery, the trial court
thus did not err in holding that appellants acts not only violated the provisions of the
our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also Article 6bis of
the Paris Convention.[39] (Emphasis and underscoring supplied)
We therefore hold that the courts a quo erred in retroactively applying the IP Code in
this case.
It is a fundamental principle that the validity and obligatory force of a law proceed
from the fact that it has first been promulgated. A law that is not yet effective cannot
be considered as conclusively known by the populace. To make a law binding even
before it takes effect may lead to the arbitrary exercise of the legislative power.[40]
Nova constitutio futuris formam imponere debet non praeteritis. A new state of the
law ought to affect the future, not the past. Any doubt must generally be resolved
against the retroactive operation of laws, whether these are original enactments,
amendments or repeals.[41] There are only a few instances when laws may be given
retroactive effect,[42] none of which is present in this case.
The IP Code, repealing the Trademark Law,[43] was approved on June 6, 1997.
Section 241 thereof expressly decreed that it was to take effect only on January 1,
1998, without any provision for retroactive application. Thus, the Makati RTC and the
CA should have limited the consideration of the present case within the parameters
of the Trademark Law and the Paris Convention, the laws in force at the time of the
filing of the complaint.
DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION
Although the laws on trademark infringement and unfair competition have a common
conception at their root, that is, a person shall not be permitted to misrepresent his
goods or his business as the goods or business of another, the law on unfair
competition is broader and more inclusive than the law on trademark infringement.
The latter is more limited but it recognizes a more exclusive right derived from the
trademark adoption and registration by the person whose goods or business is first
associated with it. The law on trademarks is thus a specialized subject distinct from
the law on unfair competition, although the two subjects are entwined with each other
and are dealt with together in the Trademark Law (now, both are covered by the IP
Code). Hence, even if one fails to establish his exclusive property right to a
trademark, he may still obtain relief on the ground of his competitors unfairness or
fraud. Conduct constitutes unfair competition if the effect is to pass off on the public
the goods of one man as the goods of another. It is not necessary that any particular
means should be used to this end.[44]
In Del Monte Corporation vs. Court of Appeals,[45] we distinguished trademark
infringement from unfair competition:
(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair
competition is the passing off of one's goods as those of another.
(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair
competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a
prerequisite to the action, whereas in unfair competition registration is not necessary.
Pertinent Provisions on Trademark
Infringement under the Paris
Convention and the Trademark Law
Article 6bis of the Paris Convention,[46] an international agreement binding on the
Philippines and the United States (Gallo Winerys country of domicile and origin)
prohibits the [registration] or use of a trademark which constitutes a reproduction,
imitation or translation, liable to create confusion, of a mark considered by the
competent authority of the country of registration or use to be well-known in that
country as being already the mark of a person entitled to the benefits of the [Paris]
Convention and used for identical or similar goods. [This rule also applies] when the
essential part of the mark constitutes a reproduction of any such well-known mark or
an imitation liable to create confusion therewith. There is no time limit for seeking the
prohibition of the use of marks used in bad faith.[47]
Thus, under Article 6bis of the Paris Convention, the following are the elements of
trademark infringement:
(a) registration or use by another person of a trademark which is a reproduction,
imitation or translation liable to create confusion,
(b) of a mark considered by the competent authority of the country of registration or
use[48] to be well-known in that country and is already the mark of a person entitled
to the benefits of the Paris Convention, and
(c) such trademark is used for identical or similar goods.
On the other hand, Section 22 of the Trademark Law holds a person liable for
infringement when, among others, he uses without the consent of the registrant, any
reproduction, counterfeit, copy or colorable imitation of any registered mark or
tradename in connection with the sale, offering for sale, or advertising of any goods,
business or services or in connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others as to the source or origin of
such goods or services, or identity of such business; or reproduce, counterfeit, copy
or colorably imitate any such mark or tradename and apply such reproduction,
counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with such
goods, business or services.[49] Trademark registration and actual use are material
to the complaining partys cause of action.
Corollary to this, Section 20 of the Trademark Law[50] considers the trademark
registration certificate as prima facie evidence of the validity of the registration, the
registrants ownership and exclusive right to use the trademark in connection with the
goods, business or services as classified by the Director of Patents[51] and as
specified in the certificate, subject to the conditions and limitations stated therein.
Sections 2 and 2-A[52] of the Trademark Law emphasize the importance of the
trademarks actual use in commerce in the Philippines prior to its registration. In the
adjudication of trademark rights between contending parties, equitable principles of
laches, estoppel, and acquiescence may be considered and applied.[53]
Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following
constitute the elements of trademark infringement:
(a) a trademark actually used in commerce in the Philippines and registered in the
principal register of the Philippine Patent Office
(b) is used by another person in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such use
is likely to cause confusion or mistake or to deceive purchasers or others as to the
source or origin of such goods or services, or identity of such business; or such
trademark is reproduced, counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or colorable imitation is applied to
labels, signs, prints, packages, wrappers, receptacles or advertisements intended to
be used upon or in connection with such goods, business or services as to likely
cause confusion or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.
In summary, the Paris Convention protects well-known trademarks only (to be
determined by domestic authorities), while the Trademark Law protects all
trademarks, whether well-known or not, provided that they have been registered and
are in actual commercial use in the Philippines. Following universal acquiescence
and comity, in case of domestic legal disputes on any conflicting provisions between
the Paris Convention (which is an international agreement) and the Trademark law
(which is a municipal law) the latter will prevail.[54]
Under both the Paris Convention and the Trademark Law, the protection of a
registered trademark is limited only to goods identical or similar to those in respect of
which such trademark is registered and only when there is likelihood of confusion.
Under both laws, the time element in commencing infringement cases is material in
ascertaining the registrants express or implied consent to anothers use of its
trademark or a colorable imitation thereof. This is why acquiescence, estoppel or
laches may defeat the registrants otherwise valid cause of action.
Hence, proof of all the elements of trademark infringement is a condition precedent
to any finding of liability.
THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.
By respondents own judicial admission, the GALLO wine trademark was registered
in the Philippines in November 1971 but the wine itself was first marketed and sold in
the country only in 1974 and only within the former U.S. military facilities, and outside
thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the
Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981
addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926
dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City,
Philippines. Both invoices were for the sale and shipment of GALLO wines to the
Philippines during that period.[55] Nothing at all, however, was presented to
evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that
matter, prior to July 9, 1981.
On the other hand, by testimonial evidence supported by the BIR authorization
letters, forms and manufacturers sworn statement, it appears that petitioners and its
predecessor-in-interest, Tobacco Industries, have indeed been using and selling
GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.[56]
In Emerald Garment Manufacturing Corporation vs. Court of Appeals,[57] we
reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,[58]
Converse Rubber Corporation vs. Universal Rubber Products, Inc.,[59] Sterling
Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,[60] Kabushi
Kaisha Isetan vs. Intermediate Appellate Court,[61] and Philip Morris vs. Court of
Appeals,[62] giving utmost importance to the actual commercial use of a trademark
in the Philippines prior to its registration, notwithstanding the provisions of the Paris
Convention:
xxx xxx xxx
In addition to the foregoing, we are constrained to agree with petitioner's contention
that private respondent failed to prove prior actual commercial use of its LEE
trademark in the Philippines before filing its application for registration with the
BPTTT and hence, has not acquired ownership over said mark.
Actual use in commerce in the Philippines is an essential prerequisite for the
acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166) x x x
xxx xxx xxx
The provisions of the 1965 Paris Convention for the Protection of Industrial Property
relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No.
166) were sufficiently expounded upon and qualified in the recent case of Philip
Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):
xxx xxx xxx
Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a
municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization,
1971 Ed., p. 20). Withal, the fact that international law has been made part of the law
of the land does not by any means imply the primacy of international law over
national law in the municipal sphere. Under the doctrine of incorporation as applied
in most countries, rules of international law are given a standing equal, not superior,
to national legislative enactments.
xxx xxx xxx
In other words, (a foreign corporation) may have the capacity to sue for infringement
irrespective of lack of business activity in the Philippines on account of Section 21-A
of the Trademark Law but the question of whether they have an exclusive right over
their symbol as to justify issuance of the controversial writ will depend on actual use
of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law.
It is thus incongruous for petitioners to claim that when a foreign corporation not
licensed to do business in the Philippines files a complaint for infringement, the entity
need not be actually using the trademark in commerce in the Philippines. Such a
foreign corporation may have the personality to file a suit for infringement but it may
not necessarily be entitled to protection due to absence of actual use of the emblem
in the local market.
xxx xxx xxx
Undisputably, private respondent is the senior registrant, having obtained several
registration certificates for its various trademarks LEE, LEE RIDERS, and
LEESURES in both the supplemental and principal registers, as early as 1969 to
1973. However, registration alone will not suffice. In Sterling Products International,
Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated in
Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we
declared:
xxx xxx xxx
A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite in the acquisition
of the right of ownership over a trademark.
xxx xxx xxx
The credibility placed on a certificate of registration of one's trademark, or its weight
as evidence of validity, ownership and exclusive use, is qualified. A registration
certificate serves merely as prima facie evidence. It is not conclusive but can and
may be rebutted by controverting evidence.
xxx xxx xxx
In the case at bench, however, we reverse the findings of the Director of Patents and
the Court of Appeals. After a meticulous study of the records, we observe that the
Director of Patents and the Court of Appeals relied mainly on the registration
certificates as proof of use by private respondent of the trademark LEE which, as we
have previously discussed are not sufficient. We cannot give credence to private
respondent's claim that its LEE mark first reached the Philippines in the 1960's
through local sales by the Post Exchanges of the U.S. Military Bases in the
Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of
Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary
of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p.
52) Similarly, we give little weight to the numerous vouchers representing various
advertising expenses in the Philippines for LEE products. It is well to note that these
expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered
into a licensing agreement with private respondent on 11 May 1981. (Exhibit E)
On the other hand, petitioner has sufficiently shown that it has been in the business
of selling jeans and other garments adopting its STYLISTIC MR. LEE trademark
since 1975 as evidenced by appropriate sales invoices to various stores and
retailers. (Exhibit 1-e to 1-o)
Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982])
and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA 154
[1987]), respectively, are instructive:
The Trademark Law is very clear. It requires actual commercial use of the mark prior
to its registration. There is no dispute that respondent corporation was the first
registrant, yet it failed to fully substantiate its claim that it used in trade or business in
the Philippines the subject mark; it did not present proof to invest it with exclusive,
continuous adoption of the trademark which should consist among others, of
considerable sales since its first use. The invoices submitted by respondent which
were dated way back in 1957 show that the zippers sent to the Philippines were to
be used as samples and of no commercial value. The evidence for respondent must
be clear, definite and free from inconsistencies. Samples are not for sale and
therefore, the fact of exporting them to the Philippines cannot be considered to be
equivalent to the use contemplated by law. Respondent did not expect income from
such samples. There were no receipts to establish sale, and no proof were
presented to show that they were subsequently sold in the Philippines.
xxx xxx xxx
For lack of adequate proof of actual use of its trademark in the Philippines prior to
petitioner's use of its own mark and for failure to establish confusing similarity
between said trademarks, private respondent's action for infringement must
necessarily fail. (Emphasis supplied.)
In view of the foregoing jurisprudence and respondents judicial admission that the
actual commercial use of the GALLO wine trademark was subsequent to its
registration in 1971 and to Tobacco Industries commercial use of the GALLO
cigarette trademark in 1973, we rule that, on this account, respondents never
enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of
Tobacco Industries and its successors-in-interest, herein petitioners, either under the
Trademark Law or the Paris Convention.
Respondents GALLO trademark
registration is limited to
wines only
We also note that the GALLO trademark registration certificates in the Philippines
and in other countries expressly state that they cover wines only, without any
evidence or indication that registrant Gallo Winery expanded or intended to expand
its business to cigarettes.[63]
Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys
exclusive right to use the GALLO trademark should be limited to wines, the only
product indicated in its registration certificates. This strict statutory limitation on the
exclusive right to use trademarks was amply clarified in our ruling in Faberge, Inc. vs.
Intermediate Appellate Court:[64]
Having thus reviewed the laws applicable to the case before Us, it is not difficult to
discern from the foregoing statutory enactments that private respondent may be
permitted to register the trademark BRUTE for briefs produced by it notwithstanding
petitioner's vehement protestations of unfair dealings in marketing its own set of
items which are limited to: after-shave lotion, shaving cream, deodorant, talcum
powder and toilet soap. Inasmuch as petitioner has not ventured in the production of
briefs, an item which is not listed in its certificate of registration, petitioner cannot and
should not be allowed to feign that private respondent had invaded petitioner's
exclusive domain. To be sure, it is significant that petitioner failed to annex in its Brief
the so-called eloquent proof that petitioner indeed intended to expand its mark BRUT
to other goods (Page 27, Brief for the Petitioner; page 202, Rollo). Even then, a mere
application by petitioner in this aspect does not suffice and may not vest an exclusive
right in its favor that can ordinarily be protected by the Trademark Law. In short,
paraphrasing Section 20 of the Trademark Law as applied to the documentary
evidence adduced by petitioner, the certificate of registration issued by the Director
of Patents can confer upon petitioner the exclusive right to use its own symbol only
to those goods specified in the certificate, subject to any conditions and limitations
stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in
Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed
the principle enunciated by the United States Supreme Court in American Foundries
vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has
adopted and used a trademark on his goods does not prevent the adoption and use
of the same trademark by others for products which are of a different description.
Verily, this Court had the occasion to observe in the 1966 case of George W. Luft
Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed
by the petitioner therein since the applicant utilized the emblem Tango for no other
product than hair pomade in which petitioner does not deal.
This brings Us back to the incidental issue raised by petitioner which private
respondent sought to belie as regards petitioner's alleged expansion of its business.
It may be recalled that petitioner claimed that it has a pending application for
registration of the emblem BRUT 33 for briefs (page 25, Brief for the Petitioner; page
202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL
Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity
of goods will not preclude relief if the junior user's goods are not remote from any
other product which the first user would be likely to make or sell (vide, at page 1025).
Commenting on the former provision of the Trademark Law now embodied
substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite
jurist opined that the law in point does not require that the articles of manufacture of
the previous user and late user of the mark should possess the same descriptive
properties or should fall into the same categories as to bar the latter from registering
his mark in the principal register. (supra at page 1026).
Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law
extends only to the goods used by the first user as specified in the certificate of
registration following the clear message conveyed by Section 20.
How do We now reconcile the apparent conflict between Section 4(d) which was
relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would
seem that Section 4(d) does not require that the goods manufactured by the second
user be related to the goods produced by the senior user while Section 20 limits the
exclusive right of the senior user only to those goods specified in the certificate of
registration. But the rule has been laid down that the clause which comes later shall
be given paramount significance over an anterior proviso upon the presumption that
it expresses the latest and dominant purpose. (Graham Paper Co. vs. National
Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87
Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin,
Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that
Section 20 is controlling and, therefore, private respondent can appropriate its
symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez
in Sterling Products International Inc. vs. Farbenfabriken Bayer (27 SCRA 1214
[1969]):
Really, if the certificate of registration were to be deemed as including goods not
specified therein, then a situation may arise whereby an applicant may be tempted to
register a trademark on any and all goods which his mind may conceive even if he
had never intended to use the trademark for the said goods. We believe that such
omnibus registration is not contemplated by our Trademark Law. (1226).
NO LIKELIHOOD OF CONFUSION, MISTAKE
OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS AND RESPONDENTS
GOODS OR BUSINESS
A crucial issue in any trademark infringement case is the likelihood of confusion,
mistake or deceit as to the identity, source or origin of the goods or identity of the
business as a consequence of using a certain mark. Likelihood of confusion is
admittedly a relative term, to be determined rigidly according to the particular (and
sometimes peculiar) circumstances of each case. Thus, in trademark cases, more
than in other kinds of litigation, precedents must be studied in the light of each
particular case. [65]
There are two types of confusion in trademark infringement. The first is confusion of
goods when an otherwise prudent purchaser is induced to purchase one product in
the belief that he is purchasing another, in which case defendants goods are then
bought as the plaintiffs and its poor quality reflects badly on the plaintiffs reputation.
The other is confusion of business wherein the goods of the parties are different but
the defendants product can reasonably (though mistakenly) be assumed to originate
from the plaintiff, thus deceiving the public into believing that there is some
connection between the plaintiff and defendant which, in fact, does not exist.[66]
In determining the likelihood of confusion, the Court must consider: [a] the
resemblance between the trademarks; [b] the similarity of the goods to which the
trademarks are attached; [c] the likely effect on the purchaser and [d] the registrants
express or implied consent and other fair and equitable considerations.
Petitioners and respondents both use GALLO in the labels of their respective
cigarette and wine products. But, as held in the following cases, the use of an
identical mark does not, by itself, lead to a legal conclusion that there is trademark
infringement:
(a) in Acoje Mining Co., Inc. vs. Director of Patent,[67] we ordered the approval of
Acoje Minings application for registration of the trademark LOTUS for its soy sauce
even though Philippine Refining Company had prior registration and use of such
identical mark for its edible oil which, like soy sauce, also belonged to Class 47;
(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,[68] we upheld
the Patent Directors registration of the same trademark CAMIA for Ng Sams ham
under Class 47, despite Philippine Refining Companys prior trademark registration
and actual use of such mark on its lard, butter, cooking oil (all of which belonged to
Class 47), abrasive detergents, polishing materials and soaps;
(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,
[69] we dismissed Hickoks petition to cancel private respondents HICKOK trademark
registration for its Marikina shoes as against petitioners earlier registration of the
same trademark for handkerchiefs, briefs, belts and wallets;
(d) in Shell Company of the Philippines vs. Court of Appeals,[70] in a minute
resolution, we dismissed the petition for review for lack of merit and affirmed the
Patent Offices registration of the trademark SHELL used in the cigarettes
manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell
Companys opposition as the prior registrant of the same trademark for its gasoline
and other petroleum products;
(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,[71] we dismissed ESSOs
complaint for trademark infringement against United Cigarette Corporation and
allowed the latter to use the trademark ESSO for its cigarettes, the same trademark
used by ESSO for its petroleum products, and
(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,
[72] we affirmed the rulings of the Patent Office and the CA that NSR Rubber
Corporation could use the trademark CANON for its sandals (Class 25) despite
Canon Kabushiki Kaishas prior registration and use of the same trademark for its
paints, chemical products, toner and dyestuff (Class 2).
Whether a trademark causes confusion and is likely to deceive the public hinges on
colorable imitation[73] which has been defined as such similarity in form, content,
words, sound, meaning, special arrangement or general appearance of the
trademark or tradename in their overall presentation or in their essential and
substantive and distinctive parts as would likely mislead or confuse persons in the
ordinary course of purchasing the genuine article.[74]
Jurisprudence has developed two tests in determining similarity and likelihood of
confusion in trademark resemblance:[75]
(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals[76] and
other cases,[77] and
(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of
Appeals[78] and its preceding cases.[79]
The Dominancy Test focuses on the similarity of the prevalent features of the
competing trademarks which might cause confusion or deception, and thus
infringement. If the competing trademark contains the main, essential or dominant
features of another, and confusion or deception is likely to result, infringement takes
place. Duplication or imitation is not necessary; nor is it necessary that the infringing
label should suggest an effort to imitate. The question is whether the use of the
marks involved is likely to cause confusion or mistake in the mind of the public or
deceive purchasers.[80]
On the other hand, the Holistic Test requires that the entirety of the marks in question
be considered in resolving confusing similarity. Comparison of words is not the only
determining factor. The trademarks in their entirety as they appear in their respective
labels or hang tags must also be considered in relation to the goods to which they
are attached. The discerning eye of the observer must focus not only on the
predominant words but also on the other features appearing in both labels in order
that he may draw his conclusion whether one is confusingly similar to the other.[81]
In comparing the resemblance or colorable imitation of marks, various factors have
been considered, such as the dominant color, style, size, form, meaning of letters,
words, designs and emblems used, the likelihood of deception of the mark or name's
tendency to confuse[82] and the commercial impression likely to be conveyed by the
trademarks if used in conjunction with the respective goods of the parties.[83]
Applying the Dominancy and Holistic Tests, we find that the dominant feature of the
GALLO cigarette trademark is the device of a large rooster facing left, outlined in
black against a gold background. The roosters color is either green or red green for
GALLO menthols and red for GALLO filters. Directly below the large rooster device is
the word GALLO. The rooster device is given prominence in the GALLO cigarette
packs in terms of size and location on the labels.[84]
The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it
has no relation at all to the product but was chosen merely as a trademark due to the
fondness for fighting cocks of the son of petitioners president. Furthermore,
petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to
appeal to one of their target markets, the sabungeros (cockfight aficionados).[85]
Also, as admitted by respondents themselves,[86] on the side of the GALLO
cigarette packs are the words MADE BY MIGHTY CORPORATION, thus clearly
informing the public as to the identity of the manufacturer of the cigarettes.
On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of
them, the labels are embellished with sketches of buildings and trees, vineyards or a
bunch of grapes while in a few, one or two small roosters facing right or facing each
other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs
in green, red and yellow colors, appear as minor features thereof.[87] Directly below
or above these sketches is the entire printed name of the founder-owners, ERNEST
& JULIO GALLO or just their surname GALLO,[88] which appears in different fonts,
sizes, styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO
mark.
Moreover, on the labels of Gallo Winerys wines are printed the words VINTED AND
BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.[89]
The many different features like color schemes, art works and other markings of both
products drown out the similarity between them the use of the word GALLO a
family surname for the Gallo Winerys wines and a Spanish word for rooster for
petitioners cigarettes.
WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS
Confusion of goods is evident where the litigants are actually in competition; but
confusion of business may arise between non-competing interests as well.[90]
Thus, apart from the strict application of Section 20 of the Trademark Law and Article
6bis of the Paris Convention which proscribe trademark infringement not only of
goods specified in the certificate of registration but also of identical or similar goods,
we have also uniformly recognized and applied the modern concept of related goods.
[91] Simply stated, when goods are so related that the public may be, or is actually,
deceived and misled that they come from the same maker or manufacturer,
trademark infringement occurs.[92]
Non-competing goods may be those which, though they are not in actual
competition, are so related to each other that it can reasonably be assumed that they
originate from one manufacturer, in which case, confusion of business can arise out
of the use of similar marks.[93] They may also be those which, being entirely
unrelated, cannot be assumed to have a common source; hence, there is no
confusion of business, even though similar marks are used.[94] Thus, there is no
trademark infringement if the public does not expect the plaintiff to make or sell the
same class of goods as those made or sold by the defendant.[95]
In resolving whether goods are related,[96] several factors come into play:
(a) the business (and its location) to which the goods belong
(b) the class of product to which the goods belong
(c) the product's quality, quantity, or size, including the nature of the package,
wrapper or container [97]
(d) the nature and cost of the articles[98]
(e) the descriptive properties, physical attributes or essential characteristics with
reference to their form, composition, texture or quality
(f) the purpose of the goods[99]
(g) whether the article is bought for immediate consumption,[100] that is, day-to-day
household items[101]
(h) the fields of manufacture[102]
(i) the conditions under which the article is usually purchased[103] and
(j) the channels of trade through which the goods flow,[104] how they are distributed,
marketed, displayed and sold.[105]
The wisdom of this approach is its recognition that each trademark infringement case
presents its own unique set of facts. No single factor is preeminent, nor can the
presence or absence of one determine, without analysis of the others, the outcome
of an infringement suit. Rather, the court is required to sift the evidence relevant to
each of the criteria. This requires that the entire panoply of elements constituting the
relevant factual landscape be comprehensively examined.[106] It is a weighing and
balancing process. With reference to this ultimate question, and from a balancing of
the determinations reached on all of the factors, a conclusion is reached whether the
parties have a right to the relief sought.[107]
A very important circumstance though is whether there exists a likelihood that an
appreciable number of ordinarily prudent purchasers will be misled, or simply
confused, as to the source of the goods in question.[108] The purchaser is not the
completely unwary consumer but is the ordinarily intelligent buyer considering the
type of product involved.[109] He is accustomed to buy, and therefore to some extent
familiar with, the goods in question. The test of fraudulent simulation is to be found in
the likelihood of the deception of some persons in some measure acquainted with an
established design and desirous of purchasing the commodity with which that design
has been associated. The test is not found in the deception, or the possibility of
deception, of the person who knows nothing about the design which has been
counterfeited, and who must be indifferent between that and the other. The
simulation, in order to be objectionable, must be such as appears likely to mislead
the ordinary intelligent buyer who has a need to supply and is familiar with the article
that he seeks to purchase.[110]
Hence, in the adjudication of trademark infringement, we give due regard to the
goods usual purchasers character, attitude, habits, age, training and education. [111]
Applying these legal precepts to the present case, petitioners use of the GALLO
cigarette trademark is not likely to cause confusion or mistake, or to deceive the
ordinarily intelligent buyer of either wines or cigarettes or both as to the identity of the
goods, their source and origin, or identity of the business of petitioners and
respondents.
Obviously, wines and cigarettes are not identical or competing products. Neither do
they belong to the same class of goods. Respondents GALLO wines belong to Class
33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases
while petitioners GALLO cigarettes fall under Class 34.
We are mindful that product classification alone cannot serve as the decisive factor
in the resolution of whether or not wines and cigarettes are related goods. Emphasis
should be on the similarity of the products involved and not on the arbitrary
classification or general description of their properties or characteristics. But the
mere fact that one person has adopted and used a particular trademark for his goods
does not prevent the adoption and use of the same trademark by others on articles
of a different description. [112]
Both the Makati RTC and the CA held that wines and cigarettes are related products
because: (1) they are related forms of vice, harmful when taken in excess, and used
for pleasure and relaxation and (2) they are grouped or classified in the same section
of supermarkets and groceries.
We find these premises patently insufficient and too arbitrary to support the legal
conclusion that wines and cigarettes are related products within the contemplation of
the Trademark Law and the Paris Convention.
First, anything - not only wines and cigarettes can be used for pleasure and
relaxation and can be harmful when taken in excess. Indeed, it would be a grave
abuse of discretion to treat wines and cigarettes as similar or related products likely
to cause confusion just because they are pleasure-giving, relaxing or potentially
harmful. Such reasoning makes no sense.
Second, it is common knowledge that supermarkets sell an infinite variety of wholly
unrelated products and the goods here involved, wines and cigarettes, have nothing
whatsoever in common with respect to their essential characteristics, quality,
quantity, size, including the nature of their packages, wrappers or containers.[113]
Accordingly, the U.S. patent office and courts have consistently held that the mere
fact that goods are sold in one store under the same roof does not automatically
mean that buyers are likely to be confused as to the goods respective sources,
connections or sponsorships. The fact that different products are available in the
same store is an insufficient standard, in and of itself, to warrant a finding of
likelihood of confusion.[114]
In this regard, we adopted the Director of Patents finding in Philippine Refining Co.,
Inc. vs. Ng Sam and the Director of Patents:[115]
In his decision, the Director of Patents enumerated the factors that set respondents
products apart from the goods of petitioner. He opined and we quote:
I have taken into account such factors as probable purchaser attitude and habits,
marketing activities, retail outlets, and commercial impression likely to be conveyed
by the trademarks if used in conjunction with the respective goods of the parties, I
believe that ham on one hand, and lard, butter, oil, and soap on the other are
products that would not move in the same manner through the same channels of
trade. They pertain to unrelated fields of manufacture, might be distributed and
marketed under dissimilar conditions, and are displayed separately even though they
frequently may be sold through the same retail food establishments. Opposers
products are ordinary day-to-day household items whereas ham is not necessarily
so. Thus, the goods of the parties are not of a character which purchasers would
likely attribute to a common origin.
The observations and conclusion of the Director of Patents are correct. The
particular goods of the parties are so unrelated that consumers, would not, in any
probability mistake one as the source of origin of the product of the other. (Emphasis
supplied).
The same is true in the present case. Wines and cigarettes are non-competing and
are totally unrelated products not likely to cause confusion vis--vis the goods or the
business of the petitioners and respondents.
Wines are bottled and consumed by drinking while cigarettes are packed in cartons
or packages and smoked. There is a whale of a difference between their descriptive
properties, physical attributes or essential characteristics like form, composition,
texture and quality.
GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines
are patronized by middle-to-high-income earners while GALLO cigarettes appeal
only to simple folks like farmers, fishermen, laborers and other low-income workers.
[116] Indeed, the big price difference of these two products is an important factor in
proving that they are in fact unrelated and that they travel in different channels of
trade. There is a distinct price segmentation based on vastly different social classes
of purchasers.[117]
GALLO cigarettes and GALLO wines are not sold through the same channels of
trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass
off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are
distributed, marketed and sold through ambulant and sidewalk vendors, small local
sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis
Oriental, Pangasinan, Bohol, and Cebu.[118] On the other hand, GALLO wines are
imported, distributed and sold in the Philippines through Gallo Winerys exclusive
contracts with a domestic entity, which is currently Andresons. By respondents own
testimonial evidence, GALLO wines are sold in hotels, expensive bars and
restaurants, and high-end grocery stores and supermarkets, not through sari-sari
stores or ambulant vendors.[119]
Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing
Company vs. Philip Morris, Inc.[120] to support its finding that GALLO wines and
GALLO cigarettes are related goods. The courts a quo should have taken into
consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co.
Limited vs. S & M Brands, Inc.:[121]
IDV correctly acknowledges, however, that there is no per se rule that the use of the
same mark on alcohol and tobacco products always will result in a likelihood of
confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons,
Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd, 222 F. 2d 460
(5th Cir. 1955), wherein the court enjoined the use of the mark JOHNNIE WALKER
on cigars because the fame of the plaintiffs mark for scotch whiskey and because the
plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The
court, in John Walker & Sons, placed great significance on the finding that the
infringers use was a deliberate attempt to capitalize on the senior marks fame. Id. At
256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330,
1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the mark
BLACK LABEL for cigarettes because it was likely to cause confusion with the
plaintiffs well-known mark BLACK LABEL for beer.
xxx xxx xxx
Those decisions, however, must be considered in perspective of the principle that
tobacco products and alcohol products should be considered related only in cases
involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co.,
57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances
has been found to exist where there is a finding of unfair competition or where a
famous or well-known mark is involved and there is a demonstrated intent to
capitalize on that mark. For example, in John Walker & Sons, the court was
persuaded to find a relationship between products, and hence a likelihood of
confusion, because of the plaintiffs long use and extensive advertising of its mark
and placed great emphasis on the fact that the defendant used the trademark
Johnnie Walker with full knowledge of its fame and reputation and with the intention
of taking advantage thereof. John Walker & Sons, 124 F. Supp. At 256; see
Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307
(1959) (holding that the decision in John Walker & Sons was merely the law on the
particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F.
Supp. At 1363 (defendants adoption of Dunhill mark was not innocent). However, in
Schenley, the court noted that the relation between tobacco and whiskey products is
significant where a widely known arbitrary mark has long been used for diversified
products emanating from a single source and a newcomer seeks to use the same
mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the
court looked at the industry practice and the facts of the case in order to determine
the nature and extent of the relationship between the mark on the tobacco product
and the mark on the alcohol product.
The record here establishes conclusively that IDV has never advertised BAILEYS
liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has
no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not
market bar accessories, or liqueur related products, with its cigarettes. The
advertising and promotional materials presented a trial in this action demonstrate a
complete lack of affiliation between the tobacco and liqueur products bearing the
marks here at issue.
xxx xxx xxx
Of equal significance, it is undisputed that S & M Brands had no intent, by adopting
the family name Baileys as the mark for its cigarettes, to capitalize upon the fame of
the BAILEYS mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be
discussed below, and as found in Mckesson & Robbins, the survey evidence refutes
the contention that cigarettes and alcoholic beverages are so intimately associated in
the public mind that they cannot under any circumstances be sold under the same
mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.
Taken as a whole, the evidence here demonstrates the absence of the special
circumstances in which courts have found a relationship between tobacco and
alcohol products sufficient to tip the similarity of goods analysis in favor of the
protected mark and against the allegedly infringing mark. It is true that BAILEYS
liqueur, the worlds best selling liqueur and the second best selling in the United
States, is a well-known product. That fact alone, however, is insufficient to invoke the
special circumstances connection here where so much other evidence and so many
other factors disprove a likelihood of confusion. The similarity of products analysis,
therefore, augers against finding that there is a likelihood of confusion. (Emphasis
supplied).
In short, tobacco and alcohol products may be considered related only in cases
involving special circumstances which exist only if a famous mark is involved and
there is a demonstrated intent to capitalize on it. Both of these are absent in the
present case.
THE GALLO WINE TRADEMARK IS NOT A
WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS
First, the records bear out that most of the trademark registrations took place in the
late 1980s and the 1990s, that is, after Tobacco Industries use of the GALLO
cigarette trademark in 1973 and petitioners use of the same mark in 1984.
GALLO wines and GALLO cigarettes are neither the same, identical, similar nor
related goods, a requisite element under both the Trademark Law and the Paris
Convention.
Second, the GALLO trademark cannot be considered a strong and distinct mark in
the Philippines. Respondents do not dispute the documentary evidence that aside
from Gallo Winerys GALLO trademark registration, the Bureau of Patents,
Trademarks and Technology Transfer also issued on September 4, 1992 Certificate
of Registration No. 53356 under the Principal Register approving Productos
Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration
and use for its noodles, prepared food or canned noodles, ready or canned sauces
for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice
cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species
and ice.[122]
Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court
of Appeals and NSR Rubber Corporation,[123] GALLO cannot be considered a well-
known mark within the contemplation and protection of the Paris Convention in this
case since wines and cigarettes are not identical or similar goods:
We agree with public respondents that the controlling doctrine with respect to the
applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha
Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the
BPTTT:
Regarding the applicability of Article 8 of the Paris Convention, this Office believes
that there is no automatic protection afforded an entity whose tradename is alleged
to have been infringed through the use of that name as a trademark by a local entity.
In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No.
75420, 15 November 1991, the Honorable Supreme Court held that:
The Paris Convention for the Protection of Industrial Property does not automatically
exclude all countries of the world which have signed it from using a tradename which
happens to be used in one country. To illustrate if a taxicab or bus company in a town
in the United Kingdom or India happens to use the tradename Rapid Transportation,
it does not necessarily follow that Rapid can no longer be registered in Uganda, Fiji,
or the Philippines.
This office is not unmindful that in (sic) the Treaty of Paris for the Protection of
Intellectual Property regarding well-known marks and possible application thereof in
this case. Petitioner, as this office sees it, is trying to seek refuge under its protective
mantle, claiming that the subject mark is well known in this country at the time the
then application of NSR Rubber was filed.
However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin,
issued a memorandum dated 25 October 1983 to the Director of Patents, a set of
guidelines in the implementation of Article 6bis of the Treaty of Paris. These
conditions are:
a) the mark must be internationally known;
b) the subject of the right must be a trademark, not a patent or copyright or anything
else;
c) the mark must be for use in the same or similar kinds of goods; and
d) the person claiming must be the owner of the mark (The Parties Convention
Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the
World Intellectual Property Organization, Geneva, Switzerland, 1985)
From the set of facts found in the records, it is ruled that the Petitioner failed to
comply with the third requirement of the said memorandum that is the mark must be
for use in the same or similar kinds of goods. The Petitioner is using the mark
CANON for products belonging to class 2 (paints, chemical products) while the
Respondent is using the same mark for sandals (class 25).
Hence, Petitioner's contention that its mark is well-known at the time the Respondent
filed its application for the same mark should fail. (Emphasis supplied.)
Consent of the Registrant and
Other air, Just and Equitable
Considerations
Each trademark infringement case presents a unique problem which must be
answered by weighing the conflicting interests of the litigants.[124]
Respondents claim that GALLO wines and GALLO cigarettes flow through the same
channels of trade, that is, retail trade. If respondents assertion is true, then both
goods co-existed peacefully for a considerable period of time. It took respondents
almost 20 years to know about the existence of GALLO cigarettes and sue
petitioners for trademark infringement. Given, on one hand, the long period of time
that petitioners were engaged in the manufacture, marketing, distribution and sale of
GALLO cigarettes and, on the other, respondents delay in enforcing their rights (not
to mention implied consent, acquiescence or negligence) we hold that equity, justice
and fairness require us to rule in favor of petitioners. The scales of conscience and
reason tip far more readily in favor of petitioners than respondents.
Moreover, there exists no evidence that petitioners employed malice, bad faith or
fraud, or that they intended to capitalize on respondents goodwill in adopting the
GALLO mark for their cigarettes which are totally unrelated to respondents GALLO
wines. Thus, we rule out trademark infringement on the part of petitioners.
PETITIONERS ARE ALSO NOT LIABLE
FOR UNFAIR COMPETITION
Under Section 29 of the Trademark Law, any person who employs deception or any
other means contrary to good faith by which he passes off the goods manufactured
by him or in which he deals, or his business, or services for those of the one having
established such goodwill, or who commits any acts calculated to produce said
result, is guilty of unfair competition. It includes the following acts:
(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer or
dealer other than the actual manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public;
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
the goods, business or services of another.
The universal test question is whether the public is likely to be deceived. Nothing
less than conduct tending to pass off one mans goods or business as that of another
constitutes unfair competition. Actual or probable deception and confusion on the
part of customers by reason of defendants practices must always appear.[125] On
this score, we find that petitioners never attempted to pass off their cigarettes as
those of respondents. There is no evidence of bad faith or fraud imputable to
petitioners in using their GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws as well as those
recognized by jurisprudence, we conclude that petitioners are not liable for
trademark infringement, unfair competition or damages.
WHEREFORE, finding the petition for review meritorious, the same is hereby
GRANTED. The questioned decision and resolution of the Court of Appeals in CA-
G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999
order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are
hereby REVERSED and SET ASIDE and the complaint against petitioners
DISMISSED.
Costs against respondents.
SO ORDERED.
Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.
Carpio-Morales, J., no part.
G.R. No. 91332 July 16, 1993
PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES
OF TABAC REUNIES, S.A., petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION,
respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.
MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges
(Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical
exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the
Revised Rules of Court when respondent Court of Appeals lifted the writ of
preliminary injunction it earlier had issued against Fortune Tobacco Corporation,
herein private respondent, from manufacturing and selling "MARK" cigarettes in the
local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN",
and "LARK", also for cigarettes, must be protected against unauthorized
appropriation, petitioners twice solicited the ancillary writ in the course the main suit
for infringement but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized
that resolution of the issue on the propriety of lifting the writ of preliminary injunction
should not be construed as a prejudgment of the suit below. Aware of the fact that
the discussion we are about to enter into involves a mere interlocutory order, a
discourse on the aspect infringement must thus be avoided. With these caveat, we
shall now shift our attention to the events which spawned the controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation
organized under the laws of the State of Virginia, United States of America, and does
business at 100 Park Avenue, New York, New York, United States of America. The
two other plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip
Morris, Inc., are similarly not doing business in the Philippines but are suing on an
isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK"
per certificates of registration issued by the Philippine Patent Office on April 26,
1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that
defendant Fortune Tobacco Corporation has no right to manufacture and sell
cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in
contravention of Section 22 of the Trademark Law, and should, therefore, be
precluded during the pendency of the case from performing the acts complained of
via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of
registration with the Philippine Patent Office subject to the affirmative and special
defense on misjoinder of party plaintiffs. Private respondent alleged further that it has
been authorized by the Bureau of Internal Revenue to manufacture and sell
cigarettes bearing the trademark "MARK", and that "MARK" is a common word which
cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP
No. 13132). On March 28, 1983, petitioners' prayer for preliminary injunction was
denied by the Presiding Judge of Branch 166 of the Regional Trial Court of the
National Capital Judicial Region stationed at Pasig, premised upon the following
propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are
not doing business in the Philippines and are suing on an isolated transaction . . .".
This simply means that they are not engaged in the sale, manufacture, importation,
expor[t]ation and advertisement of their cigarette products in the Philippines. With
this admission, defendant asks: ". . . how could defendant's "MARK" cigarettes cause
the former "irreparable damage" within the territorial limits of the Philippines?"
Plaintiffs maintain that since their trademarks are entitled to protection by treaty
obligation under Article 2 of the Paris Convention of which the Philippines is a
member and ratified by Resolution No. 69 of the Senate of the Philippines and as
such, have the force and effect of law under Section 12, Article XVII of our
Constitution and since this is an action for a violation or infringement of a trademark
or trade name by defendant, such mere allegation is sufficient even in the absence of
proof to support it. To the mind of the Court, precisely, this is the issue in the main
case to determine whether or not there has been an invasion of plaintiffs' right of
property to such trademark or trade name. This claim of plaintiffs is disputed by
defendant in paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis
for the issuance of a writ of preliminary injunction.
There is no dispute that the First Plaintiff is the registered owner of trademar[k]
"MARK VII" with Certificate of Registration No. 18723, dated April 26,1973 while the
Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under
Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a
registrant of trademark "LARK" as shown by Certificate of Registration No. 10953
dated March 23, 1964, in addition to a pending application for registration of
trademark "MARK VII" filed on November 21, 1980 under Application Serial No.
43243, all in the Philippine Patent Office. In same the manner, defendant has a
pending application for registration of the trademark "LARK" cigarettes with the
Philippine Patent Office under Application Serial No. 44008. Defendant contends that
since plaintiffs are "not doing business in the Philippines" coupled the fact that the
Director of Patents has not denied their pending application for registration of its
trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs
contend that this act(s) of defendant is but a subterfuge to give semblance of good
faith intended to deceive the public and patronizers into buying the products and
create the impression that defendant's goods are identical with or come from the
same source as plaintiffs' products or that the defendant is a licensee of plaintiffs
when in truth and in fact the former is not. But the fact remains that with its pending
application, defendant has embarked in the manufacturing, selling, distributing and
advertising of "MARK" cigarettes. The question of good faith or bad faith on the part
of defendant are matters which are evidentiary in character which have to be proven
during the hearing on the merits; hence, until and unless the Director of Patents has
denied defendant's application, the Court is of the opinion and so holds that issuance
a writ of preliminary injunction would not lie.
There is no question that defendant has been authorized by the Bureau of Internal
Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben
B. Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated
April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated
September 24, 1982). However, this authority is qualified . . . that the said brands
have been accepted and registered by the Patent Office not later than six (6) months
after you have been manufacturing the cigarettes and placed the same in the
market." However, this grant ". . . does not give you protection against any person or
entity whose rights may be prejudiced by infringement or unfair competition in
relation to your indicated trademarks/brands". As aforestated, the registration of
defendant's application is still pending in the Philippine Patent Office.
It has been repeatedly held in this jurisdiction as well as in the United States that the
right or title of the applicant for injunction remedy must be clear and free from doubt.
Because of the disastrous and painful effects of an injunction, Courts should be
extremely careful, cautious and conscionable in the exercise of its discretion
consistent with justice, equity and fair play.
There is no power the exercise of which is more delicate which requires greater
caution, deliberation, and sound discretion, or (which is) more dangerous in a
doubtful case than the issuing of an injunction; it is the strong arm of equity that
never ought to be extended unless to cases of great injury, where courts of law
cannot afford an adequate or commensurate remedy in damages. The right must be
clear, the injury impending or threatened, so as to be averted only by the protecting
preventive process of injunction. (Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1,
617, Baldw. 205, 217.)
Courts of equity constantly decline to lay down any rule which injunction shall be
granted or withheld. There is wisdom in this course, for it is impossible to foresee all
exigencies of society which may require their aid to protect rights and restrain
wrongs. (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)
It is the strong arm of the court; and to render its operation begin and useful, it must
be exercised with great discretion, and when necessary requires it. (Attorney-
General v. Utica Inc. Co., P. John Ch. (N.Y.) 371.)
Having taken a panoramic view of the position[s] of both parties as viewed from their
pleadings, the picture reduced to its minimum size would be this: At the crossroads
are the two (2) contending parties, plaintiffs vigorously asserting the rights granted by
law, treaty and jurisprudence to restrain defendant in its activities of manufacturing,
selling, distributing and advertising its "MARK" cigarettes and now comes defendant
who countered and refused to be restrained claiming that it has been authorized
temporarily by the Bureau of Internal Revenue under certain conditions to do so as
aforestated coupled by its pending application for registration of trademark "MARK"
in the Philippine Patent Office. This circumstance in itself has created a dispute
between the parties which to the mind of the Court does not warrant the issuance of
a writ of preliminary injunction.
It is well-settled principle that courts of equity will refuse an application for the
injunctive remedy where the principle of law on which the right to preliminary
injunction rests is disputed and will admit of doubt, without a decision of the court of
law establishing such principle although satisfied as to what is a correct conclusion of
law upon the facts. The fact, however, that there is no such dispute or conflict does
not in itself constitute a justifiable ground for the court to refuse an application for the
injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J.
Eg. 94.)
Hence, the status quo existing between the parties prior to the filing of this case
should be maintained. For after all, an injunction, without reference to the parties,
should be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the
order denying issuance of the requested writ, the court of origin took cognizance of
the certification executed on January 30, 1984 by the Philippine Patent Office
attesting to the fact that private respondent's application for registration is still
pending appropriate action. Apart from this communication, what prompted the trial
court judge to entertain the idea of prematurity and untimeliness of petitioners'
application for a writ of preliminary injunction was the letter from the Bureau of
Internal Revenue date February 2, 1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your query as to
whether your label approval automatically expires or becomes null and void after six
(6) months if the brand is not accepted and by the patent office, please be informed
that no provision in the Tax Code or revenue regulation that requires an applicant to
comply with the aforementioned condition order that his label approved will remain
valid and existing.
Based on the document you presented, it shows that registration of this particular
label still pending resolution by the Patent Office. These being so , you may therefore
continue with the production said brand of cigarette until this Office is officially
notified that the question of ownership of "MARK" brand is finally resolved.
Very truly yours,
TEODORO D. PAREO
Chief, Manufactured Tobacco
Tax Division
TAN-P6531-D2830-A-6
(p. 348, Rollo.)
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark
Division of the then Philippine Patent Office that Fortune's application for its
trademark is still pending before said office (p. 311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since
March 28, 1983, when the trial court first declined issuing a writ of preliminary
injunction, that could alter the results of the case in that Fortune's application had
been rejected, nay, barred by the Philippine Patent Office, and that the application
had been forfeited by abandonment, but the trial court nonetheless denied the
second motion for issuance of the injunctive writ on April 22, 1987, thus:
For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants
have fallen far short of the legal requisites that would justify the grant of the writ of
preliminary injunction prayed for. For one, they did not even bother to establish by
competent evidence that the products supposedly affected adversely by defendant's
trademark now subject of an application for registration with the Philippine Patents
Office, are in actual use in the Philippines. For another, they concentrated their fire
on the alleged abandonment and forfeiture by defendant of said application for
registration.
The Court cannot help but take note of the fact that in their complaint plaintiffs
included a prayer for issuance preliminary injunction. The petition was duly heard,
and thereafter matter was assiduously discussed lengthily and resolved against
plaintiffs in a 15-page Order issued by the undersigned's predecessor on March 28,
1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8 page
Order issued on April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of this case,
plaintiffs came up with the present motion citing therein the said changes which are:
that defendant's application had been rejected and barred by the Philippine Patents
Office, and that said application has been deemed abandoned and forfeited. But
defendant has refiled the same.
Plaintiffs' arguments in support of the present motion appear to be a mere rehash of
their stand in the first above-mentioned petition which has already been ruled upon
adversely against them. Granting that the alleged changes in the material facts are
sufficient grounds for a motion seeking a favorable grant of what has already been
denied, this motion just the same cannot prosper.
In the first place there is no proof whatsoever that any of plaintiffs' products which
they seek to protect from any adverse effect of the trademark applied for by
defendant, is in actual use and available for commercial purposes anywhere in the
Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less than
the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique
Madarang, the abandonment of an application is of no moment, for the same can
always be refiled. He said there is no specific provision in the rules prohibiting such
refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to
Madarang, the refiled application of defendant is now pending before the Patents
Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo
in G. R. No. 91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before
the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of
Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's
order dated April 22, 1987, and granted the issuance of a writ of preliminary
injunction enjoining Fortune, its agents, employees, and representatives, from
manufacturing, selling, and advertising "MARK" cigarettes. The late Justice Cacdac,
speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132,
remarked:
There is no dispute that petitioners are the registered owners of the trademarks for
cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition). As
found and reiterated by the Philippine Patent Office in two (2) official communications
dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly
similar" to the trademarks of petitioners, hence registration was barred under Sec. 4
(d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third official
communication dated April 8, 1986, the trademark application of private respondent
for the "MARK" under Serial No. 44008 filed on February 13, 1981 which was
declared abandoned as of February 16, 1986, is now deemed forfeited, there being
no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in
Trademark Cases." (p. 107, CA rollo). The foregoing documents or communications
mentioned by petitioners as "the changes in material facts which occurred after
March 28, 1983", are not also questioned by respondents.
Pitted against the petitioners' documentary evidence, respondents pointed to (1) the
letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting
Commissioner of Internal Revenue, temporarily granting the request of private
respondent for a permit to manufacture two (2) new brands of cigarettes one of
which is brand "MARK" filter-type blend, and (2) the certification dated September
26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the
written request of private respondents' counsel dated September 17, 1986 attesting
that the records of his office would show that the "trademark MARK" for cigarettes is
now the subject of a pending application under Serial No. 59872 filed on September
16, 1986.
Private respondent's documentary evidence provides the reasons neutralizing or
weakening their probative values. The penultimate paragraph of Commissioner Diaz'
letter of authority reads:
Please be informed further that the authority herein granted does not give you
protection against any person or entity whose rights may be prejudiced by
infringement or unfair competition in relation to your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as follows:
This Certification, however, does not give protection as against any person or entity
whose right may be prejudiced by infringement or unfair competition in relation to the
aforesaid trademark nor the right to register if contrary to the provisions of the
Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in
Trademark Cases.
The temporary permit to manufacture under the trademark "MARK" for cigarettes
and the acceptance of the second application filed by private respondent in the
height of their dispute in the main case were evidently made subject to the outcome
of the said main case or Civil Case No. 47374 of the respondent Court. Thus, the
Court has not missed to note the absence of a mention in the Sandico letter of
September 26, 1986 of any reference to the pendency of the instant action filed on
August 18, 1982. We believe and hold that petitioners have shown a prima facie
case for the issuance of the writ of prohibitory injunction for the purposes stated in
their complaint and subsequent motions for the issuance of the prohibitory writ.
(Buayan Cattle Co. vs. Quintillan, 125 SCRA 276)
The requisites for the granting of preliminary injunction are the existence of the right
protected and the facts against which the injunction is to be directed as violative of
said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148
SCRA 326). It is a writ framed according to the circumstances of the case
commanding an act which the Court regards as essential to justice and restraining
an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151
SCRA 570). If it is not issued, the defendant may, before final judgment, do or
continue the doing of the act which the plaintiff asks the court to restrain, and thus
make ineffectual the final judgment rendered afterwards granting the relief sought by
the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon
the sound discretion of the Court except on a clear case of abuse (Belish Investment
& Finance Co. vs. State House, 151 SCRA 636). Petitioners' right of exclusivity to
their registered trademarks being clear and beyond question, the respondent court's
denial of the prohibitive writ constituted excess of jurisdiction and grave abuse
discretion. If the lower court does not grant preliminary injunction, the appellate court
may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139).
(pp. 165-167, Rollo in G.R. No. 91332.)
After private respondent Fortune's motion for reconsideration was rejected, a motion
to dissolve the disputed writ of preliminary injunction with offer to post a counterbond
was submitted which was favorably acted upon by the Court of Appeals, premised on
the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may
suffer as a result thereof, to wit:
The private respondent seeks to dissolve the preliminary injunction previously
granted by this Court with an offer to file a counterbond. It was pointed out in its
supplemental motion that lots of workers employed will be laid off as a consequence
of the injunction and that the government will stand to lose the amount of specific
taxes being paid by the
private respondent. The specific taxes being paid is the sum total of P120,120,
295.98 from January to July 1989.
The petitioners argued in their comment that the damages caused by the
infringement of their trademark as well as the goodwill it generates are incapable of
pecuniary estimation and monetary evaluation and not even the counterbond could
adequately compensate for the damages it will incur as a result of the dissolution of
the bond. In addition, the petitioner further argued that doing business in the
Philippines is not relevant as the injunction pertains to an infringement of a
trademark right.
After a thorough re-examination of the issues involved and the arguments advanced
by both parties in the offer to file a counterbond and the opposition thereto, WE
believe that there are sound and cogent reasons for US to grant the dissolution of
the writ of preliminary injunction by the offer of the private respondent to put up a
counterbond to answer for whatever damages the petitioner may suffer as a
consequence of the dissolution of the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence
of the lifting of the preliminary injunction considering that they are not actually
engaged in the manufacture of the cigarettes with the trademark in question and the
filing of the counterbond will amply answer for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve an
injunction previously granted, nevertheless, it is equally true that an injunction could
be dissolved only upon good and valid grounds subject to the sound discretion of the
court. As WE have maintained the view that there are sound and good reasons to lift
the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-54,
Rollo in G.R. No. 91332.)
Petitioners, in turn, filed their own motion for re-examination geared towards
reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R.
No. 91332).
Hence, the instant petition casting three aspersions that respondent court gravely
abused its discretion tantamount to excess of jurisdiction when:
I. . . . it required, contrary to law and jurisprudence, that in order that petitioners
may suffer irreparable injury due to the lifting of the injunction, petitioners should be
using actually their registered trademarks in commerce in the Philippines;
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of
Court; and

III. . . . after having found that the trial court had committed grave abuse of
discretion and exceeded its jurisdiction for having refused to issue the writ of
injunction to restrain private respondent's acts that are contrary to equity and good
conscience, it made a complete about face for legally insufficient grounds and
authorized the private respondent to continue performing the very same acts that it
had considered contrary to equity and good conscience, thereby ignoring not only
the mandates of the Trademark Law, the international commitments of the
Philippines, the judicial admission of private respondent that it will have no more right
to use the trademark "MARK" after the Director of Patents shall have rejected the
application to register it, and the admonitions of the Supreme Court. (pp. 24-25,
Petition; pp. 25-26, Rollo.)
To sustain a successful prosecution of their suit for infringement, petitioners, as
foreign corporations not engaged in local commerce, rely on section 21-A of the
Trademark Law reading as follows:
Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name
has been registered or assigned under this act may bring an action hereunder for
infringement, for unfair competition, or false designation of origin and false
description, whether or not it has been licensed to do business in the Philippines
under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known
as the Corporation Law, at the time it brings complaint: Provided, That the country of
which the said foreign corporation or juristic person is a citizen or in which it is
domiciled, by treaty, convention or law, grants a similar privilege to corporate or
juristic persons of the Philippines. (As inserted by Sec. 7 of Republic Act No. 638.)
to drive home the point that they are not precluded from initiating a cause of action in
the Philippines on account of the principal perception that another entity is pirating
their symbol without any lawful authority to do so. Judging from a perusal of the
aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct
for the proposition in support thereof is embedded in the Philippine legal
jurisprudence.
Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41
SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that:
Parenthetically, it may be stated that the ruling in the Mentholatum case was
subsequently derogated when Congress, purposely to "counteract the effects" of
said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark
Law, which allows a foreign corporation or juristic person to bring an action in
Philippine courts for infringement of a mark or tradename, for unfair competition, or
false designation of origin and false description, "whether or not it has been licensed
to do business in the Philippines under Act Numbered Fourteen hundred and fifty-
nine, as amended, otherwise known as the Corporation Law, at the time it brings
complaint."
Petitioner argues that Section 21-A militates against respondent's capacity to
maintain a suit for cancellation, since it requires, before a foreign corporation may
bring an action, that its trademark or tradename has been registered under the
Trademark Law. The argument misses the essential point in the said provision, which
is that the foreign corporation is allowed thereunder to sue "whether or not it has
been licensed to do business in the Philippines" pursuant to the Corporation Law
(precisely to counteract the effects of the decision in the Mentholatum case). (at p.
57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was
qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373
[1984]), to the effect that a foreign corporation not doing business in the Philippines
may have the right to sue before Philippine Courts, but existing adjective axioms
require that qualifying circumstances necessary for the assertion of such right should
first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991
Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it
is not sufficient for a foreign corporation suing under Section 21-A to simply allege its
alien origin. Rather, it must additionally allege its personality to sue. Relative to this
condition precedent, it may be observed that petitioners were not remiss in averring
their personality to lodge a complaint for infringement (p. 75, Rollo in AC-G.R. SP
No. 13132) especially so when they asserted that the main action for infringement is
anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic
Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado,
Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).
Another point which petitioners considered to be of significant interest, and which
they desire to impress upon us is the protection they enjoy under the Paris
Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this
discourse is concerned, there is no necessity to treat the matter with an extensive
response because adherence of the Philippines to the 1965 international covenant
due to pact sunt servanda had been acknowledged in La Chemise (supra at page
390).
Given these confluence of existing laws amidst the cases involving trademarks, there
can be no disagreement to the guiding principle in commercial law that foreign
corporations not engaged in business in the Philippines may maintain a cause of
action for infringement primarily because of Section 21-A of the Trademark Law
when the legal standing to sue is alleged, which petitioners have done in the case at
hand.
In assailing the justification arrived at by respondent court when it recalled the writ of
preliminary injunction, petitioners are of the impression that actual use of their
trademarks in Philippine commercial dealings is not an indispensable element under
Article 2 of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or establishment in the
country where protection is claimed may be required of persons entitled to the
benefits of the Union for the enjoyment of any industrial property of any industrial
property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)
Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and
2-A of the Trademark Law which speak loudly, about necessity of actual commercial
use of the trademark in the local forum:
Sec. 2. What are registrable. Trademarks, tradenames and service marks owned
by persons, corporations, partnerships or associations domiciled in the Philippines
and by persons, corporations, partnerships or associations domiciled in any foreign
country may be registered in accordance with the provisions of this Act; Provided,
That said trademarks, tradenames, or service marks are actually in use in commerce
and services not less than two months in the Philippines before the time the
applications for registration are filed; And provided, further, That the country of which
the applicant for registration is a citizen grants by law substantially similar privileges
to citizens of the Philippines, and such fact is officially certified, with a certified true
copy of the foreign law translated into the English language, by the government of
the foreign country to the Government of the Republic of the Philippines. (As
amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired.
Anyone who lawfully produces or deals in merchandise of any kind or who
engages in any lawful business, or who renders any lawful service in commerce, by
actual use thereof in manufacture or trade, in business, and in the service rendered,
may appropriate to his exclusive use a trademark, a tradename, or a service mark
not so appropriated by another, to distinguish his merchandise, business or service
from the merchandise, business or service of others. The ownership or possession of
a trademark, tradename, service mark, heretofore or hereafter appropriated, as in
this section provided, shall be recognized and protected in the same manner and to
the same extent as are other property rights known to the law. (As amended by R.A.
No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583
[1991], at pp. 589-590; emphasis supplied.)
Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a
municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization,
1971 Ed., p. 20). Withal, the fact that international law has been made part of the law
of the land does not by any means imply the primacy of international law over
national law in the municipal sphere. Under the doctrine of incorporation as applied
in most countries, rules of international law are given a standing equal, not superior,
to national legislative enactments (Salonga and Yap, Public International Law, Fourth
ed., 1974, p. 16).
The aforequoted basic provisions of our Trademark Law, according to Justice
Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA
583 [1991]), have been construed in this manner:
A fundamental principle of Philippine Trademark Law is that actual use in commerce
in the Philippines is a pre-requisite to the acquisition of ownership over a trademark
or a tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products International, Inc. v.
Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:
A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite to the acquisition
of the right of ownership over a trademark.
xxx xxx xxx
. . . Adoption alone of a trademark would not give exclusive right thereto. Such right
grows out of their actual use. Adoption is not use. One may make advertisements,
issue circulars, give out price lists on certain goods; but these alone would not give
exclusive right of use. For trademark is a creation of use. The underlying reason for
all these is that purchasers have come to understand the mark as indicating the
origin of the wares. Flowing from this is the trader's right to protection in the trade he
has built up and the goodwill he has accumulated from use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it
in commerce.
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526
[1982]):
3. The Trademark law is very clear. It requires actual commercial use of the
mark prior to its registration. There is no dispute that respondent corporation was the
first registrant, yet it failed to fully substantiate its claim that it used in trade or
business in the Philippines the subject mark; it did not present proof to invest it with
exclusive, continuous adoption of the trademark which should consist among others,
of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b)
submitted by respondent which were dated way back in 1957 show that the zippers
sent to the Philippines were to be used as "samples" and "of no commercial value".
The evidence for respondent must be clear, definite and free from inconsistencies.
(Sy Ching v. Gaw Lui, 44 SCRA 148-149) "Samples" are not for sale and therefore,
the fact of exporting them to the Philippines cannot be considered to be equivalent to
the "use" contemplated by the law. Respondent did not expect income from such
"samples". There were no receipts to establish sale, and no proof were presented to
show that they were subsequently sold in the Philippines. (Pagasa Industrial Corp. v.
Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)
The records show that the petitioner has never conducted any business in the
Philippines. It has never promoted its tradename or trademark in the Philippines. It is
unknown to Filipino except the very few who may have noticed it while travelling
abroad. It has never paid a single centavo of tax to the Philippine government. Under
the law, it has no right to the remedy it seeks. (at pp. 589-591.)
In other words, petitioners may have the capacity to sue for infringement irrespective
of lack of business activity in the Philippines on account of Section 21-A of the
Trademark Law but the question whether they have an exclusive right over their
symbol as to justify issuance of the controversial writ will depend on actual use of
their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It
is thus incongruous for petitioners to claim that when a foreign corporation not
licensed to do business in Philippines files a complaint for infringement, the entity
need not be actually using its trademark in commerce in the Philippines. Such a
foreign corporation may have the personality to file a suit for infringement but it may
not necessarily be entitled to protection due to absence of actual use of the emblem
in the local market.
Going back to the first assigned error, we can not help but notice the manner the
ascription was framed which carries with it the implied but unwarranted assumption
of the existence of petitioners' right to relief. It must be emphasized that this aspect
of exclusive dominion to the trademarks, together with the corollary allegation of
irreparable injury, has yet to be established by petitioners by the requisite quantum of
evidence in civil cases. It cannot be denied that our reluctance to issue a writ of
preliminary injunction is due to judicial deference to the lower courts, involved as
there is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In
point of adjective law, the petition has its roots on a remedial measure which is but
ancillary to the main action for infringement still pending factual determination before
the court of origin. It is virtually needless to stress the obvious reality that critical facts
in an infringement case are not before us more so when even Justice Feliciano's
opinion observes that "the evidence is scanty" and that petitioners "have yet to
submit copies or photographs of their registered marks as used in cigarettes" while
private respondent has not, for its part, "submitted the actual labels or packaging
materials used in selling its "Mark" cigarettes." Petitioners therefore, may not be
permitted to presume a given state of facts on their so called right to the trademarks
which could be subjected to irreparable injury and in the process, suggest the fact of
infringement. Such a ploy would practically place the cart ahead of the horse. To our
mind, what appears to be the insurmountable barrier to petitioners' portrayal of
whimsical exercise of discretion by the Court of Appeals is the well-taken remark of
said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that they are not
actually engaged in the manufacture of the cigarettes with the trademark in question
and the filing of the counterbond will amply answer for such damages. (p. 54. Rollo in
G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R.
No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No.
91332) indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which
can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58,
Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must
show that there exists a right to be protected and that the facts against which
injunction is directed are violative of said right (Searth Commodities Corporation vs.
Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that
albeit petitioners are holders of certificate of registration in the Philippines of their
symbols as admitted by private respondent, the fact of exclusive ownership cannot
be made to rest solely on these documents since dominion over trademarks is not
acquired by the mere fact of registration alone and does not perfect a trademark right
(Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804
[1983]).
Even if we disregard the candid statements of petitioners anent the absence of
business activity here and rely on the remaining statements of the complaint below,
still, when these averments are juxtaposed with the denials and propositions of the
answer submitted by private respondent, the supposed right of petitioners to the
symbol have thereby been controverted. This is not to say, however, that the manner
the complaint was traversed by the answer is sufficient to tilt the scales of justice in
favor of private respondent. Far from it. What we are simply conveying is another
basic tenet in remedial law that before injunctive relief may properly issue,
complainant's right or title must be undisputed and demonstrated on the strength of
one's own title to such a degree as to unquestionably exclude dark clouds of doubt,
rather than on the weakness of the adversary's evidence, inasmuch as the possibility
of irreparable damage, without prior proof of transgression of an actual existing right,
is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling
Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of
Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82).
On the economic repercussion of this case, we are extremely bothered by the
thought of having to participate in throwing into the streets Filipino workers engaged
in the manufacture and sale of private respondent's "MARK" cigarettes who might be
retrenched and forced to join the ranks of the many unemployed and unproductive
as a result of the issuance of a simple writ of preliminary injunction and this, during
the pendency of the case before the trial court, not to mention the diminution of tax
revenues represented to be close to a quarter million pesos annually. On the other
hand, if the status quo is maintained, there will be no damage that would be suffered
by petitioners inasmuch as they are not doing business in the Philippines.
With reference to the second and third issues raised by petitioners on the lifting of
the writ of preliminary injunction, it cannot be gainsaid that respondent court acted
well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:
Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. The
injunction may be refused or, if granted ex parte, may be dissolved, upon the
insufficiency of the complaint as shown by the complaint itself, with or without notice
to the adverse party. It may also be refused or dissolved on other grounds upon
affidavits on the part of the defendants which may be opposed by the plaintiff also by
affidavits. It may further be refused or, if granted, may be dissolved, if it appears after
hearing that although the plaintiff is entitled to the injunction, the issuance or
continuance thereof, as the case may be, would cause great damage to the
defendant while the plaintiff can be fully compensated for such damages as he may
suffer, and the defendant files a bond in an amount fixed by the judge conditioned
that he will pay all damages which the plaintiff may suffer by the refusal or the
dissolution of the injunction. If it appears that the extent of the preliminary injunction
granted is too great, it must be modified.
Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved,
on the following instances:
(1) If there is insufficiency of the complaint as shown by the allegations therein.
Refusal or dissolution may be granted in this case with or without notice to the
adverse party.
(2) If it appears after hearing that although the plaintiff is entitled to the injunction,
the issuance or continuance thereof would cause great damage to the defendant,
while the plaintiff can be fully compensated for such damages as he may suffer. The
defendant, in this case, must file a bond in an amount fixed by the judge conditioned
that he will pay all damages which plaintiff may suffer by the refusal or the dissolution
of the injunction.
(3) On the other grounds upon affidavits on the part of the defendant which may
be opposed by the plaintiff also affidavits.
Modification of the injunction may also be ordered by the court if it appears that the
extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court,
1986 ed., p. 99; Francisco, supra, at p. 268.)
In view of the explicit representation of petitioners in the complaint that they are not
engaged in business in the Philippines, it inevitably follows that no conceivable
damage can be suffered by them not to mention the foremost consideration
heretofore discussed on the absence of their "right" to be protected. At any rate, and
assuming in gratia argumenti that respondent court erroneously lifted the writ it WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court
previously issued, the same may be cured by appeal and not in the form of a petition of Appeals dated September 14, 1989 and November 29, 1989 are hereby
for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). AFFIRMED.
Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory
order which is always under the control of the court before final judgment, petitioners' SO ORDERED.
criticism must fall flat on the ground, so to speak, more so when extinction of the
previously issued writ can even be made without previous notice to the adverse party Bidin, J., concurs.
and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of
Court, 1970 ed., p. 81). Davide, Jr., concurs in the result.

Romero, J. took no part.