[G.R. No. 148222.

August 15, 2003]

PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, INCORPORATED, and
NORTH EDSA MARKETING, INCORPORATED,respondents.

DECISION
CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl
& Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision[1] of the Court of Appeals reversing the
October 31, 1996 decision[2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-
516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI)
liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals[3] contained a summary of this dispute:

Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of
advertising display units simply referred to as light boxes. These units utilize specially printed posters
sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to
secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display
units. The advertising light boxes were marketed under the trademark Poster Ads. The application for
registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology
Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No.
41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services
to manufacture its advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the
lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under
construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and
Dean agreed. On September 11, 1985, Pearl and Deans General Manager, Rodolfo Vergara,
submitted for signature the contracts covering SM Cubao and SM Makati to SMIs Advertising
Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati,
however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other
contract and reminding him that their agreement for installation of light boxes was not only for its SM
Makati branch, but also for SM Cubao. SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMIs house counsel informed Pearl and Dean that it was
rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated
February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the
same letter, he pushed for the signing of the contract for SM Cubao.

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to
fabricate its display units, offered to construct light boxes for Shoemarts chain of stores. SMI
approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for
SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD
Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in
1991. These were delivered on a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed
at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out
that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were
also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa
Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up
primarily to sell advertising space in lighted display units located in SMIs different branches. Pearl
and Dean noted that NEMI is a sister company of SMI.

In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and
NEMI enjoining them to cease using the subject light boxes and to remove the same from SMIs
establishments. It also demanded the discontinued use of the trademark Poster Ads, and the
payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos
(P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light
boxes and NEMI took down its advertisements for Poster Ads from the lighted display units in SMIs
stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this
instant case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster
panels using commonly known techniques and available technology, without notice of or reference to
Pearl and Deans copyright. SMI noted that the registration of the mark Poster Ads was only for
stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word Poster
Ads is a generic term which cannot be appropriated as a trademark, and, as such, registration of such
mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its
complaint since its advertising display units contained no copyright notice, in violation of Section 27 of
P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was
purely intended to malign SMIs good name. On this basis, SMI, aside from praying for the dismissal
of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of
Pearl and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and
Certificate of Trademark Registration No. 4165 dated September 12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor
having engaged in the business of advertising. It repleaded SMIs averments, admissions and denials
and prayed for similar reliefs and counterclaims as SMI.

The RTC of Makati City decided in favor of P & D:

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of
copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of
RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and
Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:

(1) to pay plaintiff the following damages:

(a) actual damages - P16,600,000.00,

representing profits
 derived by defendants
as a result of infringe-
ment of plaintiffs copyright
from 1991 to 1992

(b) moral damages - P1,000.000.00

(c) exemplary damages - P1,000,000.00

(d) attorneys fees - P1,000,000.00

plus

(e) costs of suit;

(2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which
were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation;

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark Poster
Ads, for destruction; and

(4) to permanently refrain from infringing the copyright on plaintiffs light boxes and its
trademark Poster Ads.

Defendants counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.[4]

On appeal, however, the Court of Appeals reversed the trial court:

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints,
pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a
copyrightable class O work, we have to agree with SMI when it posited that what was copyrighted
were the technical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like
plaintiff-appellants will not extend to the actual object. It has so been held under jurisprudence, of
which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a
copyright protection for a book entitled Seldens Condensed Ledger or Bookkeeping Simplified which
purported to explain a new system of bookkeeping. Included as part of the book were blank forms
and illustrations consisting of ruled lines and headings, specially designed for use in connection with
the system explained in the work. These forms showed the entire operation of a day or a week or a
month on a single page, or on two pages following each other. The defendant Baker then produced
forms which were similar to the forms illustrated in Seldens copyrighted books.The Court held that
exclusivity to the actual forms is not extended by a copyright. The reason was that to grant a
monopoly in the underlying art when no examination of its novelty has ever been made would be a
surprise and a fraud upon the public; that is the province of letters patent, not of copyright. And that is
precisely the point. No doubt aware that its alleged original design would never pass the rigorous
examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the
public by conveniently resorting to a copyright registration which merely employs a recordal system
without the benefit of an in-depth examination of novelty.
The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F.
Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished
drawing entitled Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic
congestion. The defendant constructed a bridge approach which was alleged to be an infringement of
the new design illustrated in plaintiffs drawings. In this case it was held that protection of the drawing
does not extend to the unauthorized duplication of the object drawn because copyright extends only
to the description or expression of the object and not to the object itself. It does not prevent one from
using the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v.
Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without
being authorized, uses a copyrighted architectural plan to construct a structure. This is because the
copyright does not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Deans copyright over the technical drawings
of the latters advertising display units.

xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that
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 mandate conveyed by Section 20 of
Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a
mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants
ownership of the mark or trade-name, and of the registrants exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions
and limitations stated therein. (underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark
Poster Ads with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was
recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the
following products: stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of the
defendants-appellants for their use of the words Poster Ads, in the advertising display units in suit.
Jurisprudence has interpreted Section 20 of the Trademark Law as an implicit permission to a
manufacturer to venture into the production of goods and allow that producer to appropriate the brand
name of the senior registrant on goods other than those stated in the certificate of registration. The
Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through
Justice Conrado V. Sanchez, that:

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.

While we do not discount the striking similarity between Pearl and Deans registered trademark and
defendants-appellants Poster Ads design, as well as the parallel use by which said words were used
in the parties respective advertising copies, we cannot find defendants-appellants liable for
infringement of trademark. Poster Ads was registered by Pearl and Dean for specific use in its
stationeries, in contrast to defendants-appellants who used the same words in their advertising
display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond
us. But, having already done so, it must stand by the consequence of the registration which it had
caused.

xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words Poster Ads are a
simple contraction of the generic term poster advertising. In the absence of any convincing proof that
Poster Ads has acquired a secondary meaning in this jurisdiction, we find that Pearl and Deans
exclusive right to the use of Poster Ads is limited to what is written in its certificate of registration,
namely, stationeries.

Defendants-appellants cannot thus be held liable for infringement of the trademark Poster Ads.

There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the
monetary award granted by the lower court to Pearl and Dean has no leg to stand on.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and
another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack
of merit.[5]

Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the
following errors for the Courts consideration:

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT

INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO

INFRINGEMENT OF PEARL & DEANS TRADEMARK POSTER ADS WAS
COMMITTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF

THE TRIAL COURT, DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE
HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS
NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS

SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY
DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.[6]

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper
perspective four main concerns of intellectual property law patents, copyrights, trademarks and unfair
competition arising from infringement of any of the first three. We shall focus then on the following
issues:
 (1) if the engineering or technical drawings of an advertising display unit (light box) are
granted copyright protection (copyright certificate of registration) by the National Library, is
the light box depicted in such engineering drawings ipso facto also protected by such
copyright?

(2) or should the light box be registered separately and protected by a patent issued by the
Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) in
addition to the copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such trademark
if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Petitioner P & Ds complaint was that SMI infringed on its copyright over the light boxes when SMI
had the units manufactured by Metro and EYD Rainbow Advertising for its own account.Obviously,
petitioners position was premised on its belief that its copyright over the engineering drawings
extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was
no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings
alone and not to the light box itself. We agree with the appellate court.
First, petitioners application for a copyright certificate as well as Copyright Certificate No. PD-
R2588 issued by the National Library on January 20, 1981 clearly stated that it was for a class O
work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then
prevailing. Said Section 2 expressly enumerated the works subject to copyright:

SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to
any of the following works:

xxxxxxxxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps;

xxxxxxxxx

Although petitioners copyright certificate was entitled Advertising Display Units (which depicted
the box-type electrical devices), its claim of copyright infringement cannot be sustained.
Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant,
the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to
the subjects and by the persons, and on terms and conditions specified in the statute. [7] Accordingly, it
can cover only the works falling within the statutory enumeration or description. [8]
P & D secured its copyright under the classification class O work. This being so, petitioners
copyright protection extended only to the technical drawings and not to the light box itself because the
latter was not at all in the category of prints, pictorial illustrations, advertising copies, labels, tags and
box wraps. Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same
could have referred only to the technical drawings within the category of pictorial illustrations. It could
not have possibly stretched out to include the underlying light box. The strict application[9] of the laws
enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its
copyright certificate was entitled Advertising Display Units. What the law does not include, it excludes,
and for the good reason: the light box was not a literary or artistic piece which could be copyrighted
under the copyright law. And no less clearly, neither could the lack of statutory authority to make the
light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by
the National Library as Advertising Display Units.
In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the public without license
from P & D, then no doubt they would have been guilty of copyright infringement. But this was not the
case. SMIs and NEMIs acts complained of by P & D were to have units similar or identical to the light
box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for
leasing out to different advertisers. Was this an infringement of petitioners copyright over the
technical drawings? We do not think so.
During the trial, the president of P & D himself admitted that the light box was neither a literary not
an artistic work but an engineering or marketing invention.[10] Obviously, there appeared to be some
confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and
trademarks. In the leading case of Kho vs. Court of Appeals,[11] we ruled that these three legal rights
are completely distinct and separate from one another, and the protection afforded by one cannot be
used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged
with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall include a stamped or marked container of goods. In
relation thereto, a trade name means the name or designation identifying or distinguishing an
enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the moment of their
creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any
field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light
boxes without license from petitioner, private respondents cannot be held legally liable for
infringement of P & Ds copyright over its technical drawings of the said light boxes, should they be
liable instead for infringement of patent? We do not think so either.
For some reason or another, petitioner never secured a patent for the light boxes. It therefore
acquired no patent rights which could have protected its invention, if in fact it really was. And because
it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially
using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,[12] we held that there
can be no infringement of a patent until a patent has been issued, since whatever right one has to the
invention covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no
common law right to a monopoly of his invention. He has the right to make use of and vend his
invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and
use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a
patentee, he has the exclusive right of making, selling or using the invention. [13] On the assumption
that petitioners advertising units were patentable inventions, petitioner revealed them fully to the
public by submitting the engineering drawings thereof to the National Library.
To be able to effectively and legally preclude others from copying and profiting from the invention,
a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is
to bring new designs and technologies into the public domain through disclosure. [14] Ideas, once
disclosed to the public without the protection of a valid patent, are subject to appropriation without
significant restraint.[15]
On one side of the coin is the public which will benefit from new ideas; on the other are the
inventors who must be protected. As held in Bauer & Cie vs. ODonnel,[16] The act secured to the
inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent
others from exercising like privileges without the consent of the patentee. It was passed for the
purpose of encouraging useful invention and promoting new and useful inventions by the protection
and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of
the exclusive privileges granted the benefit of such inventions and improvements.
The law attempts to strike an ideal balance between the two interests:

(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and
disclosure of new useful and non-obvious advances in technology and design, in return for the
exclusive right to practice the invention for a number of years. The inventor may keep his invention
secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to
the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but
upon the expiration of that period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use.[17]

The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention;
second, it promotes disclosures of inventions to stimulate further innovation and to permit the public
to practice the invention once the patent expires; third, the stringent requirements for patent
protection seek to ensure that ideas in the public domain remain there for the free use of the public. [18]
It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-
depth investigation is required because in rewarding a useful invention, the rights and welfare of the
community must be fairly dealt with and effectively guarded. To that end, the prerequisites to
obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are
equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in
the constant demand for new appliances, the heavy hand of tribute be laid on each slight
technological advance in art.[19]
There is no such scrutiny in the case of copyrights nor any notice published before its grant to the
effect that a person is claiming the creation of a work. The law confers the copyright from the moment
of creation[20] and the copyright certificate is issued upon registration with the National Library of a
sworn ex-parte claim of creation.
Therefore, not having gone through the arduous examination for patents, the petitioner cannot
exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of
its copyright certificate over the technical drawings.
Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office
(IPO) to scrutinize the light boxs eligibility as a patentable invention. The irony here is that, had
petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through the
simplified procedure of copyright-registration with the National Library without undergoing the rigor of
defending the patentability of its invention before the IPO and the public the petitioner would be
protected for 50 years. This situation could not have been the intention of the law.
In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The publication
illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to
those illustrated in the plaintiffs copyrighted book. The US Supreme Court ruled that:
There is no doubt that a work on the subject of book-keeping, though only explanatory of well known
systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a
clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere
statement of the proposition is so evident that it requires hardly any argument to support it. The same
distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the
composition and use of medicines, be they old or new; on the construction and use of ploughs or
watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode
of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one
would contend that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or
thing described or explained has nothing to do with the validity of the copyright. To give to the
author of the book an exclusive property in the art described therein, when no examination of
its novelty has ever been officially made, would be a surprise and a fraud upon the
public. That is the province of letters patent, not of copyright. The claim to an invention of
discovery of an art or manufacture must be subjected to the examination of the Patent Office
before an exclusive right therein can be obtained; and a patent from the government can only
secure it.

The difference between the two things, letters patent and copyright, may be illustrated by reference to
the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of great
value in the healing art. If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and sale of the
medicine; he gives that to the public. If he desires to acquire such exclusive right, he must
obtain a patent for the mixture as a new art, manufacture or composition of matter. He may
copyright his book, if he pleases; but that only secures to him the exclusive right of printing
and publishing his book. So of all other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may
contain, gives no exclusive right to the modes of drawing described, though they may never have
been known or used before.By publishing the book without getting a patent for the art, the latter is
given to the public.

xxx

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication
of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right
to make, sell and use account books prepared upon the plan set forth in such book. Whether the art
might or might not have been patented, is a question, which is not before us. It was not patented, and
is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings
of accounts must necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art described in the books, which have been made the
subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the
art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays
no foundation for an exclusive claim to the art itself. The object of the one is explanation; the
object of the other is use. The former may be secured by copyright. The latter can only be
secured, if it can be secured at all, by letters patent. (underscoring supplied)
ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark Poster Ads which petitioners president
said was a contraction of poster advertising. P & D was able to secure a trademark certificate for it,
but one where the goods specified were stationeries such as letterheads, envelopes, calling cards
and newsletters.[22] Petitioner admitted it did not commercially engage in or market these goods. On
the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising
spaces thereon, which, however, were not at all specified in the trademark certificate.
Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate
Appellate Court,[23] where we, invoking Section 20 of the old Trademark Law, ruled that 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 specified in the certificate x x x. 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.[24] Faberge, Inc. was correct and was in fact recently reiterated in Canon
Kabushiki Kaisha vs. Court of Appeals.[25]
Assuming arguendo that Poster Ads could validly qualify as a trademark, the failure of P & D to
secure a trademark registration for specific use on the light boxes meant that there could not have
been any trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was
possible even if P & D had no registration.[26] However, while the petitioners complaint in the RTC
also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner
did not appeal this particular point; hence, it cannot now revive its claim of unfair competition.
But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of
unfair competition.
By the nature of things, there can be no unfair competition under the law on copyrights although it
is applicable to disputes over the use of trademarks. Even a name or phrase incapable of
appropriation as a trademark or tradename may, by long and exclusive use by a business (such that
the name or phrase becomes associated with the business or product in the mind of the purchasing
public), be entitled to protection against unfair competition. [27] In this case, there was no evidence that
P & Ds use of Poster Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners
expert witnesses himself had testified that Poster Ads was too generic a name. So it was difficult to
identify it with any company, honestly speaking.[28] This crucial admission by its own expert witness
that Poster Ads could not be associated with P & D showed that, in the mind of the public, the goods
and services carrying the trademark Poster Ads could not be distinguished from the goods and
services of other entities.
This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was
generic and incapable of being used as a trademark because it was used in the field of poster
advertising, the very business engaged in by petitioner. Secondary meaning means that a word or
phrase originally incapable of exclusive appropriation with reference to an article in the market
(because it is geographically or otherwise descriptive) might nevertheless have been used for so long
and so exclusively by one producer with reference to his article that, in the trade and to that branch of
the purchasing public, the word or phrase has come to mean that the article was his property. [29] The
admission by petitioners own expert witness that he himself could not associate Poster Ads with
petitioner P & D because it was too generic definitely precluded the application of this exception.
Having discussed the most important and critical issues, we see no need to belabor the rest.
All told, the Court finds no reversible error committed by the Court of Appeals when it reversed
the Regional Trial Court of Makati City.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated
May 22, 2001 is AFFIRMED in toto.
SO ORDERED.

[G.R. No. 115758. March 19, 2002]

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS
LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL
MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents.

DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] dated May 24, 1993 of the Court of
Appeals setting aside and declaring as null and void the Orders[2] dated February 10, 1992 and March
19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of
preliminary injunction.
The facts of the case are as follows:
On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages
with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-
10926, against the respondents Summerville General Merchandising and Company (Summerville, for
brevity) and Ang Tiam Chay.
The petitioners complaint alleges that petitioner, doing business under the name and style of KEC
Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial
Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-
3678; that she also has patent rights on Chin Chun Su & Device and Chin Chun Su for medicated
cream after purchasing the same from Quintin Cheng, the registered owner thereof in the
Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration
Certificate No. 4529; that respondent Summerville advertised and sold petitioners cream products
under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading
the public, and resulting in the decline in the petitioners business sales and income; and, that the
respondents should be enjoined from allegedly infringing on the copyrights and patents of the
petitioner.
The respondents, on the other hand, alleged as their defense that Summerville is the exclusive
and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun
Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to
register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other
appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the
copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng,
assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the
Philippines had already been terminated by the said Taiwanese Manufacturing Company.
After due hearing on the application for preliminary injunction, the trial court granted the same in
an Order dated February 10, 1992, the dispositive portion of which reads:

ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC
Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is
required to file with the Court a bond executed to defendants in the amount of five hundred thousand
pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants
may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled
thereto.

SO ORDERED.[3]

The respondents moved for reconsideration but their motion for reconsideration was denied by the
trial court in an Order dated March 19, 1992.[4]
On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary
injunction issued by the trial court. After the respondents filed their reply and almost a month after
petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for
violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the
petitioner, the respondents did not state the docket number of the civil case in the caption of their
petition and, more significantly, they did not include therein a certificate of non-forum shopping. The
respondents opposed the petition and submitted to the appellate court a certificate of non-forum
shopping for their petition.
On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in
favor of the respondents, the dispositive portion of which reads:

WHEREFORE, the petition is hereby given due course and the orders of respondent court dated
February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying
petitioners motion for reconsideration are hereby set aside and declared null and void. Respondent
court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue
raised by the parties on the merits.

SO ORDERED.[5]

In granting the petition, the appellate court ruled that:

The registration of the trademark or brandname Chin Chun Su by KEC with the supplemental register
of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in
the principal register, which is duly protected by the Trademark Law.

xxx xxx xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393:

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 on guard and
there are certain defects, some obstacles which the use 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 registrants 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. As 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. L-
10612, 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).[6]

The petitioner filed a motion for reconsideration. This she followed with several motions to declare
respondents in contempt of court for publishing advertisements notifying the public of the
promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun
Su products could be obtained only from Summerville General Merchandising and Co.
In the meantime, the trial court went on to hear petitioners complaint for final injunction and
damages. On October 22, 1993, the trial court rendered a Decision [7] barring the petitioner from using
the trademark Chin Chun Su and upholding the right of the respondents to use the same, but
recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The
trial court did not award damages and costs to any of the parties but to their respective counsels were
awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorneys fees. The petitioner duly
appealed the said decision to the Court of Appeals.
On June 3, 1994, the Court of Appeals promulgated a Resolution[8] denying the petitioners
motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803.
Hence, this petition anchored on the following assignment of errors:
I

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON
PETITIONERS MOTION TO DISMISS.

II
 RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY
RESOLVE PETITIONERS MOTION FOR RECONSIDERATION.

III

IN DELAYING THE RESOLUTION OF PETITIONERS MOTION FOR RECONSIDERATION,

THE HONORABLE COURT OF APPEALS DENIED PETITIONERS RIGHT TO SEEK
TIMELY APPELLATE RELIEF AND VIOLATED PETITIONERS RIGHT TO DUE PROCESS.

IV

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE
PRIVATE RESPONDENTS IN CONTEMPT.[9]

The petitioner faults the appellate court for not dismissing the petition on the ground of violation of
Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated
Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her
motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The
appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In
delaying the resolution thereof, the appellate court denied the petitioners right to seek the timely
appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of
court against the respondents.
We rule in favor of the respondents.
Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for
the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief
demanded, and the whole or part of such relief consists in restraining the commission or continuance
of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary
injunction order may be granted only when the application for the issuance of the same shows facts
entitling the applicant to the relief demanded.[10] This is the reason why we have ruled that it must be
shown that the invasion of the right sought to be protected is material and substantial, that the right of
complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the
writ to prevent serious damage.[11]
In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the
ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on
her copyright and patent over the same. We first find it appropriate to rule on whether the copyright
and patent over the name and container of a beauty cream product would entitle the registrant to the
use and ownership over the same to the exclusion of others.
Trademark, copyright and patents are different intellectual property rights that cannot be
interchanged with one another. A trademark is any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise and shall include a stamped or marked
container of goods.[12] In relation thereto, a trade name means the name or designation identifying or
distinguishing an enterprise.[13] Meanwhile, the scope of a copyright is confined to literary and artistic
works which are original intellectual creations in the literary and artistic domain protected from the
moment of their creation.[14] Patentable inventions, on the other hand, refer to any technical solution
of a problem in any field of human activity which is new, involves an inventive step and is industrially
applicable.[15]
 Petitioner has no right to support her claim for the exclusive use of the subject trade name and its
container. The name and container of a beauty cream product are proper subjects of a trademark
inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the
same in the sale of the beauty cream product, the user must sufficiently prove that she registered or
used it before anybody else did. The petitioners copyright and patent registration of the name and
container would not guarantee her the right to the exclusive use of the same for the reason that they
are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction
order cannot be issued for the reason that the petitioner has not proven that she has a clear right over
the said name and container to the exclusion of others, not having proven that she has registered a
trademark thereto or used the same before anyone did.
We cannot likewise overlook the decision of the trial court in the case for final injunction and
damages. The dispositive portion of said decision held that the petitioner does not have trademark
rights on the name and container of the beauty cream product. The said decision on the merits of the
trial court rendered the issuance of the writ of a preliminary injunction moot and academic
notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported
by our ruling in La Vista Association, Inc. v. Court of Appeals[16], to wit:

Considering that preliminary injunction is a provisional remedy which may be granted at any time after
the commencement of the action and before judgment when it is established that the plaintiff is
entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and
it appearing that the trial court had already granted the issuance of a final injunction in favor of
petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant
petition having been rendered moot and academic. An injunction issued by the trial court after it has
already made a clear pronouncement as to the plaintiffs right thereto, that is, after the same issue has
been decided on the merits, the trial court having appreciated the evidence presented, is proper,
notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the
proceedings for preliminary injunction cannot stand separately or proceed independently of the
decision rendered on the merit of the main case for injunction. The merit of the main case having
been already determined in favor of the applicant, the preliminary determination of its non-existence
ceases to have any force and effect. (italics supplied)

La Vista categorically pronounced that the issuance of a final injunction renders any question on the
preliminary injunctive order moot and academic despite the fact that the decision granting a final
injunction is pending appeal. Conversely, a decision denying the applicant-plaintiffs right to a final
injunction, although appealed, renders moot and academic any objection to the prior dissolution of a
writ of preliminary injunction.
The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for
non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised
the technical objection of non-compliance with Supreme Court Circular No. 28-91 by filing a motion to
dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of
the Revised Rules of Civil Procedure which provides that (I)n petitions for certiorari before the
Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed.
Before giving due course thereto, the court may require the respondents to file their comment to, and
not a motion to dismiss, the petition xxx (italics supplied). Secondly, the issue was raised one month
after petitioner had filed her answer/comment and after private respondent had replied thereto. Under
Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within
the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore
could no longer submit a motion to dismiss nor raise defenses and objections not included in the
answer/comment she had earlier tendered. Thirdly, substantial justice and equity require this Court
not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on
a technical infirmity. The granting of an injunctive writ based on a technical ground rather than
compliance with the requisites for the issuance of the same is contrary to the primary objective of
legal procedure which is to serve as a means to dispense justice to the deserving party.
The petitioner likewise contends that the appellate court unduly delayed the resolution of her
motion for reconsideration. But we find that petitioner contributed to this delay when she filed
successive contentious motions in the same proceeding, the last of which was on October 27, 1993,
necessitating counter-manifestations from private respondents with the last one being filed on
November 9, 1993. Nonetheless, it is well-settled that non-observance of the period for deciding
cases or their incidents does not render such judgments ineffective or void. [17] With respect to the
purported damages she suffered due to the alleged delay in resolving her motion for reconsideration,
we find that the said issue has likewise been rendered moot and academic by our ruling that she has
no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction.
Finally, we rule that the Court of Appeals correctly denied the petitioners several motions for
contempt of court. There is nothing contemptuous about the advertisements complained of which, as
regards the proceedings in CA-G.R. SP No. 27803 merely announced in plain and straightforward
language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to
Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive
writ was immediately executory.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals
dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the
petitioner.
SO ORDERED.

AIR PHILIPPINES G.R. No. 172835

CORPORATION,
Petitioner, Present:

YNARES-SANTIAGO, J.
Chairperson,
AUSTRIA-MARTINEZ,
- versus - CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:
PENNSWELL, INC.
Respondent. December 13, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:
Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the
Rules of Court, the nullification of the 16 February 2006 Decision [1] and the 25 May 2006
Resolution[2] of the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the Order[3] dated 30
June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air
transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in
the business of manufacturing and selling industrial chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by
Sales Invoices No. 8846,[4] 9105,[5] 8962,[6] and 8963,[7] which correspond to Purchase Orders No.
6433, 6684, 6634 and 6633, respectively. Under the contracts, petitioners total outstanding obligation
amounted to P449,864.98 with interest at 14% per annum until the amount would be fully paid. For
failure of the petitioner to comply with its obligation under said contracts, respondent filed a
Complaint[8] for a Sum of Money on 28 April 2000 with the RTC.

In its Answer,[9] petitioner contended that its refusal to pay was not without valid and justifiable
reasons. In particular, petitioner alleged that it was defrauded in the amount of P592,000.00 by
respondent for its previous sale of four items, covered by Purchase Order No. 6626. Said items were
misrepresented by respondent as belonging to a new line, but were in truth and in fact, identical with
products petitioner had previously purchased from respondent. Petitioner asserted that it was
deceived by respondent which merely altered the names and labels of such goods. Petitioner
specifically identified the items in question, as follows:

Label/Description Item No. Amount P.O. Date

1. a. Anti-Friction Fluid MPL-800 153,941.40 5714 05/20/99
b. Excellent Rust Corrosion MPL-008 155,496.00 5888 06/20/99
(fake)

2. a. Contact Grease COG #2 115,236.00 5540 04/26/99

b. Connector Grease (fake) CG 230,519.52 6327 08/05/99
3. a. Trixohtropic Grease EPC 81,876.96 4582 01/29/99
b. Di-Electric EPC#2 81,876.96 5446 04/21/99
Strength Protective Coating
(fake)
4. a. Dry Lubricant ASC-EP 87,346.52 5712 05/20/99
b. Anti-Seize Compound ASC-EP 124,108.10 4763 & 02/16/99 & 06/24/99
(fake) 2000 5890
According to petitioner, respondents products, namely Excellent Rust Corrosion, Connector Grease,
Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction
Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated
that had respondent been forthright about the identical character of the products, it would not have
purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was
discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby
the parties agreed that respondent would return to petitioner the amount it previously paid. However,
petitioner was surprised when it received a letter from the respondent, demanding payment of the
amount of P449,864.94, which later became the subject of respondents Complaint for Collection of a
Sum of Money against petitioner.

During the pendency of the trial, petitioner filed a Motion to Compel [10] respondent to give a detailed
list of the ingredients and chemical components of the following products, to wit: (a) Contact Grease
and Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c)
Dry Lubricant and Anti-Seize Compound.[11] It appears that petitioner had earlier requested the
Philippine Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a comparison of
respondents goods.

On 15 March 2004, the RTC rendered an Order granting the petitioners motion. It disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner]
Air Philippines Corporation[,] a detailed list of the ingredients or chemical components of
the following chemical products:

a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric

Strength Protective Coating; and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order
to submit to [petitioner] Air Philippines Corporation the chemical components of all the
above-mentioned products for chemical comparison/analysis.[12]

Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to
disclose the chemical components sought because the matter is confidential.It argued that what
petitioner endeavored to inquire upon constituted a trade secret which respondent cannot be forced
to divulge. Respondent maintained that its products are specialized lubricants, and if their
components were revealed, its business competitors may easily imitate and market the same types of
products, in violation of its proprietary rights and to its serious damage and prejudice.
The RTC gave credence to respondents reasoning, and reversed itself. It issued an Order dated 30
June 2004, finding that the chemical components are respondents trade secrets and are privileged in
character. A priori, it rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good
Government, 299 SCRA 744, p. 764, that the drafters of the Constitution also
unequivocally affirmed that aside from national security matters and intelligence
information, trade or industrial secrets (pursuant to the Intellectual Property Code and
other related laws) as well as banking transactions (pursuant to the Secrecy of Bank
Deposit Act) are also exempted from compulsory disclosure.

Trade secrets may not be the subject of compulsory disclosure. By reason of [their]
confidential and privileged character, ingredients or chemical components of the
products ordered by this Court to be disclosed constitute trade secrets lest [herein
respondent] would eventually be exposed to unwarranted business competition with
others who may imitate and market the same kinds of products in violation of
[respondents] proprietary rights. Being privileged, the detailed list of ingredients or
chemical components may not be the subject of mode of discovery under Rule 27,
Section 1 of the Rules of Court, which expressly makes privileged information an
exception from its coverage.[13]

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition
for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals, which denied the Petition
and affirmed the Order dated 30 June 2004 of the RTC.

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients
of its lubricants is to disregard respondents rights over its trade secrets. It was categorical in declaring
that the chemical formulation of respondents products and their ingredients are embraced within the
meaning of trade secrets. In disallowing the disclosure, the Court of Appeals expounded, thus:

The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989])
held that trade secrets and confidential, commercial and financial information are
exempt from public scrutiny. This is reiterated in Chavez v. Presidential Commission on
Good Government (299 SCRA 744 [1998]) where the Supreme Court enumerated the
kinds of information and transactions that are recognized as restrictions on or privileges
against compulsory disclosure. There, the Supreme Court explicitly stated that:

The drafters of the Constitution also unequivocally affirmed that, aside from
national security matters and intelligence information, trade or industrial
secrets (pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt
from compulsory disclosure.

It is thus clear from the foregoing that a party cannot be compelled to produce,
release or disclose documents, papers, or any object which are considered trade
secrets.
 In the instant case, petitioner [Air Philippines Corporation] would have
[respondent] Pennswell produce a detailed list of ingredients or composition of the
latters lubricant products so that a chemical comparison and analysis thereof can be
obtained. On this note, We believe and so hold that the ingredients or composition of
[respondent] Pennswells lubricants are trade secrets which it cannot be compelled to
disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients

or components of its lubricant products. The formulation thereof is not known to the
general public and is peculiar only to [respondent] Pennswell. The legitimate and
economic interests of business enterprises in protecting their manufacturing and
business secrets are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing

formulas, marketing strategies and other confidential programs and information against
the public. Otherwise, such information can be illegally and unfairly utilized by business
competitors who, through their access to [respondent] Pennswells business secrets,
may use the same for their own private gain and to the irreparable prejudice of the
latter.

xxxx

In the case before Us, the alleged trade secrets have a factual basis, i.e., it
comprises of the ingredients and formulation of [respondent] Pennswells lubricant
products which are unknown to the public and peculiar only to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of public respondent Judge in finding that the detailed list of
ingredients or composition of the subject lubricant products which petitioner [Air
Philippines Corporation] seeks to be disclosed are trade secrets of [respondent]
Pennswell; hence, privileged against compulsory disclosure.[14]

Petitioners Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of:

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH

PREVAILING LAWS AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF
THE TRIAL COURT THAT THE CHEMICAL COMPONENTS OR INGREDIENTS OF
RESPONDENTS PRODUCTS ARE TRADE SECRETS OR INDUSTRIAL SECRETS
THAT ARE NOT SUBJECT TO COMPULSORY DISCLOSURE.[15]

Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and
ingredients of respondents products to conduct a comparative analysis of its products. Petitioner
assails the conclusion reached by the Court of Appeals that the matters are trade secrets which are
protected by law and beyond public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court,
petitioner argues that the use of modes of discovery operates with desirable flexibility under the
discretionary control of the trial court.Furthermore, petitioner posits that its request is not done in bad
faith or in any manner as to annoy, embarrass, or oppress respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner
and those of his employees to whom it is necessary to confide it. [16] The definition also extends to a
secret formula or process not patented, but known only to certain individuals using it in compounding
some article of trade having a commercial value.[17] A trade secret may consist of any formula,
pattern, device, or compilation of information that: (1) is used in one's business; and (2) gives the
employer an opportunity to obtain an advantage over competitors who do not possess the
information.[18] Generally, a trade secret is a process or device intended for continuous use in the
operation of the business, for example, a machine or formula, but can be a price list or catalogue or
specialized customer list.[19] It is indubitable that trade secrets constitute proprietary rights.The
inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may
be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of the
trade secret by one who obtained the information "in confidence" or through a "confidential
relationship."[20] American jurisprudence has utilized the following factors[21] to determine if an
information is a trade secret, to wit:
(1) the extent to which the information is known outside of the employer's
business;

(2) the extent to which the information is known by employees and others
involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the
information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in

developing the information; and

(6) the extent to which the information could be easily or readily obtained through
an independent source.[22]

In Cocoland Development Corporation v. National Labor Relations Commission, [23] the issue
was the legality of an employees termination on the ground of unauthorized disclosure of trade
secrets. The Court laid down the rule that any determination by management as to the confidential
nature of technologies, processes, formulae or other so-called trade secrets must have a substantial
factual basis which can pass judicial scrutiny. The Court rejected the employers naked contention that
its own determination as to what constitutes a trade secret should be binding and conclusive upon the
NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label
almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss
an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be
none at all to speak of.[24] Hence, in Cocoland, the parameters in the determination of trade secrets
were set to be such substantial factual basis that can withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondents special lubricants are
trade secrets within the contemplation of the law. Respondent was established to engage in the
business of general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose
of goods, wares, merchandise, products, including but not limited to industrial chemicals, solvents,
lubricants, acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations,
among others. It is unmistakable to our minds that the manufacture and production of respondents
products proceed from a formulation of a secret list of ingredients. In the creation of its lubricants,
respondent expended efforts, skills, research, and resources. What it had achieved by virtue of its
investments may not be wrested from respondent on the mere pretext that it is necessary for
petitioners defense against a collection for a sum of money. By and large, the value of the information
to respondent is crystal clear. The ingredients constitute the very fabric of respondents production
and business. No doubt, the information is also valuable to respondents competitors. To compel its
disclosure is to cripple respondents business, and to place it at an undue disadvantage. If the
chemical composition of respondents lubricants are opened to public scrutiny, it will stand to lose the
backbone on which its business is founded. This would result in nothing less than the probable
demise of respondents business. Respondents proprietary interest over the ingredients which it had
developed and expended money and effort on is incontrovertible. Our conclusion is that the detailed
ingredients sought to be revealed have a commercial value to respondent. Not only do we
acknowledge the fact that the information grants it a competitive advantage; we also find that there is
clearly a glaring intent on the part of respondent to keep the information confidential and not available
to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect
documents or things upon a showing of good cause before the court in which an action is pending. Its
entire provision reads:

SECTION 1. Motion for production or inspection order. Upon motion of any party showing good
cause therefore, the court in which an action is pending may (a) order any party to
produce and permit the inspection and copying or photographing, by or on behalf of the
moving party, of any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his possession,
custody or control; or (b) order any party to permit entry upon designated land or other
property in his possession or control for the purpose of inspecting, measuring,
surveying, or photographing the property or any designated relevant object or operation
thereon. The order shall specify the time, place and manner of making the inspection
and taking copies and photographs, and may prescribe such terms and conditions as
are just.
 A more than cursory glance at the above text would show that the production or inspection of
documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by
any party upon a showing of good cause therefor before the court in which an action is pending. The
court may order any party: a) to produce and permit the inspection and copying or photographing of
any designated documents, papers, books, accounts, letters, photographs, objects or tangible things,
which are not privileged;[25] which constitute or contain evidence material to any matter involved in
the action; and which are in his possession, custody or control; or b) to permit entry upon designated
land or other property in his possession or control for the purpose of inspecting, measuring,
surveying, or photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters,
photographs, objects or tangible things that may be produced and inspected should not be
privileged.[26] The documents must not be privileged against disclosure.[27] On the ground of public
policy, the rules providing for production and inspection of books and papers do not authorize the
production or inspection of privileged matter; that is, books and papers which, because of their
confidential and privileged character, could not be received in evidence. [28] Such a condition is in
addition to the requisite that the items be specifically described, and must constitute or contain
evidence material to any matter involved in the action and which are in the partys possession,
custody or control.

Section 24[29] of Rule 130 draws the types of disqualification by reason of privileged
communication, to wit: (a) communication between husband and wife; (b) communication between
attorney and client; (c) communication between physician and patient; (d) communication between
priest and penitent; and (e) public officers and public interest. There are, however, other privileged
matters that are not mentioned by Rule 130. Among them are the following: (a) editors may not be
compelled to disclose the source of published news; (b) voters may not be compelled to disclose for
whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank
deposits. [30]

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld
the finding of the RTC that there is substantial basis for respondent to seek protection of the law for
its proprietary rights over the detailed chemical composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that this
jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of Procedure on
Government Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for
rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree
No. 902-A,[31] as amended; and (2) cases for rehabilitation transferred from the Securities and
Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The
Securities Regulation Code, expressly provides that the court may issue an order to protect trade
secrets or other confidential research, development, or commercial information belonging to
the debtor.[32] Moreover, the Securities Regulation Code is explicit that the Securities and Exchange
Commission is not required or authorized to require the revelation of trade secrets or
processes in any application, report or document filed with the Commission.[33] This
confidentiality is made paramount as a limitation to the right of any member of the general public,
upon request, to have access to all information filed with the Commission. [34]

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the
following articles:

Art. 291. Revealing secrets with abuse of office. The penalty of arresto mayor and a fine
not exceeding 500 pesos shall be imposed upon any manager, employee or servant
who, in such capacity, shall learn the secrets of his principal or master and shall reveal
such secrets.

Art. 292. Revelation of industrial secrets. The penalty of prision correccional in its
minimum and medium periods and a fine not exceeding 500 pesos shall be
imposed upon the person in charge, employee or workman of any manufacturing or
industrial establishment who, to the prejudice of the owner thereof, shall reveal the
secrets of the industry of
the latter.

Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of
1997, has a restrictive provision on trade secrets, penalizing the revelation thereof by internal
revenue officers or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who
causes or procures an officer or employee of the Bureau of Internal Revenue to divulge
any confidential information regarding the business, income or inheritance of any
taxpayer, knowledge of which was acquired by him in the discharge of his official
duties, and which it is unlawful for him to reveal, and any person who publishes or prints
in any manner whatever, not provided by law, any income, profit, loss or expenditure
appearing in any income tax return, shall be punished by a fine of not more than two
thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor
more than five (5) years, or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control
Act of 1990, enacted to implement the policy of the state to regulate, restrict or prohibit the
importation, manufacture, processing, sale, distribution, use and disposal of chemical substances and
mixtures that present unreasonable risk and/or injury to health or the environment, also contains a
provision that limits the right of the public to have access to records, reports or information
concerning chemical substances and mixtures including safety data submitted and data on
emission or discharge into the environment, if the matter is confidential such that it would
divulge trade secrets, production or sales figures; or methods, production or processes
unique to such manufacturer, processor or distributor; or would otherwise tend to affect
adversely the competitive position of such manufacturer, processor or distributor.[35]

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and
industrial property rights cases are not simple property cases.[36] Without limiting such industrial
property rights to trademarks and trade names, this Court has ruled that all agreements concerning
intellectual property are intimately connected with economic development. [37] The protection of
industrial property encourages investments in new ideas and inventions and stimulates creative
efforts for the satisfaction of human needs. It speeds up transfer of technology and industrialization,
and thereby bring about social and economic progress. [38] Verily, the protection of industrial secrets is
inextricably linked to the advancement of our economy and fosters healthy competition in trade.

Jurisprudence has consistently acknowledged the private character of trade secrets. There is a
privilege not to disclose ones trade secrets.[39] Foremost, this Court has declared that trade secrets
and banking transactions are among the recognized restrictions to the right of the people to
information as embodied in the Constitution.[40] We said that the drafters of the Constitution also
unequivocally affirmed that, aside from national security matters and intelligence information, trade or
industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from
compulsory disclosure.[41]

Significantly, our cases on labor are replete with examples of a protectionist stance towards
the trade secrets of employers. For instance, this Court upheld the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any competitor
company, on the rationalization that the company has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs and information from
competitors.[42] Notably, it was in a labor-related case that this Court made a stark ruling on the
proper determination of trade secrets.

In the case at bar, petitioner cannot rely on Section 77[43] of Republic Act 7394, or the
Consumer Act of the Philippines, in order to compel respondent to reveal the chemical components of
its products. While it is true that all consumer products domestically sold, whether manufactured
locally or imported, shall indicate their general make or active ingredients in their respective labels of
packaging, the law does not apply to respondent. Respondents specialized lubricants -- namely,
Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating,
Dry Lubricant and Anti-Seize Compound -- are not consumer products. Consumer products, as it is
defined in Article 4(q),[44] refers to goods, services and credits, debts or obligations which are
primarily for personal, family, household or agricultural purposes, which shall include, but not be
limited to, food, drugs, cosmetics, and devices. This is not the nature of respondents products. Its
products are not intended for personal, family, household or agricultural purposes. Rather, they are
for industrial use, specifically for the use of aircraft propellers and engines.

Petitioners argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs,
requires the disclosure of the active ingredients of a drug is also on faulty ground. [45] Respondents
products are outside the scope of the cited law. They do not come within the purview of a
drug[46] which, as defined therein, refers to any chemical compound or biological substance, other
than food, that is intended for use in the treatment, prevention or diagnosis of disease in man or
animals. Again, such are not the characteristics of respondents products.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical
formulation of respondents products is not known to the general public and is unique only to it. Both
courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such
factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh
all over again the evidence already considered in the proceedings below. [47] We need not delve into
the factual bases of such findings as questions of fact are beyond the pale of Rule 45 of the Rules of
Court. Factual findings of the trial court when affirmed by the Court of Appeals, are binding and
conclusive on the Supreme Court.[48]

We do not find merit or applicability in petitioners invocation of Section 12 [49] of the Toxic
Substances and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access
to records, reports or information concerning chemical substances and mixtures, including safety data
submitted, and data on emission or discharge into the environment. To reiterate, Section 12[50] of
said Act deems as confidential matters, which may not be made public, those that would
divulge trade secrets, including production or sales figures or methods; production or
processes unique to such manufacturer, processor or distributor, or would otherwise tend to
affect adversely the competitive position of such manufacturer, processor or distributor. It is
true that under the same Act, the Department of Environment and Natural Resources may release
information; however, the clear import of the law is that said authority is limited by the right to
confidentiality of the manufacturer, processor or distributor, which information may be released only
to a medical research or scientific institution where the information is needed for the purpose of
medical diagnosis or treatment of a person exposed to the chemical substance or mixture. The right
to confidentiality is recognized by said Act as primordial. Petitioner has not made the slightest attempt
to show that these circumstances are availing in the case at bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is
indispensable for doing justice.[51] We do not, however, find reason to except respondents trade
secrets from the application of the rule on privilege. The revelation of respondents trade secrets
serves no better purpose to the disposition of the main case pending with the RTC, which is on the
collection of a sum of money. As can be gleaned from the facts, petitioner received respondents
goods in trade in the normal course of business. To be sure, there are defenses under the laws of
contracts and sales available to petitioner. On the other hand, the greater interest of justice ought to
favor respondent as the holder of trade secrets. If we were to weigh the conflicting interests between
the parties, we rule in favor of the greater interest of respondent. Trade secrets should receive
greater protection from discovery, because they derive economic value from being generally
unknown and not readily ascertainable by the public.[52] To the mind of this Court, petitioner was
not able to show a compelling reason for us to lift the veil of confidentiality which shields respondents
trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the
Resolution dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No
costs.

SO ORDERED.

G.R. NO. 156041 February 21, 2007

PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), represented by its

President, MANUEL J. CHAVEZ, Petitioner,
vs.
FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT OF
AGRICULTURE, FPA OFFICER- IN-CHARGE CESAR M. DRILON, AND FPA DEPUTY DIRECTOR
DARIO C. SALUBARSE,Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking to set aside the Decision1 of the Regional
Trial Court of Quezon City, Branch 90 (RTC) dated November 5, 2002.

The case commenced upon petitioner’s filing of a Petition For Declaratory Relief With Prayer For
Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining Order with the RTC on
January 4, 2002. Petitioner, a non-stock corporation duly organized and existing under the laws of the
Philippines, is an association of pesticide handlers duly licensed by respondent Fertilizer and
Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory
Policies and Implementing Guidelines, which provides thus:

3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a pesticide active
ingredient in the Philippines will be granted proprietary protection for a period of seven years
from the date of such registration. During this period subsequent registrants may rely on
these data only with third party authorization or otherwise must submit their own data. After
this period, all data may be freely cited in support of registration by any applicant, provided convincing
proof is submitted that the product being registered is identical or substantially similar to any current
registered pesticide, or differs only in ways that would not significantly increase the risk of
unreasonable adverse effects.

Pesticides granted provisional registration under P.D. 1144 will be considered first registered in 1977,
the date of the Decree.

Pesticide products in which data is still under protection shall be referred to as proprietary pesticides,
and all others as commodity pesticides. (Emphasis supplied)

Petitioner argued that the specific provision on the protection of the proprietary data in FPA’s
Pesticide Regulatory Policies and Implementing Guidelines is unlawful for going counter to the
objectives of Presidential Decree No. 1144 (P.D. No. 1144); for exceeding the limits of delegated
authority; and for encroaching on the exclusive jurisdiction of the Intellectual Property Office.

On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of merit. The RTC
held that "the FPA did not exceed the limits of its delegated authority in issuing the aforecited Section
3.12 of the Guidelines granting protection to proprietary data x x x because the issuance of the
aforecited Section was a valid exercise of its power to regulate, control and develop the pesticide
industry under P.D. 1144"2 and the assailed provision does "not encroach on one of the functions of
the Intellectual Properly Office (IPO)."3

Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for review
on certiorari where the following issues are raised:

WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE OF ITS
DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY PROTECTION TO
DATA SUBMITTED TO SUPPORT THE FIRST FULL OR CONDITIONAL REGISTRATION OF A
PESTICIDE INGREDIENT IN THE PHILIPPINES;

II

WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE JURISDICTION

OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS PESTICIDE
REGULATORY POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR
PROPRIETARY DATA PROTECTION;

III

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL RESTRAINT

OF FREE TRADE;

IV
WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS COUNTER TO THE
OBJECTIVES OF P.D. NO. 1144;

WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 90,
COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE VALIDITY OF SECTION 3.12 OF
THE PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES ISSUED BY
RESPONDENT FPA.

Respondents, on the other hand, maintain that the provision on the protection of proprietary data in
the FPA's Pesticide Regulatory Policies and Implementing Guidelines is valid and legal as it does not
violate the objectives of P.D. No. 1144; the proprietary data are a substantial asset which must be
protected; the protection for a limited number of years does not constitute unlawful restraint of free
trade; and such provision does not encroach upon the jurisdiction of the Intellectual Property Office.

Respondents expound that since under P.D. No. 1144, the FPA is mandated to regulate, control and
develop the pesticide industry, it was necessary to provide for such protection of proprietary data,
otherwise, pesticide handlers will proliferate to the the detriment of the industry and the public since
the inherent toxicity of pesticides are hazardous and are potential environmental contaminants.

They also pointed out that the protection under the assailed Pesticide Regulatory Policies and
Implementing Guidelines is warranted, considering that the development of proprietary data involves
an investment of many years and large sums of money, thus, the data generated by an applicant in
support of his application for registration are owned and proprietary to him. Moreover, since the
protection accorded to the proprietary data is limited in time, then such protection is reasonable and
does not constitute unlawful restraint of trade.

Lastly, respondents emphasize that the provision on protection of proprietary data does not usurp the
functions of the Intellectual Property Office (IPO) since a patent and data protection are two different
matters. A patent prohibits all unlicensed making, using and selling of a particular product, while data
protection accorded by the FPA merely prevents copying or unauthorized use of an applicant's data,
but any other party may independently generate and use his own data. It is further argued that under
Republic Act No. 8293 (R.A. No. 8293), the grant of power to the IPO to administer and implement
State policies on intellectual property is not exclusionary as the IPO is even allowed to coordinate
with other government agencies to formulate and implement plans and policies to strengthen the
protection of intellectual property rights.

The petition is devoid of merit.

The law being implemented by the assailed Pesticide Regulatory Policies and Implementing
Guidelines is P.D. No. 1144, entitled Creating the Fertilizer and Pesticide Authority and Abolishing the
Fertilizer Industry Authority. As stated in the Preamble of said decree, "there is an urgent need to
create a technically-oriented government authority equipped with the required expertise to regulate,
control and develop both the fertilizer and the pesticide industries." (Underscoring supplied) The
decree further provided as follows:

Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing handlers of
pesticides, fertilizers and other agricultural chemical inputs. The FPA shall have the following powers
and functions:

I. Common to Fertilizers, Pesticides and other Agricultural Chemicals

 xxx

4. To promulgate rules and regulations for the registration and licensing of handlers of these
products, collect fees pertaining thereto, as well as the renewal, suspension, revocation, or
cancellation of such registration or licenses and such other rules and regulations as may be
necessary to implement this Decree;

xxx

Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is hereby
authorized to issue or promulgate rules and regulations to implement, and carry out the purposes and
provisions of this Decree.

Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144 by
issuing regulations that provide for protection of proprietary data? The answer is in the negative.

Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to implement
and carry out the purposes and provisions of said decree, i.e., to regulate, control and develop the
pesticide industry. In furtherance of such ends, the FPA sees the protection of proprietary data as one
way of fulfilling its mandate. In Republic v. Sandiganbayan,4 the Court emphasized that:

x x x [t]he interpretation of an administrative government agency, which is tasked to

implement a statute is generally accorded great respect and ordinarily controls the
construction of the courts. The reason behind this rule was explained in Nestle Philippines, Inc. vs.
Court of Appeals in this wise:

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or
modernizing society and the establishment of diverse administrative agencies for addressing and
satisfying those needs; it also relates to the accumulation of experience and growth of specialized
capabilities by the administrative agency charged with implementing a particular statute. In Asturias
Sugar Central, Inc. vs. Commissioner of Customs, the Court stressed that executive officials are
presumed to have familiarized themselves with all the considerations pertinent to the meaning
and purpose of the law, and to have formed an independent, conscientious and competent
expert opinion thereon. The courts give much weight to the government agency officials
charged with the implementation of the law, their competence, expertness, experience and
informed judgment, and the fact that they frequently are the drafters of the law they interpret."

x x x.5 [Emphasis supplied]

Verily, in this case, the Court acknowledges the experience and expertise of FPA officials who are
best qualified to formulate ways and means of ensuring the quality and quantity of pesticides and
handlers thereof that should enter the Philippine market, such as giving limited protection to
proprietary data submitted by applicants for registration. The Court ascribes great value and will not
disturb the FPA's determination that one way of attaining the purposes of its charter is by granting
such protection, specially where there is nothing on record which shows that said administrative
agency went beyond its delegated powers.

Moreover, petitioner has not succeeded in convincing the Court that the provision in question has
legal infirmities.1awphi1.net

There is no encroachment upon the powers of the IPO granted under R.A. No. 8293, otherwise
known as the Intellectual Property Code of the Philippines. Section 5 thereof enumerates the
functions of the IPO. Nowhere in said provision does it state nor can it be inferred that the law
intended the IPO to have the exclusive authority to protect or promote intellectual property rights in
the Philippines. On the contrary, paragraph (g) of said Section even provides that the IPO shall
"[c]oordinate with other government agencies and the private sector efforts to formulate and
implement plans and policies to strengthen the protection of intellectual property rights in the country."
Clearly, R.A. No. 8293 recognizes that efforts to fully protect intellectual property rights cannot be
undertaken by the IPO alone. Other agencies dealing with intellectual property rights are, therefore,
not precluded from issuing policies, guidelines and regulations to give protection to such rights.

There is also no evidence whatsoever to support petitioner's allegation that the grant of protection to
proprietary data would result in restraining free trade. Petitioner did not adduce any reliable data to
prove its bare allegation that the protection of proprietary data would unduly restrict trade on
pesticides. Furthermore, as held in Association of Philippine Coconut Desiccators v. Philippine
Coconut Authority,6 despite the fact that "our present Constitution enshrines free enterprise as a
policy, it nonetheless reserves to the government the power to intervene whenever necessary to
promote the general welfare." There can be no question that the unregulated use or proliferation of
pesticides would be hazardous to our environment. Thus, in the aforecited case, the Court declared
that "free enterprise does not call for removal of ‘protective regulations’." 7 More recently, in Coconut
Oil Refiners Association, Inc. v. Torres,8 the Court held that "[t]he mere fact that incentives and
privileges are granted to certain enterprises to the exclusion of others does not render the issuance
unconstitutional for espousing unfair competition." It must be clearly explained and proven by
competent evidence just exactly how such protective regulation would result in the restraint of trade.

In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and Implementing Guidelines
granting protection to proprietary data is well within the authority of the FPA to issue so as to carry out
its purpose of controlling, regulating and developing the pesticide industry.

WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court of Quezon City,
Branch 90, in SP. Civil Case No. Q-01-42790 is AFFIRMED.

SO ORDERED.