THIRD DIVISION

G.R. No. 154342 July 14, 2004

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC., petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.

DE CI SI ON

CORONA, J.:

In thi s petition for review on certiorari under Rule 45, petitioners Mi ghty Corporation and La Ca mpana Fabrica de Tabaco, Inc . (La Campana) seek to
a nnul, reverse and set aside: (a ) the November 15, 2001 deci sion1 of the Court of Appeals (CA) i n CA-G.R. CV No. 65175 a ffi rming the November 26,
1998 deci sion,2 as modified by the June 24, 1999 order,3 of the Regional Trial Court of Ma kati Ci ty, Bra nch 57 (Ma kati RTC) i n Ci vil Ca se No. 93-850,
whi ch held petitioners liable for, and permanently enjoin ed them from, committing tra demark infringement and unfair competition, and which
ordered them to pay damages to respondents E. & J. Ga l lo Wi nery (Gallo Winery) a nd The Andresons Group, Inc. (Andresons); (b) the July 11, 2002
CA res olution denying their motion for reconsideration4 and (c) the aforesaid Ma kati RTC decision i tself.

I.

The Fa ctual Background

Res pondent Gallo Winery i s a foreign corporation not doing business i n the Philippines but organized and existing under the l aws of the State of
Ca l i fornia, United States of America (U.S.), where all its wineries are located. Gallo Wi nery produces different kinds of wines and brandy products
a nd s ells them in many countries under different registered tra demarks, including the GALLO a nd ERNEST & JULIO GALLO wi ne tra demarks.

Res pondent domestic corporation, Andresons, has been Gallo Winery’s exclusive wine importer a nd distributor i n the Philippine s since 1991, selling
thes e products in its own name a nd for i ts own a ccount.5

Ga l lo Winery’s GALLO wine trademark was registered in the principal register of the Philippine Pa tent Office (now Intellectual Property Office) on
November 16, 1971 under Certificate of Registration No. 17021 which was renewed on November 16, 1991 for a nother 20 yea rs.6 G allo Winery
a l so applied for registration of i ts ERNEST & JULIO GALLO wine tra demark on October 11, 1990 under Application Serial No. 90101 1-00073599-PN
but the records do not disclose i f i t was ever approved by the Director of Pa tents.7

On the other hand, petitioners Mi ghty Corporation and La Campana a nd their sister company, Tobacco Industries of the Philippines (Tobacco
Industries), are engaged in the cultivation, manufacture, distribution and sale of tobacco products for which they have been using the GALLO
ci ga rette tra demark s ince 1973. 8

The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s ci garette mark on September 14, 1973 a nd GALLO filter
ci ga rette mark on Ma rch 26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco Indus tries filed its manufacturer’s
s worn s tatement as basis for BIR’s collection of s pecific ta x on GALLO ci garettes.9

On February 5, 1974, Toba cco Industries applied for, but eventually did not pursue, the registration of the GALLO ci garette t ra demark in the
pri ncipal register of the then Philippine Patent Office.10

In Ma y 1984, Toba cco Industries assigned the GALLO ci garette tra demark to La Ca mpana which, on July 16, 1985, a pplied for tra demark
regi stration in the Philippine Patent Office.11 On July 17, 1985, the Na ti onal Library i ssued Certi ficate of Copyri ght Registration No. 5834 for La
Ca mpa na’s lifetime copyri ght claim over GALLO ci garette labels.12

Subs equently, La Ca mpana authorized Mi ghty Corporation to manufacture and sell cigarettes bearing the GALLO tra demark.13 BIR approved
Mi ghty Corpora tion’s use of GALLO 100’s ci garette brand, under l icensing agreement with Tobacco Industries, on Ma y 18, 1988, a nd GALLO
SPECIAL MENTHOL 100’s ci ga rette brand on April 3, 1989.14

Peti ti oners cl aim that GALLO ci garettes have been s old i n the Philippines since 1973, i nitially by Tobacco Industries, then by La Ca mpana and finally
by Mi ghty Corpora tion.15

On the other hand, although the GALLO wi ne tra demark was registered i n the Philippines in 1971, res pondents cl aim that they first i ntroduced a nd
s ol d the GALLO a nd ERNEST & JULIO GALLO wines in the Philippines circa 1974 wi thin the then U.S. military fa cilities only. By 1979, they ha d
expa nded their Philippine market through authorized distributors a nd independent o utlets.16

Res pondents cl aim that they first l earned a bout the existence of GALLO ci garettes i n the latter part of 1992 when a n Andresons employee saw such
ci ga rettes on display with GALLO wines in a Davao s upermarket wine cellar s ection.17 Forthwith, respondents sent a demand letter to petitioners
a s king them to s top using the GALLO tra demark, to no a vail.

II.

The Legal Dispute

On Ma rch 12, 1993, res pondents s ued petitioners i n the Ma kati RTC for tra demark a nd tra dename infringement a nd unfair competi tion, with a
pra yer for da mages a nd preliminary i njunction.

Res pondents charged petitioners wi th vi olating Arti cle 6bis of the Pa ris Convention for the Protection of Industrial Property (Pa ris Convention)18
a nd RA 166 (Tra demark Law),19 specifically, Sections 22 a nd 23 (for tra demark i nfringement),20 29 a nd 3021 (for unfair competition and false
des ignation of origin) and 37 (for tra dename infringement).22 They cl aimed that petitioners a dopted the GALLO tra demark to ri de on Gallo
Wi nery’s GALLO a nd ERNEST & JULIO GALLO tra demarks’ established reputation a nd popularity, thus ca using confusion, deception and mistake on
the pa rt of the purchasing public who had a lways associated GALLO a nd ERNEST & JULIO GALLO tra demarks with Gallo Winery’s wines.
Res pondents prayed for the issuance of a wri t of preliminary i njunction and ex parte restraining order, plus P2 million as actual a nd compensatory
da mages, at l east P500,000 a s exemplary a nd moral damages, a nd at least P500,000 a s a ttorney’s fees and litigation expenses. 23
In their a nswer, petitioners alleged, a mong other a ffirmative defenses, that: petitioner’s GALLO ci garettes and Gallo Winery’ s wines were totally
unrelated products; Gallo Winery’s GALLO tra demark registration certificate covered wines only, not cigarettes; GALLO ci garettes and GALLO wines
were s old through different channels of trade; GALLO ci garettes, sold at P4.60 for GALLO fi lters a nd P3 for GALLO menthols, w ere low-cost items
compa red to Gallo Wi nery’s high-priced l uxury wines which cost between P98 to P242.50; the ta rget market of Gallo Winery’s wines was the
mi ddle or high-income bracket with a t least P10,000 monthly i ncome while GALLO ci garette buyers were farmers, fishermen, laborers and other
l ow-income workers; the dominant feature of the GALLO ci garette mark was the rooster devi ce with the manufacturer’s name clearly i ndicated as
MIGHTY CORPORATION while, in the case of Gallo Wi nery’s wines, i t was the full names of the founders -owners ERNEST & JULIO GALLO or just
thei r s urname GALLO; by their i naction and conduct, respondents were guilty of l aches and estoppel; a nd petitioners a cted with honesty, justice
a nd good faith in the exercise of their ri ght to manufacture a nd s ell GALLO ci garettes.

In a n order dated April 21, 1993,24 the Ma kati RTC d enied, for lack of merit, respondent’s prayer for the issuance of a writ of preliminary
i njunction,25 holding that respondent’s GALLO tra demark registration certificate covered wi nes only, that respondents’ wines and petitioners’
ci ga rettes were not related goods and respondents failed to prove ma terial damage or great i rreparable i njury a s required by Section 5, Rule 58 of
the Rul es of Court.26

On Augus t 19, 1993, the Ma kati RTC denied, for lack of merit, respondents’ motion for reconsideration. The court reiterated that respondents’
wi nes a nd petitioners’ ci garettes were not related goods since the l ikelihood of deception a nd confusion on the part of the c onsuming public was
very remote. The trial court emphasized that i t could not rely on foreign rulings ci ted by respondents "because the[se] cases were decided by
forei gn courts on the basis of unknown facts peculiar to each case or upon factual surroundings which may exist only wi thin t heir jurisdiction.
Moreover, there [was] no s howing that [these cases had] been tested or found a pplicable in our jurisdiction."27

On February 20, 1995, the CA l i kewise dismissed respondents’ petition for review on certiorari, docketed as CA -G.R. No. 32626, thereby a ffirming
the Ma kati RTC’s denial of the a pplication for issuance of a writ of preliminary i njunction a gainst petitioners.28

After tri a l on the merits, however, the Ma kati RTC, on November 26, 1998, hel d petitioners liable for, a nd permanently enjoined them from,
commi tting tra demark i nfringement a nd unfair competition with respect to the GALLO tra demark:

WHEREFORE, judgment is rendered i n favor of the plaintiff (sic) and against the defendant (sic), to wi t:

a . permanently restraining a nd enjoining defendants, their distributors, trade outlets, a nd all persons acting for them or under their i nstructions,
from (i ) using E & J’s registered tra demark GALLO or a ny other reproduction, counterfeit, copy or colorable imitation of s aid trademark, either
s i ngly or i n conjunction with other words, designs or emblems and other a cts of similar nature, and (ii) committing other a ct s of unfair competition
a ga inst plaintiffs by ma nufacturing a nd s elling their cigarettes in the domestic or export markets under the GALLO tra demark.

b. orderi ng defendants to pay plaintiffs –

(i ) a ctual a nd compensatory damages for the injury a nd prejudice and im pairment of plaintiffs’ business a nd goodwill as a result of the acts and
conduct pleaded as basis for this suit, i n a n amount equal to 10% of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND PESOS
(PHP14,235,000.00) from the filing of the complaint until fully paid;

(i i ) exemplary damages i n the amount of PHP100,000.00;

(i i i) attorney’s fees and expenses of litigation i n the a mount of PHP1,130,068.91;

(i v) the cost of suit.

SO ORDERED."29

On June 24, 1999, the Ma kati RTC gra nted respondent’s motion for partial reconsideration a nd i ncreased the award of actual a nd compensatory
da mages to 10% of P199,290,000 or P19,929,000.30

On a ppeal, the CA a ffirmed the Makati RTC decision and subsequently denied petitioner’s motion for reconsideration.

III.

The Issues

Peti ti oners now s eek relief from this Court contending that the CA did not follow prevailing laws a nd jurisprudence when i t h eld that: [a] RA 8293
(Intellectual Property Code of the Philippines [IP Code]) was a pplicable in this case; [b] GALLO ci garettes a nd GALLO wines were identical, similar or
rel a ted goods for the reason alone that they were purportedly forms of vi ce; [c] both goods passed through the s ame channels of trade and [d]
peti tioners were liable for tra demark infringement, unfair competition and damages.31

Res pondents, on the other hand, assert that this petition which invokes Rule 45 does not i nvolve pure questions of law, and h ence, must be
di s missed outright.

IV.

Di s cussion

THE EXCEPTIONAL CIRCUMSTANCES

IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CA’S FACTUAL FINDINGS

As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of l aw"32 (that is, the doubt pertains to the
a pplication a nd i nterpretation of law to a certain set of facts) a nd not "questions of fa ct" (where the doubt concerns the truth or falsehood of
a l leged facts),33 otherwise, the petition will be denied. We are not a tri er of facts and the Court of Appeals’ factual findi ngs a re generally
concl usive upon us.34
Thi s case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the fa ctual issues concerning
the goods’ similarity, i dentity, relation, channels of tra de, a nd a cts of tra demark i nfringement and unfair competition is greatly dependent on the
i nterpretation of applicable laws. The controversy here is not simply the i dentity or s imilarity of both parties’ trademarks but whether or not
i nfri ngement or unfair competition was committed, a conclusio n based on statutory i nterpretation. Furthermore, one or more of the following
exceptional ci rcumstances oblige us to review the evidence on record:35

(1) the concl usion is grounded entirely on speculation, surmises, a nd conjectures;

(2) the i nference of the Court of Appeals from its findings of fact is manifestly mi staken, absurd a nd i mpossible;

(3) there i s grave a buse of discretion;

(4) the judgment is based on a misapprehension of facts;

(5) the a ppellate court, i n making i ts findings, went beyond the issues of the case, a nd the same a re contrary to the admissions of both the
a ppellant and the appellee;

(6) the fi ndings are without ci tation of specific evi dence on which they a re based;

(7) the fa cts s et forth in the petition as well as in the petitioner's main and reply briefs a re not disputed by the respondents; a nd

(8) the fi ndings of fact of the Court of Appeals a re premised on the absence of evidence and are contradicted [by the evidenc e] on record.36

In thi s light, after thoroughly examining the evi dence on record, weighing, analyzing a nd balancing all factors to determine whether tra demark
i nfri ngement a nd/or unfair competition has been committed, we conclude that both the Court of Appeals a nd the tri al court veered away from the
l a w a nd well-settled jurisprudence.

Thus , we gi ve due course to the petition.

THE TRADEMARK LAW AND THE PARIS

CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE

We note that respondents sued petitioners on Ma rch 12, 1993 for tra demark i nfringement a nd unfair competition committed during the effectivi ty
of the Pa ris Convention a nd the Tra demark La w.

Yet, i n the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the afore said governing l aws but also under the
IP Code which took effect only on January 1, 1998,37 or a bout fi ve years after the filing of the complaint:

Defendants’ unauthorized use of the GALLO tra demark constitutes tra demark infringement pursuant to Section 22 of Republic Act No. 166, Section
155 of the IP Code, Article 6bis of the Pa ris Convention, and Article 16 (1) of the TRIPS Agreement as i t causes confusion, d eception and mistake on
the pa rt of the purchasing public.38 (Emphasis and underscoring supplied)

The CA a pparently did not notice the error and affirmed the Makati RTC decision:

In the l ight of i ts fi nding that appellants’ use of the GALLO tra demark on i ts ci garettes is likely to create confusion with the GALLO tra demark on
wi nes previ ously registered and used in the Philippines by a ppellee E & J Ga l lo Winery, the tri al court thus did not err i n holding that a ppellants’
a cts not only vi olated the provisions of the our tra demark laws (R.A. No. 166 a nd R.A. Nos. (sic) 8293) but also Arti cle 6bis of the Paris
Conventi on.39 (Emphasis and underscoring supplied)

We therefore hold that the courts a quo erred i n retroactively a pplying the IP Code i n this ca se.

It i s a fundamental principle that the va lidity and obligatory force of a l aw proceed from the f act that it has first been promulgated. A l aw that is not
yet effective cannot be considered as conclusively known by the populace. To make a law binding even before it ta kes effect m ay l ead to the
a rbi trary exercise of the legislative power.40 Nova constitutio futuris formam i mponere debet non praeteritis. A new state of the law ought to
a ffect the future, not the past. Any doubt must generally be resolved against the retroactive operation of l aws, whether thes e are original
ena ctments, amendments or repeals.41 There are only a few i nstances when l aws may be gi ven retroactive effect,42 none of which is present i n
thi s case.

The IP Code, repealing the Tra demark Law,43 was approved on June 6, 1997. Secti on 241 thereof expressly decreed that it was t o ta ke effect only
on Ja nuary 1, 1998, wi thout any provision for retroactive a pplication. Thus, the Ma kati RTC a nd the CA s hould have limited th e consideration of the
pres ent ca se within the parameters of the Tra demark Law and the Pa ris Convention, the laws in force a t the time of the filing of the complaint.

DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION

Al though the laws on tra demark i nfringement and unfair competition have a common conception a t their root, that is, a person s hall not be
permi tted to misrepresent his goods or his business as the goods or business of another, the l aw on unfair competition i s broader a nd more
i ncl usive than the law on tra demark i nfringement. The l atter is more limited but it recognizes a more exclusive ri ght derived from the trademark
a doption a nd registration by the person whose goods or business is first associated with i t. The law on tra demarks is thus a s pecialized s ubject
di s tinct from the l aw on unfair competition, a lthough the two s ubjects are entwined with each other a nd a re dealt wi th together i n the Trademark
La w (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property ri ght to a trademark, he may s till obtain
rel i ef on the ground of his competitor’s unfairness or fra ud. Conduct constitutes unfair competition i f the effect is to pass off on the public the
goods of one man as the goods of another. It is not necessary that a ny particular means s hould be used to this end.44

In Del Monte Corporation vs . Court of Appeals,45 we distinguished tra demark i nfringement from unfair competition:
(1) Infri ngement of trademark i s the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods a s those of
a nother.

(2) In i nfringement of tra demark fra udulent intent is unnecessary, whereas i n unfair competition fraudulent i ntent i s essenti al.

(3) In i nfringement of tra demark the prior registration of the tra demark is a prerequisite to the action, whereas in unfair competition registration i s
not necessary.

Perti nent Provisions on Tra demark

Infri ngement under the Paris
Conventi on a nd the Tra demark La w

Arti cl e 6bis of the Pa ris Convention,46 a n i nternational a greement binding on the Philippines and the United States (Gallo Winer y’s country of
domi cile and origin) prohibits "the [registration] or use of a tra demark which constitutes a reproduction, imitation or tra nslation, liable to create
confusion, of a mark considered by the competent a uthority of the country of registration or use to be well -known i n that country a s being already
the ma rk of a person entitled to the benefits of the [Paris] Convention a nd used for i dentical or similar goods. [This rule also a pplies] when the
es sential part of the mark constitutes a reproduction of a ny s uch well-known mark or an imitation liable to create confusion therewith." There is no
ti me l imit for seeking the prohibition of the use of marks used in bad faith.47

Thus , under Arti cle 6bis of the Paris Convention, the following are the elements of tra demark infringement:

(a ) registration or use by a nother person of a tra demark which is a reproduction, i mitation or tra nsl ation liable to create confusion,

(b) of a ma rk considered by the competent authority of the country of registration or use48 to be well -known i n that country a nd is already the
ma rk of a person entitled to the benefits of the Paris Convention, and

(c) s uch tra demark i s used for i dentical or similar goods.

On the other hand, Section 22 of the Tra demark La w holds a person l iable for i nfringement when, a mong others, he "uses without the consent of
the registrant, any reproduction, counterfeit, copy or col orable i mitation of any registered mark or tra dename i n connection with the s ale, offering
for s a le, or a dvertising of any goods, business or s ervices or i n connection with which s uch use is likely to ca use confusion or mistake or to deceive
purcha sers or others as to the s ource or ori gin of s uch goods or s ervices, or i dentity of s uch business; or reproduce, counterfeit, copy or col orably
i mi tate any such mark or tra dename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs , prints, packages,
wra ppers, receptacles or a dvertisements i ntended to be used upon or i n connection with s uch goods, business or s ervices."49 T rademark
regi stration and actual use are material to the complaining party’s ca use of action.

Corol l ary to this, Section 20 of the Trademark Law50 considers the tra demark registration certificate a s prima facie evi dence of the va lidity of the
regi stration, the registrant’s ownership and exclusive right to use the tra demark i n connection with the goods, business or s ervices as classified by
the Di rector of Patents51 a nd as specified in the certificate, subject to the conditions a nd l imitations stated therein. Sect ions 2 a nd 2-A52 of the
Tra demark La w emphasize the importance of the trademark’s a ctual use i n commerce in the Philippines prior to its registration. In the adjudication
of tra demark ri ghts between contending parties, equitable principles of laches, estoppel, and a cquiescence may be considered a nd a pplied.53

Under Sections 2, 2-A, 9-A, 20 a nd 22 of the Tra demark Law therefore, the following constitute the elements of tra demark infringement:

(a ) a tra demark a ctually used in commerce i n the Philippines and registered i n the principal register of the Philippine Pa tent Office

(b) i s used by a nother person i n connection with the sale, offering for sale, or advertising of a ny goods, business or servi c es or in connection with
whi ch such use is likely to ca use confusion or mistake or to deceive purchasers or others as to the source or origin of s uch goods or servi ces, or
i dentity of s uch business; or s uch tra demark is reproduced, counterfeited, copied or colorably i mitated by a nother person and such reproduction,
counterfeit, copy or col orable imitation is a pplied to labels, signs, prints, packages, wrappers, receptacles or a dvertisements intended to be used
upon or i n connection wi th such goods, business or s ervices as to l ikely ca use confusion or mistake or to deceive purchasers,

(c) the tra demark is used for i dentical or similar goods, a nd

(d) s uch act is done without the consent of the tra demark registrant or a ssignee.

In s ummary, the Paris Convention protects well-known trademarks only (to be determined by domestic a uthorities), while the Tra demark Law
protects all trademarks, whether well-known or not, provided that they ha ve been registered and are i n a ctual commercial use i n the Philippines.
Fol lowing universal acquiescence and comity, i n case of domestic legal disputes on any conflicting provisions between the Paris Convention (which
i s a n i nternational a greement) and the Tra demark law (which is a municipal law) the l atter will prevail.54

Under both the Pa ris Convention a nd the Tra demark La w, the protection of a registered tra demark is limited only to goods iden tical or similar to
thos e i n respect of which such trademark is registered a nd only when there is likelihood of confusion. Under both laws, the t i me element i n
commencing infringement cases is material i n ascertaining the registrant’s express or i mplied consent to another’s use of i ts trademark or a
col orable i mitation thereof. This is why a cquiescence, estoppel or l aches may defeat the registrant’s otherwise va lid cause o f a ction.

Hence, proof of all the elements of trademark infringement is a condition precedent to a ny fi nding of liability.

THE ACTUAL COMMERCIAL USE IN THE

PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.

By res pondents’ own judicial admission, the GALLO wine trademark was registered in the Philippines i n November 1971 but the wine i tself was first
ma rketed a nd s old i n the country only i n 1974 a nd only within the former U.S. military fa cilities, a nd outside thereof, only i n 1979. To prove
commercial use of the GALLO wine tra demark i n the Philippines, respondents presented sales invoice no. 29991 da ted July 9, 1981 a ddressed to
Conra d Company Inc., Ma kati, Philippines and sales i nvoice no. 85926 da ted Ma rch 22, 1996 a ddressed to Andresons Global, Inc. , Quezon Ci ty,
Phi l ippines. Both i nvoices were for the s ale a nd s hipment of GALLO wines to the Philippines during that period.55 Nothing at all, however, was
pres ented to evidence the a lleged sales of GALLO wines in the Philippines i n 1974 or, for tha t matter, prior to July 9, 1981.

On the other hand, by testimonial evidence supported by the BIR a uthorization letters, forms a nd manufacturer’s sworn s tatement, it appears that
peti tioners a nd i ts predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO ci garettes in the Philippines s ince 1973 or
before July 9, 1981.56

In Emerald Ga rment Manufacturing Corporation vs . Court of Appeals,57 we reiterated our rulings i n Pa gasa Industrial Corporati on vs . Court of
Appeals,58 Converse Rubber Corporation vs . Universal Rubber Products, Inc.,59 Sterling Products International, Inc. vs . Farbenfabriken Bayer
Akti engesellschaft,60 Ka bushi Kaisha Isetan vs . Intermediate Appellate Court,61 a nd Philip Morris vs . Court of Appeals,62 giving utmost importance
to the a ctual commercial use of a tra demark i n the Philippines prior to i ts registration, notwithstanding the provisions of the Pa ris Convention:

xxx xxx xxx

In a ddition to the foregoing, we a re constrained to agree with petitioner's contention that private respondent failed to prove prior a ctual
commercial use of i ts "LEE" trademark in the Philippines before filing i ts a pplication for registration with the BPTTT and hence, has not a cquired
ownership over said mark.

Actua l use in commerce in the Philippines i s an essential prerequisite for the a cquisition of ownership over a tra demark purs uant to Sec. 2 a nd 2-A
of the Phi lippine Tra demark Law (R.A. No. 166) x x x

xxx xxx xxx

The provi sions of the 1965 Pa ri s Convention for the Protection of Industrial Property relied upon by priva te respondent and Sec. 21-A of the
Tra demark La w (R.A. No. 166) were sufficiently expounded upon and qualified i n the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA
576 [1993]):

xxx xxx xxx

Fol lowing universal acquiescence and comity, our municipal law on tra demarks regarding the requirement of actual use i n the Philippines must
s ubordinate an international agreement inasmuch as the a pparent clash is being decided by a muni cipal tribunal (Mortisen vs. Peters, Great Britain,
Hi gh Court of Judiciary of Scotland, 1906, 8 Ses sions, 93; Pa ras, International Law and World Organization, 1971 Ed., p. 20). Wi thal, the fact that
i nternational law has been made part of the law of the l and does not by any means i mply the primacy of i nternational l aw over national l aw in the
muni cipal sphere. Under the doctrine of i ncorporation as applied in most countries, rules of international law a re given a s tanding equal, not
s uperior, to national l egislative enactments.

xxx xxx xxx

In other words, (a foreign corporation) may ha ve the ca pacity to s ue for i nfringement irrespective of l ack of business a ctivi ty i n the Philippines on
a ccount of Section 21-A of the Trademark La w but the question of whether they have an exclusive ri ght over their s ymbol as to justify issuance of
the controversial writ will depend on actual use of their tra demarks i n the Philippines in line with Sections 2 a nd 2-A of the same law. It is thus
i ncongruous for petitioners to cl aim that when a foreign corporation not l icensed to do business in the Philippines files a complaint for
i nfri ngement, the entity need not be a ctually using the tra demark i n commerce in the Philippines. Such a foreign corporation may have the
pers onality to file a suit for i nfringement but it may not necessarily be entitled to protection due to absence of a ctual use of the embl em i n the
l oca l market.

xxx xxx xxx

Undi sputably, pri vate respondent is the senior registrant, having obtained several registration certificates for i ts va rious tra demarks "LEE," "LEE
RIDERS," and "LEESURES" in both the s upplemental and principal registers, as early a s 1969 to 1973. However, registration alo ne will not suffice. In
Sterl ing Products International, Inc. v. Fa rbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Rei terated i n Ka bushi Isetan vs. Intermediate
Appellate Court (203 SCRA 583 [1991]) we declared:

xxx xxx xxx

A rul e widely a ccepted and firmly entrenched because it has come down through the years is th at a ctual use i n commerce or business is a
prerequisite i n the a cquisition of the right of ownership over a tra demark.

xxx xxx xxx

The credibility placed on a certificate of registration of one's tra demark, or i ts weight as evi dence of va lidity, ownershi p a nd exclusive use, is
qua lified. A registration certificate serves merely a s prima facie evidence. It is not conclusive but can and may be rebutted by controverting
evi dence.

xxx xxx xxx

In the ca se at bench, however, we reverse the findings of the Director of Pa tents and the Court of Appeals. After a meticulous s tudy of the records,
we obs erve that the Director of Pa tents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent
of the tra demark "LEE" which, as we have previously discussed are not sufficient. We ca nnot give credence to private responde nt's cl aim that its
"LEE" ma rk fi rst reached the Philippines i n the 1960's through l ocal sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo,
p. 177) ba sed as it was s olely on the s elf-servi ng statements of Mr. Edward Poste, General Ma nager of Lee (Phils.), Inc., a wholly owned subsidiary
of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Ori ginal Records, p. 52) Similarly, we give l ittle weight to the numerous vouchers
representing va rious advertising expenses in the Philippines for "LEE" products. It is well to note that these expenses were i ncurred only i n 1981
a nd 1982 by LEE (Phi ls.), Inc. a fter i t entered into a licensing a greement with private respondent on 11 Ma y 1981. (Exhi bit E )

On the other hand, petitioner has sufficiently s hown that it has been i n the business of selling jeans and other ga rments adopting its "STYLISTIC MR.
LEE" tra demark since 1975 a s evidenced by a ppropriate sales invoices to va rious stores and retailers. (Exhibit 1-e to 1-o)
Our rul i ngs in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) a nd Converse Rubber Corp. v. Uni versal Rubber Products, Inc., (147
SCRA 154 [1987]), res pectively, a re i nstructive:

The Tra demark Law is very cl ear. It requires a ctual commercial use of the mark prior to i ts registration. There is no dispute that respondent
corpora tion was the first registrant, yet it failed to fully s ubstantiate i ts cl aim that it used i n tra de or business in the Philippines t he s ubject mark; it
di d not present proof to i nvest i t with exclusive, continuous a doption of the tra demark which should consist am ong others, of considerable sales
s i nce its first use. The invoices submitted by respondent which were dated way back in 1957 s how that the zippers sent to the Philippines were to
be us ed as "samples" and "of no commercial va lue." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples"
a re not for sale a nd therefore, the fa ct of exporting them to the Philippines ca nnot be considered to be equivalent to the "u se" contemplated by
l a w. Respondent did not expect i ncome from such "samples." There were no receipts to establish sale, a nd no proof were presented to s how that
they were s ubsequently sold in the Philippines.

xxx xxx xxx

For l a ck of a dequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish
confusing similarity between s aid trademarks, private respondent's action for i nfringement must necessarily fail. (Emphasis s upplied.)

In vi ew of the foregoing jurisprudence a nd respondents’ judicial a dmission that the actual commercial use of the GALLO wine tra demark was
s ubsequent to its registration in 1971 a nd to Tobacco Industries’ commercial use of the GALLO ci garette trademark i n 1973, we rule that, on this
a ccount, respondents never enjoyed the e xclusive ri ght to use the GALLO wi ne tra demark to the prejudice of Tobacco Industries and its successors -
i n-interest, herein petitioners, either under the Trademark La w or the Paris Convention.

Res pondents’ GALLO tra demark

regi stration is limited to wines only

We a l so note that the GALLO tra demark registration certificates i n the Philippines and in other countries expressly s tate tha t they cover wines only,
wi thout a ny evidence or i ndication that registrant Gallo Winery expanded or i ntended to expand its business to ci garettes.63

Thus , by s trict a pplication of Section 20 of the Trademark Law, Gallo Winery’s exclusive ri ght to use the GALLO tra demark should be l imited to
wi nes, the only product i ndicated i n its registration certificates. This s trict statutory l imitation on the exclusive ri ght to use trademarks was amply
cl a ri fied i n our ruling i n Faberge, Inc. vs . Intermediate Appellate Court:64

Ha vi ng thus reviewed the l aws applicable to the ca se before Us, it is not difficult to discern from the foregoing statutory enactments that private
res pondent may be permitted to register the tra demark "BRUTE" for bri efs produced by i t notwithstanding petitioner's vehement protestations of
unfa ir dealings in marketing i ts own s et of i tems which are l imited to: a fter-shave lotion, shavi ng cream, deodorant, talcum powder a nd toilet soap.
Ina smuch as petitioner has not ventured in the production of briefs, a n item which is not listed i n i ts certificate of regist ration, petitioner cannot
a nd s hould not be allowed to feign that private respondent had inva ded petitioner's exclusive domain. To be s ure, i t is significant that petitioner
fa i led to a nnex i n i ts Bri ef the s o-called "eloquent proof that petitioner i ndeed intended to expand i ts mark ‘BRUT’ to other goods" (Page 27, Brief
for the Peti tioner; page 202, Rollo). Even then, a mere application by petitioner i n this aspect does not s uffice a nd may not vest a n exclusive right in
i ts fa vor that ca n ordinarily be protected by the Tra demark Law. In short, paraphrasing Section 20 of the Tra demark La w as a pplied to the
documentary evidence adduced by petitioner, the certificate of registration i ssued by the Director of Patents ca n confer upon petitioner the
excl usive ri ght to use its own symbol only to those goods s pecified i n the certificate, s ubject to a ny conditions and limitations stated therein. This
ba s ic point is perhaps the unwritten rationale of Justice Es colin in Philippine Refining Co., Inc. vs . Ng Sam (115 SCRA 472 [ 1982]), when he s tressed
the pri nciple enunciated by the United States Supreme Court i n American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) tha t
one who has adopted and used a tra demark on his goods does not prevent the a doption a nd use of the same tra demark by others f or products
whi ch are of a different description. Verily, this Court had the occasion to observe in the 1966 ca se of George W. Luft Co., Inc. vs . Ngo Guan (18
SCRA 944 [1966]) tha t no s erious objection was posed by the petitioner therein since the applicant utilized the emblem "Tango" for no other
product than hair pomade i n which petitioner does not deal.

Thi s brings Us back to the incidental i ssue raised by petitioner which priva te respondent sought to belie a s regards petitioner's alleged expansion of
i ts business. It may be recalled that petitioner claimed that it has a pending a pplication for registration of the emblem "BRUT 33" for b ri efs (page
25, Bri ef for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes i n Sta. Ana vs . Maliwat (24
SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remo te from a ny other product
whi ch the first user would be likely to ma ke or s ell (vi de, a t page 1025). Comm enting on the former provision of the Tra demark Law now embodied
s ubstantially under Section 4(d) of Republic Act No. 166, a s amended, the erudite jurist opined that the law in point "does n ot require that the
a rti cl es of manufacture of the previ ous user and late user of the mark s hould possess the same descriptive properties or s hould fall into the same
ca tegories a s to bar the latter from registering his mark in the principal register." (supra at page 1026).

Yet, i t i s equally true that a s aforesaid, the protective mantle of the Tra demark La w extends only to the goods used by the first user a s specified in
the certi ficate of registration following the cl ear message conveyed by Section 20.

How do We now reconcile the a pparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case a nd Section
20? It woul d s eem that Section 4(d) does not require that the goods manufactured by the s econd user be related to the goods p roduced by the
s enior user while Section 20 l imits the exclusive ri ght of the s enior user only to those goods specified i n the certificate of registration. But the rule
ha s been laid down that the cl ause which comes later s hall be given paramount significance over a n a nterior proviso upon the presumption that i t
expresses the latest and dominant purpose. (Graham Pa per Co. vs . Na tional Newspapers Asso. (Mo. App.) 193 S.W. 1003; Ba rnett vs . Merchant's L.
Ins . Co., 87 Okl . 42; Sta te ex nel Atty. Gen. vs . Toledo, 26 N.E., p. 1061; ci ted by Ma rti n, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It
i neluctably follows that Section 20 i s controlling and, therefore, priva te respondent can appropriate i ts s ymbol for the brie fs i t manufactures
beca use as a ptly remarked by Justice Sanchez in Sterling Products International Inc. vs . Farbenfabriken Bayer (27 SCRA 1214 [1969]):

"Rea lly, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may a rise whereby an
a pplicant may be tempted to register a tra demark on a ny a nd all goods which his mind may conceive even i f he had n ever intended to use the
tra demark for the said goods. We believe that s uch omnibus registration is not contemplated by our Tra demark La w." (1226).

NO LIKELIHOOD OF CONFUSION, MISTAKE

OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS’ AND RESPONDENTS’
GOODS OR BUSINESS
A cruci a l issue in a ny tra demark infringement case is the likelihood of confusion, mistake or deceit as to the i dentity, s ource or origin of the goods
or i dentity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined ri gidly
a ccording to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark ca ses, more than i n other kinds of litigation,
precedents must be s tudied i n the light of each particular ca se. 65

There a re two types of confusion in trademark infringement. The first is "confusion of goods" when an otherwise prudent purch aser i s induced to
purcha se one product i n the belief that he is purchasing a nother, in which ca se defendant’s goods are then bought as the plaintiff’s and its poor
qua lity reflects badly on the plaintiff’s reputation. The other i s "confusion of business" wherein the goods of the parties a re different but the
defendant’s product ca n reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that
there i s some connection between the plaintiff and defendant which, in fact, does not exist.66

In determining the likelihood of confusion, the Court must consider: [a ] the resemblance between the tra demarks; [b] the similarity of the goods to
whi ch the tra demarks are a ttached; *c+ the likely effect on the purchaser a nd *d+ the registrant’s express or implied consent a nd other fair a nd
equitable considerations.

Peti ti oners a nd respondents both use "GALLO" i n the labels of their respective cigarette a nd wine products. But, as held i n the following cases, the
us e of an i dentical mark does not, by i tself, lead to a legal conclusion that there is tra demark i nfringement:

(a ) i n Acoje Mining Co., Inc. vs . Director of Pa tent,67 we ordered the approval of Acoje Mi ning’s a pplication for registration of the tra demark LOTUS
for i ts s oy s auce even though Philippine Refining Company had prior registration and use of s uch i denti cal mark for i ts edible oil which, l ike s oy
s a uce, also belonged to Cl ass 47;

(b) i n Philippine Refining Co., Inc. vs . Ng Sam a nd Director of Patents,68 we upheld the Patent Director’s registration of th e same trademark CAMIA
for Ng Sa m’s ham under Class 47, despite Philippine Refining Company’s prior tra demark registration a nd actual use of s uch mark on i ts lard,
butter, cooking oil (all of which belonged to Cl ass 47), a brasive detergents, polishing materials a nd s oaps;

(c) i n Hi ckok Ma nufacturing Co., I nc. vs . Court of Appeals a nd Santos Lim Bun Li ong,69 we dismissed Hickok’s petition to ca ncel private
res pondent’s HICKOK tra demark registration for i ts Marikina s hoes as a gainst petitioner’s earlier registration of the s ame tra demark for
ha ndkerchiefs, briefs, belts and wallets;

(d) i n Shell Company of the Philippines vs . Court of Appeals,70 in a minute resolution, we dismissed the petition for review for l ack of merit and
a ffi rmed the Pa tent Office’s registration of the tra demark SHELL used i n the cigarettes manufactured by respondent Fortune Tobacco Corporation,
notwi thstanding Shell Company’s opposition as the prior registrant of the same tra demark for its gasoline and other petroleum products;

(e) i n Esso Standard Eastern, Inc. vs . Court of Appeals,71 we dismissed ESSO’s complaint for tra demark i nfringement against United Ci garette
Corpora tion and allowed the latter to use the tra demark ESSO for its ci garettes, the same trademark used by ESSO for i ts petroleum products, a nd

(f) i n Ca non Kabushiki Kaisha vs . Court of Appeals and NSR Rubber Corporation,72 we affirmed the rulings of the Patent Office a nd the CA that NSR
Rubber Corporation could use the tra demark CANON for i ts sandals (Class 25) despite Ca non Kabushiki Kaisha’s prior registrati on and use of the
s a me tra demark for its paints, chemical products, toner a nd dyestuff (Class 2).

Whether a tra demark causes confusion and is likely to deceive the public hinges on "colorable imitation"73 which has been def ined a s "such
s i milarity i n form, content, words, sound, meaning, s pecial a rrangement or general a ppearance of the tra demark or tra dename in their overall
pres entation or in their essential a nd s ubstantive a nd distinctive parts as would likely mi slead or confuse persons in the ordinary course of
purcha sing the genuine a rticle."74

Juri s prudence has developed two tests in determining similarity a nd l ikelihood of confusion in trademark resemblance:75

(a ) the Dominancy Test applied in Asia Brewery, Inc. vs . Court of Appeals76 a nd other cases,77 a nd

(b) the Holistic or Totality Test used i n Del Monte Corporation vs . Court of Appeals78 a nd i ts preceding cases.79

The Dominancy Test focuses on the similarity of the prevalent features of the competing tra demarks which might cause confusion or deception,
a nd thus i nfringement. If the competing trademark contains the main, essential or dominant features of another, a nd confusion or deception is
l i kely to result, infringement ta kes place. Duplication or imitation is not necessary; nor is i t necessary that th e i nfringing l abel should s uggest an
effort to i mitate. The question is whether the use of the ma rks involved is likely to ca use confusion or mistake i n the mind of the public or deceive
purcha sers.80

On the other hand, the Holistic Test requires that the entirety of the marks i n question be considered i n resolving confusing similarity. Comparison
of words is not the only determining fa ctor. The tra demarks in their entirety a s they a ppear i n their respective labels or ha ng ta gs must a lso be
cons idered in relation to the goods to which they a re a ttached. The discerning eye of the observer must focus not only on the predominant words
but a l so on the other features a ppearing in both labels i n order that he ma y draw his conclusion whether one is confusingly s imilar to the other.81

In comparing the resemblance or colorable imitation of ma rks, va rious factors have been considered, such as the dominant color, s tyle, size, form,
mea ning of letters, words, designs a nd emblems used, the likelihood of deception of the mark or name's tendency to confuse82 and the
commercial i mpression l ikely to be conveyed by the tra demarks if used i n conjunction with the respective goods of the parties .83

Appl yi ng the Dominancy a nd Holistic Tests, we find that the dominant feature of the GALLO ci garette tra demark i s the device of a large rooster
fa ci ng l eft, outlined in black against a gold background. The rooster’s color is either green or red – green for GALLO menthols and red for GALLO
fi l ters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence i n the GALLO ci garette packs in terms of
s i ze a nd l ocation on the labels.84

The GALLO ma rk a ppears to be a fanciful a nd a rbitrary ma rk for the ci garettes as i t has no relation a t all to the product but was chosen merely as a
tra demark due to the fondness for fi ghting cocks of the s on of petitioners’ president. Furthermore, petitioners adopted GALLO , the Spanish word
for roos ter, a s a ci garette tra demark to a ppeal to one of their target markets, th e sabungeros (cockfight a ficionados).85
Al s o, as admitted by respondents themselves,86 on the side of the GALLO ci garette packs are the words "MADE BY MIGHTY CORPORA TION," thus
cl ea rly i nforming the public a s to the identity of the manufacturer of the ci garettes.

On the other hand, GALLO Wi nery’s wine and brandy l abels are diverse. In many of them, the l abels a re embellished with sketch es of buildings a nd
trees , vi neyards or a bunch of grapes while i n a few, one or two small roosters facing ri ght or fa cing each other (atop the EJG crest, s urrounded by
l eaves or ribbons), with a dditional designs i n green, red a nd yellow colors, appear as minor features thereof.87 Directly bel ow or a bove these
s ketches is the entire printed name of the founder-owners, "ERNEST & JULIO GALLO" or just their s urname "GALLO,"88 which appears i n different
fonts , sizes, styles and labels, unlike petitioners’ uniform casque-font bold-lettered GALLO ma rk.

Moreover, on the labels of Gallo Winery’s wines a re printed the words "VINTED AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO,
CALIFORNIA."89

The ma ny di fferent features like color schemes, art works a nd other markings of both products drown out the s imilarity betwee n them – the use of
the word “GALLO” ― a fa mily s urname for the Gallo Winery’s wines and a Spanish word for rooster for petitioners’ cigarettes.

WINES AND CIGARETTES ARE NOT

IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

Confusion of goods is evident where the litigants are a ctually i n competition; but confusion of business may a rise between non-competing interests
a s well.90

Thus , a part from the s trict application of Section 20 of the Trademark La w and Article 6bis of the Pa ris Convention which pro scribe trademark
i nfri ngement not only of goods s pecified i n the certificate of registration but also of identical or similar goods , we have also uniformly recognized
a nd a pplied the modern concept of "related goods."91 Simply s tated, when goods a re so related that the public may be, or is a ctually, deceived and
mi s led that they come from the same maker or manufacturer, tra demark infringement occurs.92

Non-competing goods may be those which, though they a re not i n a ctual competition, are s o related to each other that i t can reasonably be
a s sumed that they ori ginate from one manufacturer, i n which case, confusion of business ca n arise out of the use of s imilar marks.93 They may also
be those which, being entirely unrelated, ca nnot be assumed to have a common s ource; hence, there i s no confusion of business , even though
s i milar ma rks are used.94 Thus, there is no tra demark i nfringement i f the public does not expect the plaintiff to make or sell the same class of
goods as those made or sold by the defendant.95

In res olving whether goods a re related,96 several factors come i nto play:

(a ) the business (and i ts l ocation) to which the goods belong

(b) the cl ass of product to which the goods belong

(c) the product's quality, quantity, or s ize, including the nature of the package, wra pper or container 97

(d) the nature and cost of the articles98

(e) the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality

(f) the purpose of the goods99

(g) whether the article is bought for immediate consumption,100 that is, day-to-day household items101

(h) the fi elds of manufacture102

(i ) the conditions under which the a rticle i s usually purchased103 a nd

(j) the cha nnels of trade through which the goods flow,104 how they are distributed, marketed, displayed and sold.105

The wi sdom of this a pproach is i ts recognition that each tra demark i nfringement case presents its own unique s et of facts. No s ingle factor is
preeminent, nor can the presence or a bsence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the
court i s required to sift the evi dence relevant to each of the cri teria. This requires that the entire panoply of elements constituting the relevant
fa ctual l andscape be comprehensively examined.106 It i s a weighing and balancing process. With reference to this ultimate que stion, and from a
ba l ancing of the determinations reached on all of the fa ctors, a conclusion is reached whether the parties have a right to th e relief s ought.107

A very i mportant circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent pu rchasers will be
mi s led, or simply confused, as to the s ource of the goods i n question.108 The "purchaser" is not the "completely u nwary consumer" but is the
"ordi narily i ntelligent buyer" considering the type of product involved.109 He is "a ccustomed to buy, a nd therefore to s ome e xtent familiar with,
the goods i n question. The test of fraudulent simulation is to be found in the l ikelihood of the deception of s ome persons in s ome measure
a cquainted with an established design a nd desirous of purchasing the commodity with which that design has been a ssociated. The test is not found
i n the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must
be i ndifferent between that and the other. The simulation, i n order to be objectionable, must be s uch as appears l ikely to mi slead the ordinary
i ntelligent buyer who has a need to s upply and is familiar with the article that he seeks to purchase."110

Hence, in the adjudication of trademark infringement, we give due regard to the goods’ usual purchaser’s character, a ttitude, habits, age, training
a nd education. 111

Appl yi ng these l egal precepts to the present ca se, petitioner’s use of the GALLO ci garette tra demark is not likely to ca use confusion or mistake, or
to deceive the "ordinarily i ntelligent buyer" of either wines or ci garettes or both as to the i dentity of the g oods, their s ource and origin, or identity
of the business of petitioners a nd respondents.
Obvi ously, wines and ci garettes are not identical or competing products. Neither do they belong to the same class of goods. R espondents’ GALLO
wi nes belong to Cl ass 33 under Rule 84*a + Cha pter III, Part II of the Rules of Pra ctice in Tra demark Ca ses while petitioners’ GALLO cigarettes fall
under Cl ass 34.

We a re mindful that product classification alone cannot s erve as the decisive factor in the resolution of whethe r or not wines a nd ci garettes are
rel a ted goods. Emphasis should be on the s imilarity of the products involved and not on the a rbitrary cl assification or gener al description of their
properties or characteristics. But the mere fact that one person has a dopted a nd used a particular tra demark for his goods does not prevent the
a doption a nd use of the same tra demark by others on a rticles of a different description. 112

Both the Ma kati RTC a nd the CA held that wines a nd cigarettes a re related products because: (1) "they are related forms of vi ce, harmful when
ta ken in excess, and used for pleasure a nd relaxation" and (2) "they a re grouped or classified i n the same section of s uperma rkets a nd groceries."

We fi nd these premises patently i nsufficient a nd too arbitrary to s upport the legal conclusion that wines a nd ci garettes are related products within
the contemplation of the Tra demark La w a nd the Pa ris Convention.

Fi rs t, a nything –- not only wi nes and cigarettes ― ca n be used for pleasure and relaxation a nd can be harmful when taken in excess. Indeed, it
woul d be a grave a buse of discretion to treat wines and cigarettes as similar or related products likely to ca use confusion j ust because they a re
pl easure-giving, relaxing or potentially ha rmful. Such reasoning makes no s ense.

Second, it is common knowledge that supermarkets sell an infinite va riety of wholly unrelated products and the goods here i nvolved, wines and
ci ga rettes, have nothing whatsoever i n common with respect to their essential characteristics, quality, quantity, size, including the nature of their
pa ckages, wrappers or containers.113

Accordi ngly, the U.S. patent office a nd courts have consistently held that the mere fact that goods a re sold in one store under the s ame roof does
not a utomatically mean that buyers a re likely to be confused a s to the goods’ respective sources, connections or sponsorships. The fact that
di fferent products are a vailable i n the same store is an insufficient standard, in and of i tself, to warrant a finding of lik elihood of confusion.114

In thi s regard, we adopted the Director of Pa tents’ finding i n Philippine Refining Co., Inc. vs . Ng Sam and the Director of Pa tents:115

In hi s decision, the Director of Pa tents enumerated the factors that s et respondent’s products a part from the goods of petitioner. He opined a nd
we quote:

"I ha ve taken i nto a ccount such factors a s probable purchaser attitude and habits, marketing activities, retail outlets, and commercial i mpression
l i kely to be conveyed by the tra demarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard,
butter, oil, a nd s oap on the other a re products that would not move in the same ma nner through the same channels of tra de. Th ey pertain to
unrelated fields of manufacture, might be distributed a nd marketed under dissimilar conditions, and are displayed s eparately even though they
frequently ma y be s old through the same retail food establishments. Opposer’s products are ordinary day-to-day household items whereas ham is
not necessarily so. Thus, the goods of the parties are not of a character which purchasers would likely a ttribute to a common origin.

The observa tions and conclusion of the Director of Pa tents a re correct. The particular goods of the parties a re so unrelated that consumers, would
not, i n a ny probability mistake one as the source of origin of the product of the other. (Emphasis supplied).

The s ame is true i n the present case. Wi nes and cigarettes a re non -competing a nd are totally unrelated products not likely to ca use confusion vis-à-
vi s the goods or the business of the petitioners a nd respondents.

Wi nes a re bottled a nd consumed by drinking while cigarettes are packed in cartons or packages a nd s moked. There is a whale of a difference
between their descriptive properties, physical attributes or essential characteristics like form, composition, texture and quality.

GALLO ci ga rettes a re inexpensive i tems while GALLO wi nes are not. GALLO wines are patronized by middle-to-high-income earners while GALLO
ci ga rettes a ppeal only to simple folks like farmers, fishermen, laborers a nd other low-income workers.116 Indeed, the big price difference of these
two products is a n important factor i n proving that they a re in fact unrelated a nd that they tra vel i n different channels of tra de. There is a distinct
pri ce s egmentation based on va stly different social classes of purchasers.117

GALLO ci ga rettes a nd GALLO wi nes are not sold through the s ame channels of trade. GALLO ci garettes are Philippine -made and petitioners neither
cl a im nor pass off their goods as i mported or emanating from Gallo Winery. GALLO ci garettes are distributed, marketed and sold through ambulant
a nd s idewalk vendors, s mall local sari-sari s tores and grocery s tores in Philippine rural areas, mainly i n Misamis Ori ental, Pangasinan, Bohol, and
Cebu.118 On the other hand, GALLO wi nes a re i mported, distributed and sold in the Philippines through Gallo Winery’s exclusive contracts with a
domestic entity, which is currently Andresons. By res pondents’ own testimonial evidence, GALLO wines a re sold in hotels, expe nsive bars a nd
res ta urants, and high-end grocery s tores a nd s upermarkets, not through sari-sari s tores or a mbulant vendors.119

Furthermore, the Makati RTC a nd the CA erred i n relying on Ca rling Brewing Company vs . Philip Morris, Inc.120 to s upport i ts finding that GALLO
wi nes a nd GALLO ci garettes a re related goods. The courts a quo s hould have taken into consideration the subsequent case of IDV North America,
Inc. a nd R & A Ba iley Co. Li mited vs . S & M Bra nds, Inc.:121

IDV correctl y acknowledges, however, that there is no per se rule that the use of the same mark on alcohol a nd tobacco products always will result
i n a l ikelihood of confusion. Nonetheless, IDV relies heavily on the decision i n John Walker & Sons, Ltd. vs . Ta mpa Ci gar Co. , 124 F. Supp. 254, 256
(S.D. Fl a. 1954), a ff’d, 222 F. 2d 460 (5th Ci r. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER" on ci gars because the fame
of the pl aintiff’s mark for scotch whiskey a nd because the plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The
court, i n John Walker & Sons, placed great s ignificance on the finding that the infringers use was a deliberate a ttempt to capitalize on the senior
ma rks ’ fame. Id. At 256. IDV a lso relies on Ca rling Brewing Co. v. Phi lip Morri s, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga . 1968), i n which the court
enjoined the defendant’s use of the mark "BLACK LABEL" for ci garettes because i t was l ikely to ca use confusion with the plaintiff’s well-known mark
"BLACK LABEL" for beer.

xxx xxx xxx

Thos e decisions, however, must be considered i n perspective of the principle that tobacco products and alcohol products should be considered
rel a ted only i n ca ses i nvolvi ng special circumstances. Schenley Distillers, Inc. v. General Ci gar Co., 57C.C.P.A. 1213, 427 F . 2d 783, 785 (1970). The
pres ence of s pecial ci rcumstances has been found to exist where there is a finding of unfair competition or where a ‘famous’ or ‘well-known mark’
i s i nvolved a nd there is a demonstrated intent to capitalize on that ma rk. For example, i n John Walker & Sons, the court was persuaded to fi nd a
rel a tionship between products, and hence a likelihood of confusion, because of the plaintiff’s l ong use and extensive adverti sing of i ts mark and
pl a ced great emphasis on the fact that the defendant used the tra demark ‘Johnnie Walker with full knowledge of i ts fame a nd reputation and with
the i ntention of taking a dvantage thereof.’ John Walker & Sons, 124 F. Supp. At 256; s ee Mckesson & Robbins, Inc. v. P. Lori l lard Co., 1959 WL
5894, 120 U.S.P.Q. 306, 307 (1959) (hol ding that the decision i n John Walker & Sons was ‘merely the law on the particular case based upon its own
peculiar facts’); see also Al fred Dunhill, 350 F. Supp. At 1363 (defendant’s a doption of ‘Dunhill’ mark was not innocent). Ho wever, in Schenley, the
court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary ma rk has l ong been used for
di versified products emanating from a single s ource and a newcomer seeks to use the same mark on unrelated goods. S chenley, 427 F.2d. a t 785.
Si gnificantly, i n Schenley, the court l ooked a t the industry practice a nd the facts of the case i n order to determine the nature and extent of the
rel a tionship between the mark on the tobacco product and the mark on the alcohol p roduct.

The record here establishes conclusively that IDV has never a dvertised BAILEYS liqueurs in conjunction with tobacco or tobacc o accessory products
a nd that IDV has no intent to do s o. And, unlike the defendant i n Dunhill, S & M Bra nds does not mark et bar accessories, or liqueur related
products, with its cigarettes. The a dvertising a nd promotional ma terials presented a trial in this a ction demonstrate a compl ete lack of affiliation
between the tobacco and liqueur products bearing the marks here a t issue.

xxx xxx xxx

Of equal s ignificance, it i s undisputed that S & M Bra nds had no i ntent, by adopting the family na me ‘Bailey’s’ as the mark f or i ts cigarettes, to
ca pi talize upon the fame of the ‘BAILEYS’ mark for l iqueurs. See Schenley, 427 F. 2d a t 785. Moreover, a s will be discussed below, and as found i n
Mckes son & Robbins, the survey evidence refutes the contention that ci garettes a nd a lcoholic beverages are s o i ntimately associated i n the public
mi nd that they ca nnot under a ny ci rcumstances be sold under the same mark without ca using confusion. See Mckesson & Robbins, 120 U.S.P.Q. a t
308.

Ta ken a s a whole, the evi dence here demonstrates the absence of the ‘s pecial ci rcumstances’ in which courts have found a rela tionship between
toba cco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and a gainst the allegedly i nfringi ng
ma rk. It i s true that BAILEYS l iqueur, the world’s best selling liqueur and the second best s elling in the United States, is a well-known product. That
fa ct a l one, however, is insufficient to i nvoke the special ci rcumstances connection here where s o much other evi dence a nd s o many other factors
di s prove a l ikelihood of confusion. The similarity of products a nalysis, therefore, a ug ers a gainst finding that there is a likelihood of confusion.
(Emphasis supplied).

In s hort, tobacco a nd alcohol products may be considered related only i n ca ses i nvolving special circumstances which exist only i f a famous mark is
i nvol ved a nd there is a demonstrated i ntent to ca pitalize on i t. Both of these a re absent in the present case.

THE GALLO WINE TRADEMARK IS NOT A

WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS

Fi rs t, the records bear out that most of the tra demark registrations took place i n the late 1980s a nd the 1990s , that is, after Tobacco Industries’ use
of the GALLO ci garette tra demark i n 1973 a nd petitioners’ use of the same ma rk i n 1984.

GALLO wi nes and GALLO cigarettes are neither the same, i dentical, similar nor related goods, a requisite element under both the Tra demark Law
a nd the Pa ris Convention.

Second, the GALLO trademark cannot be considered a s trong a nd distinct mark in the Philippines. Respondents do not dispute the documentary
evi dence that aside from Gallo Winery’s GALLO tra demark registration, the Bureau of Pa tents, Trademarks a nd Technology Tra nsf er also issued on
September 4, 1992 Certi ficate of Registration No. 53356 under the Pri ncipal Register a pproving Productos Al imenticios Gallo, S.A’s April 19, 1990
a pplication for GALLO tra demark registration and use for i ts "noodles, prepared food or canned noodles, ready or ca nned sauce s for noodles,
s emolina, wheat fl our a nd bread crumbs, pastry, confectionery, i ce cream, honey, molasses syrup, yeast, baking powder, s alt, mustard, vi negar,
s pecies a nd ice."122

Thi rd a nd most important, pursuant to our ruling in Ca non Ka bushiki Kaisha vs . Court of Appeals and NSR Rubber Corporation,12 3 "GALLO" ca nnot
be considered a "well-known" ma rk within the contemplation and protection of the Paris Convention in this case s ince wines and ci garettes are not
i dentical or similar goods:

We a gree with public respondents that the controlling doctrine with respect to the a pplicability of Arti cle 8 of the Paris Convention is that
es tablished in Ka bushi Ka isha Isetan vs . Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT:

"Rega rding the applicability of Arti cle 8 of the Pa ris Convention, this Office believes that there is no automatic protection afforded an entity whose
tra dename is alleged to have been i nfringed through the use of that name a s a tra demark by a local entity.

In Ka bushiki Kaisha Isetan vs . The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held
tha t:

‘The Pa ris Convention for the Protection of Industrial Property does not a utomatically exclude all countries of the world whi ch have signed it from
us i ng a tra dename which happens to be used in one country. To i llustrate — i f a ta xicab or bus company i n a town in the United Kingdom or India
ha ppens to use the tra dename ‘Rapid Tra nsportation,’ it does not necessarily follow that ‘Rapid’ ca n no longer be registered in Uganda, Fiji, or the
Phi l ippines.

Thi s office is not unmindful that i n (sic) the Treaty of Pa ris for the Protection of Intellectual Property regarding well -known marks a nd possible
a pplication thereof i n this case. Petitioner, as this office sees it, i s tryi ng to seek refuge under its protective mantle, claiming that the subject mark
i s well known in this country a t the ti me the then a pplication of NSR Rubber was filed.

However, the then Mi nister of Trade a nd Industry, the Hon. Roberto V. Ongpin, i ssued a memorandum dated 25 October 1983 to the Director of
Pa tents, a s et of guidelines in the implementation of Arti cle 6bis of the Treaty of Paris. These conditions a re:
a ) the mark must be i nternationally known;

b) the s ubject of the right must be a tra demark, not a patent or copyright or a nything else;

c) the ma rk must be for use i n the same or similar kinds of goods; a nd

d) the person cl aiming must be the owner of the mark (The Pa rties Convention Commentary on the Pa ris Convention. Arti cle by D r. Bogsch,
Di rector General of the World Intellectual Property Orga nization, Geneva , Switzerland, 1985)’

From the s et of facts found i n the records, it is ruled that the Petitioner failed to comply wi th the third requirement of th e s aid memorandum that
i s the ma rk must be for use i n the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to cl ass 2
(pa ints, chemical products) while the Respondent is using the same mark for s andals (class 25).

Hence, Petitioner's contention that i ts mark is well-known at the ti me the Respondent filed i ts a pplication for the same mark s hould fail."
(Emphasis supplied.)

Cons ent of the Registrant a nd

Other a i r, Just a nd Equitable
Cons iderations

Ea ch tra demark infringement case presents a unique problem which must be answered by weighing the conflicting interests of th e litigants.124

Res pondents cl aim that GALLO wines a nd GALLO ci garettes fl ow through the same channels of trade, that i s, retail trade. If res pondents’ assertion
i s true, then both goods co-existed peacefully for a considerable period of time. It took respondents a lmost 20 yea rs to know a bout the existence of
GALLO ci ga rettes a nd s ue petitioners for tra demark i nfringement. Given, on one hand, the l ong period of ti me that petitioners were engaged i n the
ma nufacture, marketing, distribution and sale of GALLO ci garettes and, o n the other, respondents’ delay i n enforcing their ri ghts (not to mention
i mplied consent, acquiescence or negligence) we hold that equity, justice a nd fairness require us to rule i n favor of petitio ners. The scales of
cons cience and reason tip fa r more readily i n favor of petitioners than respondents.

Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they i ntended to ca pitalize on respondents’
goodwill i n a dopting the GALLO ma rk for their ci garettes which are totally unrelated to respondents’ GALLO wi nes. Thus, we rule out tra demark
i nfri ngement on the part of petitioners.

PETITIONERS ARE ALSO NOT LIABLE

FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or a ny oth er means contrary to good faith by which he passes off the
goods manufactured by hi m or i n which he deals, or his business, or s ervices for those of the one having established such goodwill, or who commits
a ny a cts calculated to produce said result, i s guilty of unfair competition. It includes the following a cts:

(a ) Any person, who in selling his goods shall give them the general a ppearance of goods of another manufacturer or dealer, e ither as to the goods
thems elves or i n the wra pping of the packages i n which they a re contained, or the devi ces or words thereon, or i n a ny other feature of their
a ppearance, which would be likely to i nfluence purchasers to believe that the goods offered are those of a manufacturer or de aler other than the
a ctua l manufacturer or dealer, or who otherwise cl othes the goods with s uch appearance as shall deceive the public a nd defraud a nother of his
l egitimate tra de, or a ny s ubsequent vendor of s uch goods or a ny a gent of any vendor engaged in s elling such goods with a like purpose;

(b) Any pers on who by a ny a rtifice, or device, or who employs a ny other means calculated to induce the false belief that such person i s offering the
s ervi ces of a nother who has i dentified such s ervices in the mind of the public;

(c) Any pers on who s hall make any fa lse s tatement i n the course of tra de or who s hall commit a ny other a ct contrary to good faith of a nature
ca l culated to discredit the goods, business or s ervices of another.

The universal test question is whether the public is l ikely to be deceived. Nothing less than conduct tending to pass off one man’s goods or business
a s that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by rea son of defendant’s
pra cti ces must always appear.125 On this score, we find that petitioners never attempted to pass off their ci garettes as those of respondents.
There is no evi dence of bad faith or fra ud i mputable to petitioners i n using their GALLO ci garette mark.

Al l told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are
not l i able for tra demark infringement, unfair competition or damages.

WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The questioned decision a nd resolution of the Court of
Appeals in CA-G.R. CV No. 65175 a nd the November 26, 1998 deci sion a nd the June 24, 1999 order of the Regional Trial Court of Makati, Branch 57
i n Ci vi l Case No. 93-850 a re hereby REVERSED and SET ASIDE a nd the complaint against petitioners DISMISSED.

Cos ts a gainst respondents.

SO ORDERED.

Vi tug, (Chairman), and Sandoval-Gutierrez, JJ., concur.

Ca rpi o-Morales, J., no part..
THIRD DIVISION
G.R. No. 148222 August 15, 2003
PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,
vs.
SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED, Respondents.

DE CI SI ON

CORONA, J.:

In the i nstant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) a ssails the Ma y 22,
2001 deci sion1 of the Court of Appeals reversing the October 31, 1996 deci sion2 of the Regional Trial Court of Makati, Bra nch 133, i n Ci vil Case No.
92-516 whi ch declared private respondents Shoemart Inc. (SMI) a nd North Edsa Ma rketing Inc. (NEMI) liable for infringement of tr a demark and
copyri ght, a nd unfair competition.

FACTUAL ANTECEDENTS

The Ma y 22, 2001 deci sion of the Court of Appeals3 contained a s ummary of this dispute:

"Pl a intiff-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 s heets and illuminated with back l ights. Pearl and Dean was able to
s ecure a Certificate of Copyri ght Registration dated January 20, 1981 over thes e illuminated display units. The a dvertising l ight boxes were
ma rketed under the tra demark "Poster Ads". The a pplication for registration of the tra demark was filed with the Bureau of Pa tents, Trademarks
a nd Technology Tra nsfer on June 20, 1983, but wa s approved only on September 12, 1988, per Registration No. 41165. From 1981 to a bout 1988,
Pea rl and Dean employed the s ervices of Metro Industrial Servi ces to manufacture i ts a dvertising displays.

Sometime in 1985, Pearl a nd Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the l ight boxes in SM
Ci ty North Eds a. Since SM Ci ty North Edsa was under construction at that ti me, SMI offered a s an a lternative, SM Ma kati a nd SM Cubao, to which
Pea rl and Dean a greed. On September 11, 1985, Pea rl and Dean’s General Ma nager, Rodolfo Vergara, s ubmitted for sig nature the contracts
coveri ng SM Cubao and SM Ma kati to SMI’s Advertising Promotions and Publicity Division Ma nager, Ramonlito Abano. Only the contract for SM
Ma ka ti, however, was returned signed. On October 4, 1985, Verga ra wrote Abano i nquiring a bout the other contract and reminding him that their
a greement for i nstallation of light boxes was not only for its SM Ma kati branch, but a lso for SM Cubao. SMI did not bother to reply.

Ins tead, i n a l etter dated January 14, 1986, SMI’s house counsel informed Pearl a nd Dean that i t was rescinding the contract for SM Ma kati due to
non-performance of the terms thereof. In his reply dated February 17, 1986, Verga ra protested the unilateral a ction of SMI, s aying it was without
ba s is. In the same letter, he pushed for the signing of the contract for SM Cubao.

Two yea rs later, Metro Industrial Servi ces, the company formerly contracted by Pearl and Dean to fabricate i ts display units, offered to construct
l i ght boxes for Shoemart’s chain of s tores. SMI a pproved the proposal a nd ten (10) l ight boxes were s ubsequently fabricated b y Metro Industrial for
SMI. After i ts contract with Metro Industrial was terminated, SMI engaged the servi ces of EYD Rai nbow Advertising Corporation to make the light
boxes . Some 300 units were fabricated i n 1991. These were delivered on a s taggered basis a nd i nstalled a t SM Megamall and SM Ci ty.

Sometime in 1989, Pearl a nd Dean, received reports that exact copies of i ts l ight boxes were i nstalled a t SM Ci ty a nd in the fastfood section of SM
Cuba o. Upon i nvestigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it
ma nufactures were also i nstalled i n two (2) other SM s tores. It further discovered that defendant-appellant North Edsa Ma rketing Inc. (NEMI),
through i ts marketing arm, Pri me Spots Ma rketing Servi ces, was set up primarily to s ell a dvertising space i n lighted display units l ocated in SMI’s
di fferent branches. Pearl and Dean noted that NEMI is a sister company of SMI.

In the l ight of i ts discoveries, Pearl and Dean s ent a l etter dated December 11, 1991 to both SMI a nd NEMI enjoining them to cease using the
s ubject light boxes and to remove the same from SMI’s establishments. It also demanded the discontinued use of the trademark "Poster Ads," and
the pa yment to Pearl a nd Dean of compensatory damages i n the amount of Twenty Mi llion Pesos (P20,000,000.00).

Upon receipt of the demand l etter, SMI s uspended the l easing of two hundred twenty-four (224) light boxes a nd NEMI took down i ts
a dvertisements for "Poster Ads" from the l ighted display units i n SMI’s s tores. Cl aiming that both SMI and NEMI failed to mee t all its demands,
Pea rl and Dean filed this instant ca se for i nfringement of tra demark a nd copyright, unfair competition and damages.

In denying the charges hurled against i t, SMI maintained that i t independently developed i ts poster panels using commonly kno wn techniques and
a va ilable technology, without notice of or reference to Pearl and Dean’s copyri ght. SMI noted that the registration of the mark "Poster Ads" was
onl y for s tationeries such as l etterheads, envelopes, a nd the l ike. Besides, according to SMI, the word "Poster Ads" is a generic term which cannot
be a ppropriated as a trademark, and, as such, registration of s uch mark is i nvalid. It also stressed that Pearl and Dean is n ot entitled to the reliefs
pra yed for in its complaint s ince its a dvertising display units contained no copyright notice, i n vi olation of Section 27 of P.D. 49. SMI a l leged that
Pea rl and Dean had no cause of action against i t and that the suit was purely i ntended to malign SMI’s good name. On this bas is, SMI, aside from
pra yi ng for the dismissal of the case, also counterclaimed for moral, actual and exemplary da mages a nd for the ca ncellation of Pearl a nd Dean’s
Certi fi cation of Copyri ght Registration No. PD-R-2558 dated January 20, 1981 a nd Certificate of Tra demark Registration No. 4165 da ted September
12, 1988.

NEMI, for i ts part, denied having manufactured, i nstalled or used a ny a dvertising display units, nor having engaged i n the business of a dverti sing. It
repl eaded SMI’s averments, a dmissions and denials a nd prayed for similar reliefs and counterclaims as SMI."

The RTC of Ma kati Ci ty decided in favor of P & D:

Wherefore, defendants SMI and NEMI are found jointly and severally l iable for i nfringement of copyright under Section 2 of PD 49, a s amended,
a nd i nfringement of tra demark under Section 22 of RA No. 166, a s a mended, a nd a re hereby penalized under Section 28 of PD 49, a s amended, and
Secti ons 23 a nd 24 of RA 166, a s amended. Accordingly, defendants a re hereby directed:

(1) to pa y pl aintiff the following damages:

(a ) a ctual damages - ₱16,600,000.00,

representing profits
deri ved by defendants
a s a result of i nfringe-
ment of plaintiff’s copyri ght
from 1991 to 1992

(b) mora l damages - ₱1,000.000.00

(c) exemplary damages - ₱1,000,000.00

(d) a ttorney’s fees - ₱1,000,000.00

pl us

(e) cos ts of s uit;

(2) to del iver, under oath, for i mpounding in the Na tional Library, a ll light boxes of SMI which were fabricated by Metro Ind ustrial Servi ces a nd EYD
Ra i nbow Advertising Corporation;

(3) to del iver, under oath, to the National Library, a ll filler-posters using the tra demark "Poster Ads", for destruction; a nd

(4) to perma nently refrain from infringing the copyri ght on plaintiff’s l ight boxes and its tra demark "Poster Ads".

Defendants’ counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.4

On a ppeal, however, the Court of Appeals reversed the trial court:

Si nce the light boxes ca nnot, by a ny s tretch of the imagination, be considered as either prints, pictorial illustrations, a dvertising copies, l abels, ta gs
or box wra ps, to be properly cl assified 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 l ight boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyri ght over the drawings l ike plaintiff-appellant’s will not extend to the actual
object. It has so been held under jurisprudence, of which the l eading ca se is Baker vs . Selden (101 U.S. 841 (1879). In tha t case, Selden had
obta ined a copyright protection for a book entitled "Selden’s Condensed Ledger or Bookkeeping Simplified" which purported to explain a new
s ys tem of bookkeeping. Included a s part of the book were blank forms a nd i llustrations consisting of ruled lines and headings , specially designed for
us e in connection with the s ystem explained in the work. These forms s howed the entire operation of a day or a week or a mont h on a s ingle page,
or on two pa ges following each other. The defendant Baker then produced forms which were similar to th e forms i llustrated in Selden’s
copyri ghted books. The Court held that exclusivi ty to the a ctual forms is not extended by a copyri ght. The reason was that "t o grant a monopoly i n
the underlying art when no examination of i ts novelty has ever been made would be a surprise and a fra ud upon the public; tha t is the province of
l etters patent, not of copyri ght." And that is precisely the point. No doubt aware that its alleged original design would never pass the ri gorous
exa mination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyri ght
regi stration which merely employs a recordal system without the benefit of a n in -depth examination of novelty.

The pri nciple i n Baker vs . Selden was likewise a pplied i n Muller vs . Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller
ha d obtained a copyright over an unpublished drawing entitled "Bridge Approach – the drawing s howed a novel bridge a pproach to unsnarl traffic
congestion". The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrate d in plaintiff’s
dra wi ngs. In this case it was held that protection of the drawing does not extend to the unauthorized duplica tion of the object dra wn because
copyri ght extends only to the description or expression of the object and not to the object i tself. It does not prevent one f rom using the drawings
to cons truct the object portrayed in the drawing.

In two other ca ses, Imperial Homes Corp. v. La mont, 458 F. 2d 895 a nd Scholtz Homes, Inc. v. Ma ddox, 379 F. 2d 84, i t wa s held that there i s no
copyri ght i nfringement when one who, without being a uthorized, uses a copyrighted a rchitectural plan to construct a s tructure . This is because the
copyri ght does not extend to the structures themselves.

In fi ne, we ca nnot find SMI liable for infringing Pearl a nd Dean’s copyright over the technical drawings of the latter’s a dve rtising display units.

xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs . Intermediate Appellate Court that the protective ma ntle of th e Tra demark Law
extends only to the goods used by the first user a s specified in the certificate of registration, following the clear mandate conveyed by Section 20 of
Republic Act 166, a s amended, otherwise known as the Tra demark La w, which reads:

SEC. 20. Certi fi cation of registration prima facie evi dence of va lidity.- A certi ficate of registration of a mark or tra de-name shall be prima facie
evi dence of the validity of the registration, the registrant’s ownership of the mark or tra de-name, and of the registrant’s exclusive ri ght to use the
s a me in connection with the goods, business or servi ces specified in the certificate, subject to a ny conditions a nd limitations stated therein."
(underscoring supplied)

The records show that on June 20, 1983, Pea rl a nd Dean a pplied for the registration of the tra demark "Poster Ads" wi th the Bureau of Pa tents,
Tra demarks, and Technology Tra nsfer. Said tra demark was recorded in the Pri ncipal Register on September 12, 1988 under Registration No. 41165
coveri ng the following products: stationeries such as l etterheads, envelopes a nd ca lling ca rds and newsletters.

Wi th this as fa ctual backdrop, we s ee no legal basis to the fi nding of liability on the part of the defendants-appellants for their use of the words
"Pos ter Ads", in the a dvertising display units in s uit. Jurisprudence has i nterpreted Section 20 of the Tra demark La w as "a n implicit permission to a
ma nufacturer to venture i nto the production of goods and allow that producer to appropriate the brand name of the s enior regi strant on goods
other tha n those stated i n the certificate of registration." The Supreme Court further emphasized the restrictive meaning of Section 20 when it
s ta ted, through Justice Conrado V. Sa nchez, that:
Rea lly, i f the certificate of registration were to be deemed as including goods not s pecified therein, then a s ituation may a rise whereby a n applicant
ma y be tempted to re gister a tra demark on any a nd all goods which his mind may conceive even i f he had never i ntended to use the trademark for
the s aid goods. We believe that such omnibus registration is not contemplated by our Trademark Law.

Whi le we do not discount the striking similarity between Pearl a nd Dean’s registered trademark and defendants-appellants’ "Poster Ads" design, as
wel l as the parallel use by which said words were used in the parties’ respective advertising copies, we cannot find defendants-appellants liable for
i nfri ngement of tra demark. "Poster Ads" was registered by Pearl and Dean for specific use in i ts stationeries, in contrast to defendants-appellants
who us ed the same words in their a dvertising display units. Why Pearl a nd Dean limited the use of its tra demark to stationeries is s imply beyond
us . But, havi ng already done so, it must stand by the consequence of the registration which it had ca used.

xxx xxx xxx

We a re constrained to adopt the vi ew of defendants-appellants that the words "Poster Ads" are a simple contraction of the generic term poster
a dvertising. In the absence of a ny convincing proof that "Poster Ads" has acquired a s econdary meaning i n this jurisdiction, we find that Pearl and
Dea n’s exclusive ri ght to the use of "Poster Ads" is limited to what is written in its certificate of registration, namely, s tationeries.

Defendants-appellants cannot thus be held l iable for i nfringement of the tra demark "Poster Ads".

There being no finding of either copyright or tra demark i nfringement on the part of SMI a nd NEMI, the monetary a ward granted by the lower court
to Pea rl and Dean has no leg to s tand on.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED a nd SET ASIDE, and another i s rendered DISMISSING the compl aint a nd
counterclaims in the above-entitled case for lack of merit.5

Di s satisfied wi th the above decision, petitioner P & D fi l ed the instant petition a ssigning the following errors for the Court’s 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 & DEAN’S 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 LATTER’S FINDING, NOT DISPUTED
BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTR ACTS 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, ATTORNEY’S FEES AND COSTS OF SUIT.6

ISSUES

In res olving this very i nteresting case, we a re challenged once again to put i nto proper perspective four main concerns of i ntellectual property l aw
— pa tents, copyrights, tra demarks and unfair competition arising from infringement of any of the first three. We s hall focus th en on the following
i s sues:

(1) i f the engineering or technical drawings of an a dvertising display unit (light box) are granted copyright protection (copyri ght certificate of
regi stration) by the National Library, is the l ight box depicted in s uch engineering drawings ipso facto a lso protected by such copyright?

(2) or s hould the light box be registered s eparately a nd protected by a patent issued by the Bureau of Pa tents Trademarks a nd Technology Transfer
(now Intellectual Property Office) — i n a ddition to the copyri ght of the engineering drawings?

(3) ca n the owner of a registered tra demark legally prevent others from using such trademark if it i s a mere a bbreviation of a term descriptive of his
goods, s ervices or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Peti ti oner P & D’s complaint was that SMI infringed on its copyri ght over the l ight boxes when SMI had the units manufactured by Metro a nd E YD
Ra i nbow Advertising for i ts own a ccount. Obviously, petitioner’s position was premised on i ts belief that its copyri ght over the engineering
dra wi ngs extended ipso facto to the l ight boxes depicted or i llustrated in said drawings. In ruling that there was no copyrig ht i nfringement, 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 a ppellate court.

Fi rs t, petitioner’s a pplication for a copyright certificate — a s well as Copyright Certificate No. PD-R2588 issued by the National Library on January
20, 1981 — cl early s tated that it was for a cl ass "O" work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the s tatute
then prevailing. Said Section 2 expressly enumerated the works subject to copyri ght:

SEC. 2. The ri ghts granted by this Decree shall, from the moment of creation, subsist with respect to a ny of the following works:

xxx xxx xxx

(O) Pri nts , pictorial illustrations, advertising copies, labels, ta gs, and box wra ps;

xxx xxx xxx

Al though petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the box-type electrical devices), its claim of
copyri ght i nfringement ca nnot be sustained.
Copyri ght, i n the s trict sense of the term, is purely a statutory ri ght. Being a mere statutory gra nt, the rights are limited to what the statute confers.
It ma y be obtained and enjoyed only wi th respect to the subjects and by the persons, a nd on terms and conditions specified in the statute.7
Accordi ngly, i t ca n cove r only the works falling within the s tatutory enumeration or description.8

P & D s ecured i ts copyright under the cl assification cl ass "O" work. This being so, petitioner’s copyright protection extende d only to the technical
dra wi ngs a nd not to the light box i tself because the latter was not a t all in the category of "prints, pictorial illustrations, a dvertising copies, labels,
ta gs a nd box wraps." Stated otherwise, even as we fi nd that P & D i ndeed owned a va lid copyri ght, the same could have referre d only to the
technical drawings within the ca tegory of "pictorial illustrations." It could not have possibly s tretched out to i nclude the underlying light box. The
s tri ct a pplication9 of the l aw’s enumeration i n Section 2 prevents us from giving petitioner even a little leeway, tha t is, even i f i ts copyright
certi ficate was entitled "Advertising Display Units." What the law does not include, i t excludes, and for the good reason: th e light box was not a
l i terary or a rtistic piece which could be copyrighted under the copyright law. And no l ess cl early, neither could the lack of s tatutory a uthority to
ma ke the light box copyrightable be remedied by the s implistic a ct of entitling the copyri ght certificate issued by the National Library as
"Adverti sing Display Units."

In fi ne, if SMI a nd NEMI reprinted P & D’s technical drawings for sale to the public without license from P & D, then no doub t they would have been
gui lty of copyright i nfringement. But this was not the case. SMI’s a nd NEMI’s acts complained of by P & D were to have units s imilar or i dentical to
the l i ght box illustrated i n the technical drawings manufactured by Metro and EYD Rainbow Advertising, for l easing out to dif ferent a dvertisers.
Wa s this an i nfringement of petitioner’s copyright over the technical drawings? We do not think so.

Duri ng the trial, the president of P & D hi mself a dmitted that the l ight box was neither a literary not an artistic work but a n "engineering or
ma rketing invention."10 Obvi ously, there a ppeared to be some confusion regarding what ought or ought not to be the proper subjects of
copyri ghts, patents and trademarks. In the l eading case of Kho vs . Court of Appeals,11 we ruled that these three l egal ri ghts a re completely distinct
a nd s eparate from one another, a nd the protection a fforded by one cannot be used i nterchangeably to cover i tems or works that exclusively
perta in to the others:

Tra demark, copyri ght and patents are different intellectual property ri ghts that cannot be i nterchanged with one a nother. A t ra demark i s any
vi s i ble sign capable of distinguishing the goods (trademark) or s ervices (servi ce mark) of an enterprise a nd shall include a s ta mped or marked
conta iner of goods. In relation thereto, a tra de name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the
s cope of a copyright i s confined to literary a nd artistic works which are original i ntellectual creations i n the literary a nd artistic domain protected
from the moment of their creation. Pa tentable inventions, on the other hand, refer to a ny technical s olution of a problem i n any field of human
a cti vi ty which is new, involves a n inventive step a nd is i ndustrially a pplicable.

ON THE ISSUE OF PATENT INFRINGEMENT

Thi s brings us to the next point: if, despite its manufacture and co mmercial use of the light boxes without l icense from petitioner, priva te
res pondents ca nnot be held legally l iable for i nfringement of P & D’s copyri ght over i ts technical drawings of the said light boxes, should they be
l i able i nstead for infringement of patent? We do not think so either.

For s ome reason or a nother, petitioner never secured a patent for the light boxes. It therefore a cquired no patent ri ghts whi ch could have
protected i ts i nvention, i f i n fact i t really was. And because i t had no patent, petitioner could not legally prevent a nyone from manufacturing or
commercially using the contraption. In Creser Precision Systems, Inc. vs . Court of Appeals,12 we held that "there ca n be no i nfringement of a
pa tent until a patent has been issued, since whatever ri ght one has to the invention covered by the patent a rises alone from the grant of patent. x x
x (A)n i nventor has no common law ri ght to a monopoly of his i nvention. He has the ri ght to make use of and vend his inventio n, but i f he
vol untarily discloses it, s uch as by offering i t for sale, the world is free to copy a nd use it wi th impunity. A pa tent, however, gives the i nventor the
ri ght to excl ude a ll others. As a patentee, he has the exclusive right of making, s elling or using the invention.13 On the assumption that petitioner’s
a dvertising units were patentable inventions, petitioner revealed them fully to the public by s ubmitting the engineering drawings thereof to the
Na ti onal Li brary.

To be a ble to effectively a nd l egally preclude others from copying and profiting from the i nvention, 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 d isclosure.14 Ideas,
once disclosed to the public without the protection of a va lid patent, are s ubject to a ppropriation without s ignificant restraint.15

On one s ide of the coin is the public which will benefit from new i deas; on the other are the i nventors who must be protected. As held in Bauer &
Ci e vs . O’Donnel,16 "The act secured to the i nventor the exclusive ri ght to make use, a nd vend the thing patented, a nd conseq uently to prevent
others from exercising l ike privileges without the consent of the patentee. It was passed for the purpose of encouraging useful i nvention a nd
promoti ng new a nd useful inventions by the protection and stimulation given to inventive genius, and was intended to s ecure t o the public, a fter
the l a pse of the exclusive privileges gra nted the benefit of such inventions a nd i mprovements."

The l aw attempts to s trike an ideal balance between the two i nterests:

"(The p)atent s ystem thus embodies a carefully cra fted bargain for encouraging the creation a nd disclosure of new useful and non-obvious
a dva nces i n technology and design, i n return for the exclusive right to practice the i nvention for a number of years. The i nventor may keep his
i nvention s ecret and reap its fruits i ndefinitely. In consideration of i ts disclosure a nd the consequent benefit to the community, the patent is
gra nted. An exclusive enjoyment is guaranteed him for 17 yea rs, but upon the expiration of that period, the knowledge of the i nvention i nures to
the people, who are thus enabled to practice i t and profit by i ts use."17

The pa tent law has a three-fold purpose: "first, patent law seeks to foster and reward invention; s econd, i t promotes disclosures of inventions to
s ti mulate further i nnovation a nd to permit the public to practice the i nvention once the patent expires; third, the stringent requirements for patent
protecti on s eek to ensure that i deas i n the public domain remain there for the free use of the public."18

It i s only a fter a n exhaustive examination by the patent office that a patent is issued. Such a n in -depth i nvestigation is required because "i n
rewa rding a useful invention, the ri ghts and welfare of the community must be fairly dealt wi th and effectively guarded. To t hat end, the
prerequisites to obtaining a patent are s trictly observed and when a patent i s issued, the limitations on its exercise are equally s trictly enforced. To
begi n with, a genuine invention or discovery must be demonstrated l est i n the constant demand for new appliances, the heavy h a nd of tri bute be
l a id on each slight technological a dvance in art."19
There is no such scrutiny i n the case of copyrights nor a ny notice published before i ts gra nt to the effect that a person is claiming the creation of a
work. The l aw confers the copyright from the moment of creation20 and the copyright certificate is issued upon registration with the National
Li bra ry of a sworn ex-parte cl aim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner ca nnot exclude others from the manufac ture, sale or
commercial use of the light boxes on the s ole basis of i ts copyright certificate over the technical drawings.

Sta ted otherwise, what petitioner seeks i s exclusivity wi thout any opportunity for the patent office (IPO) to s crutinize the light box’s eligibility a s a
pa tentable i nvention. The irony here is that, had petitioner s ecured a patent instead, its exclusivity would have been for 17 yea rs only. But through
the s implified procedure of copyright-registration with the National Li brary — wi thout undergoing the rigor of defending the patentability of its
i nvention before the IPO a nd the public — the petitioner would be protected for 50 yea rs. This situation could not have been the i ntention of the
l a w.

In the oft-cited case of Baker vs . Selden21 , the United States Supreme Co urt held that only the expression of an idea is protected by copyri ght, not
the i dea itself. In that ca se, the plaintiff held the copyright of a book which expounded on a new a ccounting system he had d eveloped. The
publication illustrated blank forms of l edgers utilized in s uch a sys tem. The defendant reproduced forms similar to those illustrated in the plaintiff’s
copyri ghted 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 i s claimed only as a book. x x x. But there i s a cl ear distinction between the books, as s uch, a nd the art, whi ch it i s, intended to
i l lustrate. The mere statement of the proposition i s so evident that it requires hardly a ny a rgument to s upport i t. The same distinction may be
predi cated of every other a rt as well as that of bookkeeping. A trea tise on the composition and use of medicines, be they ol d or new; on the
cons truction a nd 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
l i nes to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would
gi ve the exclusive right to the a rt or manufacture described therein. The copyright of the book, i f not pirated from other wo rks, would be valid
wi thout regard to the novelty or want of novelty of i ts s ubject matter. The novelty of the a rt or thi ng described or explained has nothing to do with
the va l idity of the copyri ght. To give to the a uthor of the book an exclusive property i n the art described therein, when no examination of i ts
novel ty has ever been officially ma de, would be a surprise and a fraud upon the public. That is the province of letters patent, not of copyright. The
cl a im to an invention of discovery of an art or ma nufacture must be subjected to the examination of the Pa tent Office before a n exclusive right
therein can be obtained; a nd a patent from the government can only secure it.

The di fference between the two things, letters patent a nd copyright, may be i llustrated by reference to the s ubjects just enumerated. Take the
ca s e of medicines. Certain mi xtures are found to be of great va lue i n the healing a rt. If the discoverer writes and publishes a book on the subject (as
regul ar physicians generally do), he gains no exclusive ri ght to the manufacture and sale of the medicine; he gives that to t he public. If he desires to
a cquire s uch exclusive ri ght, he must obtain a patent for the mixture as a new art, ma nufacture or composition of matter. He may copyri ght his
book, i f he pleases; but that only s ecures to him the exclusive ri ght of printing and publishing his book. So of all other inventions or discoveries.

The copyri ght of a book on perspective, no matter how many drawings a nd i llustrations i t may contain, gives no exclusive ri gh t to the modes of
dra wi ng described, though they ma y never have been known or used before. By publishing the book without getting a patent for the art, the latter
i s gi ven to the public.

xxx

Now, whi lst no one has a ri ght to print or publish his book, or a ny ma terial part thereof, as a book intended to convey instruction i n the a rt, any
pers on may practice a nd use the art i tself 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 ca nnot secure the exclusive right to ma ke, sell and use account books
prepa red upon the plan set forth i n s uch book. Whether the art might or mi ght not have been patented, is a question, which is not before us. It was
not pa tented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of a ccounts must
necessarily be used as incident to i t.

The pl ausibility of the claim put forward by the complainant i n this ca se arises from a confusion of i deas produced by the pe culiar nature of the a rt
des cribed in the books, which have been made the subject of copyright. In describing the a rt, the illustrations and diagrams employed ha ppened to
corres pond more cl osely than usual with the a ctual work performed by the operator who uses the art. x x x The description of the a rt in a book,
though entitled to the benefit of copyright, lays no foundation for a n exclusive claim to the art i tself. The object of the o ne is explanation; the
object of the other is use. The former may be secured by copyright. The latter ca n only be secured, i f i t can be secured at a ll, by l etters patent."
(underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

Thi s issue concerns the use by respondents of the mark "Poster Ads" which petitioner’s president said was a contraction of "p oster a dvertising." P
& D wa s able to secure a tra demark certificate for it, but one where the goods specified were "s tationeries s uch a s letterheads, envelopes, calling
ca rds and newsletters."22 Petitioner a dmitted it did not commercially engage in or ma rket these goods. On the contrary, i t dealt i n electrically
opera ted backlit advertising units and the sale of advertising s paces thereon, which, however, were not a t all specified in t he trademark certificate.

Under the ci rcumstances, the Court of Appeals correctly ci ted Faberge Inc. vs . Intermediate Appellate Court,23 where we, invoking Section 20 of
the ol d Tra demark La w, ruled that "the certificate of registration issued by the Director of Pa tents ca n confer (upon petitioner) the exclusive right
to us e i ts own s ymbol only to those goods specified in the certificate, subject to any conditions and limitations specified i n the certificate x x x. One
who ha s adopted a nd used a tra demark on his goods does not preve nt the a doption and use of the s ame tra demark by others for products which
a re of a different description."24 Faberge, Inc. was correct and was i n fact recently rei terated in Canon Ka bushiki Kaisha vs . Court of Appeals.25

As s uming arguendo that "Poster Ads" could va lidly qualify a s a tra demark, the failure of P & D to s ecure a trademark registration for specific use on
the l i ght boxes meant that there could not have been a ny tra demark infringement since registration was a n essential element t hereof.1âwphi1

ON THE ISSUE OF UNFAIR COMPETITION

If a t a ll, the ca use of a ction s hould have been for unfair competition, a s ituation which was possible even if P & D ha d no registration.26 However,
whi le the petitioner’s complaint i n the RTC a lso cited unfair competition, the tri al court did not find private respondents l iable therefor. Petitioner
di d not appeal this particular point; hence, it ca nnot now revi ve its claim of unfair competition.
But even disregarding procedural i ssues, we nevertheless ca nnot hold respondents guilty of unfair competition.

By the na ture of things, there can be no unfair competition under the l aw on copyrights although i t is applicable to disputes over the use of
tra demarks. Even a name or phrase i ncapable of appropriation as a tra demark or tra dename may, by l ong and exclusive use by a business (such
tha t the name or phrase becomes associated with the business or product in the mi nd of the purchasing public), be entitled to protection against
unfa ir competition.27 In this case, there was no evidence that P & D’s use of "Poster Ads" was distinctive or well-known. As noted by the Court of
Appeals, petitioner’s expert witnesses himself had testified that " ‘Poster Ads’ was too generic a name. So i t was difficult to identify i t with a ny
compa ny, honestly s peaking."28 This crucial admission by i ts own expert witness that "Poster Ads" could not be associated with P & D s howed that,
i n the mind of the public, the goods and servi ces ca rrying the tra demark "Poster Ads" could not be distinguished fro m the goods and servi ces of
other entities.

Thi s fact also prevented the a pplication of the doctrine of s econdary meaning. "Poster Ads" was generic and incapable of being used as a
tra demark because it was used i n the field of poster a dvertising, the very business engaged i n by petitioner. "Secondary meaning" means that a
word or phra se originally incapable of exclusive a ppropriation with reference to an article in the market (because it is geog raphically or otherwise
des criptive) might nevertheless have been used for s o l ong and so exclusively by one producer with reference to his article that, i n the tra de and to
tha t bra nch of the purchasing public, the word or phrase has come to mean that the a rticle was his property.29 The a dmission by petitioner’s own
expert wi tness that he himself could not associate "Poster Ads" with petitioner P & D beca use i t was "too generic" definitely precluded the
a pplication of this exception.

Ha vi ng discussed the most i mportant a nd cri tical i ssues, we see no need to belabor the rest.

Al l told, the Court fi nds no reversible error committed by the Court of Appeals when it reversed the Regional Tri al Court of Ma kati Ci ty.

WHEREFORE, the petition i s hereby DENIED and the decision of the Court of Appeals dated Ma y 22, 2001 i s AF FIRMED i n toto.

SO ORDERED.

Puno, (Cha irman), Pa nganiban, Sandoval-Gutierrez, a nd Ca rpio-Morales, JJ., concur.

SECOND DIVISION
[G.R. No. 115758. March 19, 2002.]
ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, Petitioner, v. HON. COURT OF APPEALS,
SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CRAY, Respondents.

DE CI SI ON

DE LEON, JR., J.:

Before us i s a petition for review on certiorari of the Decision 1 dated May 24, 1993 of the Court of Appeals setting aside a nd declaring a s null a nd
voi d the Orders 2 dated February 10, 1992 a nd Ma rch 19, 1992 of the Regional Trial Court, Branch 90, of Quezon Ci ty granting the i ssuance of a writ
of prel iminary i njunction.chanrob1es virtua1 1aw 1ibrary

The fa cts of the case are as follows:chanrob1es vi rtual 1aw library

On December 20, 1991, peti tioner Elidad C. Kho fi led a complaint for i njunction and damages with a prayer for the issuance of a writ of preliminary
i njunction, docketed as Ci vil Ca se No. Q-91-10926, a gainst the respondents Summervi lle General Merchandising and Company (Summerville, for
brevi ty) a nd Ang Ti am Chay.

The petitioner’s complaint alleges that petitioner, doing business under the name and styl e of KEC Cos metics Laboratory, i s t he registered owner of
the copyri ghts Chin Chun Su and Ova l Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 a nd No. 0-3678;
tha t s he also has patent rights on Chin Chun Su & Devi ce and Chin Chun Su for medicated cream a fter purchasing the same from Quintin Cheng, the
regi stered owner thereof in the Supplemental Register of the Philippine Pa tent Office on February 7, 1980 under Registration Certificate No. 4 529;
tha t res pondent Summerville advertised and sold petitioner’s cream products under the brand name Chin Chun Su, in similar containers that
peti tioner uses, thereby mi sleading the public, a nd resulting in the decline in the petitioner’s business sales a nd i ncome; a nd, that the respondents
s hould be enjoined from allegedly i nfringing on the copyrights and patents of the petitioner.

The res pondents, on the other hand, alleged as their defense that Summerville is the exclusive a nd a uthorized importer, re -packer a nd distributor
of Chi n Chun Su products manufactured by Shun Yi Factory of Ta iwan; that the s aid Taiwanese manufacturing co mpany a uthorized Summerville to
regi ster i ts trade name Chin Chun Su Medicated Cream with the Philippine Pa tent Office a nd other appropriate governmental a ge ncies; that KEC
Cos metics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; a nd, that the a uthority of Quintin
Cheng, a ssignee of the patent registration certificate, to distribute a nd ma rket Chin Chun Su products i n the Philippines had already been
termi nated by the s aid Taiwanese Ma nufacturing Company.

After due hearing on the a pplication for preliminary i njunction, the tri al court granted the same in an Order dated February 10, 1992, the
di s positive portion of which reads:chanrob1es vi rtual 1a w l ibrary

ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cos metic Laboratory, for preliminary i njunction, is
hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of fi ve hundred thousand
pes os (P500,000.00) to the effect that plaintiff will pay to defendants a ll damages which defendants may s ustain by reason of the injunct ion if the
Court s hould finally decide that plaintiff i s not entitled thereto.

SO ORDERED. 3

The res pondents moved for reconsideration but their motion for reconsideration was denied by the tri al court i n an Order dated Ma rch 19, 1992. 4

On Apri l 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA -G.R. SP No. 27803, pra yi ng for the
nul lification of the said wri t of preliminary i njunction issued by the trial court. After the respondents filed their reply a nd almost a month a fter
peti tioner s ubmitted her comment, or on August 14 1992, the l a tter moved to dismiss the petition for vi olation of Supreme Court Ci rcular No. 28-
91, a ci rcular prohibiting forum shopping. According to the petitioner, the respondents did not s tate the docket number of th e ci vil case in the
ca pti on of their petition a nd, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the
peti tion a nd submitted to the a ppellate court a certificate of non-forum shopping for their petition.

On Ma y 24, 1993, the a ppellate court rendered a Decision in CA-G.R. SP No. 27803 rul ing i n favor of the respondents, the dispositive portion of
whi ch reads:chanrob1es vi rtual 1aw library

WHEREFORE, the petition i s hereby gi ven due course and the orders of respondent court dated February 10, 1992 a nd Ma rch 19, 1 992 gra nting the
wri t of preliminary i njunction and denying petitioners’ motion for reconsideration are hereby s et aside a nd declared null and void. Res pondent
court i s directed to forthwith proceed with the trial of Civil Ca se No. Q-91-10926 a nd resolve the issue raised by the parties on the merits.

SO ORDERED. 5

In gra nting the petition, the appellate court ruled that:chanrob1es vi rtual 1a w library

The registration of the tra demark or brandname "Chin Chun Su" by KEC wi th the s upplemental register of the Bureau of Pa tents, Trademarks and
Technology Tra nsfer ca nnot be equated with registration in the principal register, which is duly protected by the Trademark L a w.

x x x

As ra ti ocinated in La Chemise La coste, S.S. v. Fernandez, 129 SCRA 373, 393:jgc:cha nrobles.com.ph

"Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has a ppropriated the tra demark. By the very
fa ct tha t the tra demark ca nnot as yet he on guard a nd there are certain defects, s ome obstacles which the use must still overcome before he ca n
cl a im legal ownership of the mark or a sk the courts to vi ndicate his claims of an exclusive right to the use of the same. It would be deceptive for a
pa rty wi th nothing more than a registration i n the Supplemental Register to posture before courts of justice as i f the regist ration is in the Principal
Regi ster.
The rel iance of the private respondent on the last sentence of the Patent office action on a pplication Serial No. 30954 tha t ‘registrants i s presumed
to be the owner of the mark until after the registration i s declared cancelled’ is, therefore, misplaced and grounded on s haky foundation. The
s upposed presumption not only runs counter to the precept embodied i n Rule 124 of the Revised Rules of Pra ctice before the Philippine Pa tent
Offi ce i n Trademark Cases but considering all the facts ventilated before us i n the four i nterrelated petitions involving the petitioner a nd the
res pondent, i t is devoid of factual basis. As even i n cases where presumption a nd precept may fa ctually be reconciled, we have held that the
pres umption is rebuttable, not conclusive, (People v. Li m Hoa, G.R. No. L-10612, Ma y 30, 1958, Unreported). One may be declared a n unfair
competitor even if his competing tra demark is registered (Parke, Davis & Co. v. Ki u Foo & Co., Et Al ., 60 Phi l 928; La Yebana Co. v. chua Seco & Co.,
14 Phi l 534)." 6

The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents i n contempt of court for
publishing a dvertisements notifyi ng the public of the promulgation of the assailed decision of the a ppellate court a nd s tatin g that genuine Chin
Chun Su products could be obtained only from Summervi lle General Merchandising and Co.

In the meantime, the trial court went on to hear petitioner’s complaint for final i njunction a nd damages. On October 22, 1993 , the tri al court
rendered a Decision 7 barring the petitioner from using the trademark Chin Chun Su and upholding the ri ght 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 a ward damages and
cos ts to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) ea ch as a ttorney’s fees. The
peti tioner duly a ppealed the said decision to the Court of Appeals.

On June 3, 1994, the Court of Appeals promulgated a Resolution 8 denying the petitioner’s motions for reconsideration a nd for contempt of court
i n CA-G.R. SP No. 27803.

Hence, this petition a nchored on the following assignment of errors:chanrob1es vi rtual 1a w l ibrary

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE AB USE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO
RULE ON PETITIONER’S MOTION TO DISMISS.

II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING
TO PROMPTLY RESOLVE PETI TIONER’S MOTION FOR RECONSIDERATION.

III

IN DELAYING THE RESOLUTION OF PETITIONER’S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER’S
RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER’S 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 fa ults the a ppellate court for not dismissing the petition on the ground of vi olation of Supreme Court Ci rcular No. 28-91. Al so, the
peti tioner contends that the a ppellate court vi olated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on
her moti on for reconsideration within ninety (90) days from the time it is s ubmitted for resolution. The a ppellate court ruled only a fter the lapse of
three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the a ppellate court denied the petitioner’s right to seek
the ti mely a ppellate relief. Finally, petitioner describes as a rbitrary the denial of her motions for contempt of court a gainst the respondents.

We rul e in favor of the respondents.

Purs uant to Section 1, Rule 58 of the Revised Rules of Ci vil Procedure, one of the grounds for the issuance of a writ of preliminary i njunction is a
proof tha t the applicant i s entitled to the relief demanded, and the whole or part of s uch relief consists in restraining the commission or
conti nuance of the act or a cts complained of, either for a limited period or perpetually. Thus, a preliminary i njunction order ma y be granted only
when the a pplication for the issuance of the same shows facts entitling the a pplicant to the relief demanded. 10 Thi s is the reason why we have
rul ed that i t must be s hown that the invasion of the right s ought to be protected i s material and substantial, that the ri ght of complainant is clear
a nd unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious dama ge. 11

In the ca se at bar, the petitioner a pplied for the issuance of a preliminary i njunctive order on the ground that she is entit led to the use of the
tra demark on Chin Chun Su and its container based on her copyright a nd patent over the same. We first fi nd i t appropriate to rule on whether the
copyri ght a nd patent over the name a nd container of a beauty cream product would entitle the registrant to the use and owners hip over the same
to the excl usion of others.

Tra demark, copyri ght and patents are different intellectual property ri ghts that cannot be i nterchanged with one a nother. A tra demark i s any
vi s i ble sign capable of distinguishing the goods (trademark) or s ervices (servi ce mark) of an enterprise a nd shall include a s tamped or marked
conta iner of goods. 12 In relation thereto, a tra de name means the name or designation identifying or distinguishing an enterprise. 13 Mea nwhile,
the s cope of a copyright i s confined to literary a nd artistic works which are original i ntellectual creations i n the literary a nd a rtistic domain
protected from the moment of their creation. 14 Pa tentable inventions, on the other hand, refer to a ny technical s olution of a problem in any fi eld
of huma n activity which is new, i nvolves an inventive s tep and is i ndustrially a pplicable. 15

Peti ti oner has no ri ght to support her claim for the exclusive use of the subject tra de name a nd i ts container. The name a nd container of a beauty
crea m product are proper s ubjects of a tra demark i nasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use
the s ame in the sale of the beauty crea m product, the user must sufficiently prove that she registered or used it before anyb ody else did. The
peti tioner’s copyright a nd patent registration of the name and container would not guarantee her the ri ght to the exclusive use of the s ame for the
rea s on that they a re not a ppropriate s ubjects of the s aid intellectual ri ghts. Consequently, a preliminary i njunction order c a nnot be issued for the
rea s on that the petitioner has not proven that s he has a clear ri ght over the said name a nd container to the exclusion of others, not having proven
tha t s he has registered a tra demark thereto or used the same before anyone did.

We ca nnot likewise overlook the decision of the trial court in the case for final injunction a nd damages. The dispositive portion of said decision held
tha t the petitioner does not have tra demark ri ghts on the name and container of the beauty cream product. The said decision o n the merits of the
tri a l court rendered the issuance of the writ of a preliminary i njunction moot and academic notwithstanding the fact that the Same has been
a ppealed i n the Court of Appeals. This i s supported by our ruling i n La Vista Association, Inc. v. Court of Appeals 16 , to wi t:chanrob1es vi rtual 1aw
l i brary

Cons idering the preliminary i njunction is a provisional remedy which may be granted a t any ti me a fter the commencement of the action and before
judgment when it i s established that the plaintiff i s entitled to the relief demanded and only when his complaint s hows facts entitling such reliefs . .
. a nd i t appearing that the tri al court had already gra nted the issuance of a final i njunction in favor of petitioner in its decision rendered after trial
on the merits . . . the Court resolved to Dismiss the instant petition having been rendered moot a nd a cademic. An i njunction issued by the trial
court a fter i t has already made a clear pronouncement as to the plaintiff’s right thereto, that is, after the same issue has been decided on the
meri ts, the tri al court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rend ered is not yet final . . .
Bei ng a n ancillary remedy, the proceedings for preliminary i njunction ca nnot stand separately or proceed i ndependently 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 appli cant, the preliminary
determination of its non-existence ceases to have any force and effect. (Emphasis s upplied)

La Vi s ta categorically pronounced that the issuance of a final i njunction renders a ny question on the preliminary i njunctive order moot a nd
a ca demic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff’s
ri ght to a fi nal i njunction, although a ppealed, renders moot a nd academic a ny objection to the prior dissolution of a writ of preliminary i njunction.

The petitioner a rgues that the appellate court erred in not dismissing the petition for certiorari for non -compliance with the rule on forum
s hopping. We disagree. First, the petitioner i mproperly ra ised the technical objection of non compliance with Supreme Court Ci rcular No. 28-91 by
fi l ing 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 Ci vil
Procedure which provides that" (I)n petitions for certiorari before the Supreme Court a nd the Court of Appeals, the provisions of Section 2, Rule 56,
s ha ll be observed. Before giving due course thereto, the court ma y require the respondents to file their comment to, and not a motion to dismiss,
the petition . . . (Empha sis supplied)." Secondly, the issue was raised one month after petitioner had filed her a nswer/comment and after private
res pondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss s hall b e filed within the time
for but before filing the a nswer to the complaint or pleading asserting a claim. She therefore could no longer s ubmit a motion to dismiss nor raise
defenses and objections not i ncluded in the answer/comment s he had earlier tendered. Thirdly, s ubstantial justice a nd equity require this Court
not to revi ve a dissolved writ of injunction i n favor of a party wi thout any legal right thereto merely on a technical infirm ity. The granting of an
i njunctive writ based on a technical ground ra ther than compliance with the requisites for the i ssuance of the same i s contrary to the primary
objective of l egal procedure which is to s erve a s a means to dispense justice to the deserving party.

The petitioner l ikewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that
peti tioner contributed to this delay when s he filed s uccessive contentious motions i n the same proceeding, the l ast of which was on October 27,
1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, i t is well-
s ettled that non-observa nce of the period for deciding cases or their i ncidents does not render such judgments ineffective or void. 17 Wi th re spect
to the purported damages s he s uffered due to the alleged delay i n resolving her motion for reconsideration, we fi nd that the said issue has likewise
been rendered moot a nd academic by our ruling that she has no right over the tra demark and, consequently, to the issuance of a writ of
prel iminary i njunction.

Fi nally, we rule that the Court of Appeals correctly denied the petitioner’s several motions for contempt of court. There i s nothing contemptuous
a bout the advertisements complained of which, a s regards the proceedings i n CA-G.R. SP No. 27803 merely a nnounced i n plain and straightforward
l a nguage the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Ci vil
Procedure, the said decision nullifying the i njunctive writ was immediately executory.

WHEREFORE, the petition i s DENIED. The Decision a nd Resolution of the Court of Appeals dated Ma y 24, 1993 a nd June 3, 1994, res pectively, a re
hereby AFFIRMED. With costs against the petitioner.chanrob1es vi rtua1 1a w 1i brary

SO ORDERED.

Bel losillo, Mendoza, Quisumbing a nd Buena, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179127 December 24, 2008
IN-N-OUT BURGER, INC., petitioner,
vs.
SEHWANI, INCORPORATED AND/OR BENITA’S FRITES, INC., respondents.

DE CI SI ON

CHICO-NAZARIO, J.:

Thi s is a Petition for Revi ew on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1 dated 18 Ju ly 2006 rendered by the
Court of Appeals i n CA-G.R. SP No. 92785, whi ch reversed the Decision2 dated 23 December 2005 of the Director General of the Intellectual
Property Offi ce (IPO) in Appeal No. 10-05-01. The Court of Appeals, in i ts assailed Decision, decreed that the IPO Director of Legal Affairs and the
IPO Di rector General do not have jurisdiction over ca ses involving unfair competition.

Peti ti oner IN-N-OUT BURGER, INC., a business entity i ncorporated under the laws of Ca lifornia, United States (US) of America, which is a signatory
to the Convention of Pa ris on Protection of Industrial Property a nd the Agreement on Tra de Related Aspects of Intellectual Property Ri ghts (TRIPS).
Peti ti oner i s engaged mainly i n the restaurant business, but it has never engaged in business in the Philippines. 3

Res pondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized i n the Philippines.4

On 2 June 1997, petitioner filed trademark and servi ce mark a pplications with the Bureau of Trademarks (BOT) of the IPO for " IN-N-OUT" and "IN-
N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Acti on Pa pers issued by the IPO on 31 Ma y 2000, tha t res pondent
Sehwani, Incorporated had already obtained Tra demark Registration for the ma rk "IN N OUT (the inside of the l etter "O" formed like a star)."5 By
vi rtue of a licensing agreement, Benita Frites, Inc. was able to use the registered ma rk of respondent Sehwani, Incorporated.

Peti ti oner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO a n a dministrative complaint a gainst respondents for
unfa ir competition a nd ca ncellation of trademark registration. Petitioner a verred in i ts complaint that it i s the owner of th e tra de name IN-N-OUT
a nd the following tra demarks: (1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo." These tra demarks are
regi stered with the Tra demark Office of the US a nd i n va rious parts of the world, are i nternationally well -known, and have become distinctive of i ts
bus iness and goods through its long and exclusive commercial use.6 Petitioner pointed out that i ts internationally well-known tra demarks and the
ma rk of the respondents are all registered for the restaurant business and are clearly i dentical and confusingly s imilar. Pet itioner claimed that
res pondents a re making it a ppear that their goods a nd s ervices are those of the petitioner, thus, misleading ordinary a nd unsuspecting consumers
tha t they a re purchasing petitioner’s products.7

Fol lowing the filing of i ts complaint, petitioner s ent on 18 October 2000 a demand l etter directing respondent Sehwani, Incorporated to cease a nd
des ist from claiming ownership of the mark "IN-N-OUT" and to voluntarily ca ncel i ts tra demark registration. In a l etter-reply dated 23 October
2000, res pondents refused to a ccede to petitioner’ demand, but expressed willingness to surrender the registration of respondent Sehwani,
Incorporated of the "IN N OUT" tra demark for a fair and reasonable consideration. 8

Peti ti oner was a ble to register the mark "Double Double" on 4 Jul y 2002, ba sed on their a pplication filed on 2 June 1997.9 It a lleged that
res pondents also used this mark, as well a s the menu color scheme. Petitioners also a verred that respondent Benita’s receipts bore the phrase,
"representing IN-N-OUT Burger."10 It should be noted that that although respondent Sehwahi, Incorporated registered a mark which a ppeared as
"IN N OUT (the i nside of the l etter "O" formed like a star)," respondents used the mark "IN-N-OUT."11

To counter petitioner’s complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had
been using the mark "IN N OUT" i n the Philippines since 15 October 1982. On 15 November 1991, res pondent Sehwani, Incorporated filed with the
then Bureau of Pa tents, Trademarks a nd Technology Tra nsfer (BPTTT) an a pplication for the registration of the mark "IN N OUT (the inside of the
l etter "O" formed like a s tar)." Upon a pproval of its application, a certificate of registration of the said mark was i ssued in the name of respondent
Sehwani, Incorporated on 17 December 1993. On 30 Augus t 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a
Li censing Agreement, wherein the former entitled the latter to use i ts registered mark, "IN N OUT." Respondents asserted that respondent
Sehwani, Incorporated, being the registered owner of the mark "IN N OUT," s hould be accorded the presumption of a va lid regis tration of its mark
wi th the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for t he
ca ncellation of a certificate of registration a re present in this case. Additionally, respondents maintained that petitioner had no l egal capacity to
s ue as i t had never operated in the Philippines.12

Subs equently, the IPO Director of Legal Affairs, Es trellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 i n favor of petitioner.
Accordi ng to said Decision, petitioner had the l egal ca pacity to s ue in the Philippines, since its country of origin or domicile was a member of a nd a
s i gnatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, i t was
wi dely known in this country through the use herein of products bearing i ts corporate a nd tra de name. Petitioner’s marks are internationally well-
known, given the world-wide registration of the mark "IN-N-OUT," a nd its numerous a dvertisements in va rious publications and in the Internet.
Moreover, the IPO had already declared in a previous inter partes case that "In-N-Out Burger and Arrow Design" was an internationally well-known
ma rk. Gi ven these ci rcumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use i ts tra dename
a nd mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN N OUT" in
good fa ith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any i ntent to ri de upon petitioner’s
goodwill by copyi ng the mark "IN-N-OUT Burger" exactly. The i nside of the letter "O" i n the mark used by respondents formed a s tar. In addition,
the s imple a ct of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration o f the "IN-N-OUT" mark
wa s not deemed fra udulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads:

Wi th the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN -N-OUT" (the inside of the l etter "O"
formed like a s tar) issued in fa vor of Sehwani, Incorporated is hereby CANCELLED. Cons equently, respondents Sehwani, Inc. a nd Benita’s Fri tes are
hereby ordered to permanently cease and desist from using the mark "IN-N-OUT" a nd "IN-N-OUT BURGER LOGO" on i ts goods a nd i n i ts business.
Wi th regards the mark "Double-Double," considering that as earlier discussed, the mark has been a pproved by this Office for publication and that
a s s hown by evi dence, Complainant i s the owner of the s aid mark, Respondents a re so hereby ordered to permanently cease a nd d esist from using
the ma rk Double-Double. NO COSTS. 14
Both pa rties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents’ Motion for Reconsideratio n15 and
peti tioner’s Motion for Pa rtial Reconsideration16 were denied by the IPO Director for Legal Affairs i n Resolution No. 2004 -1817 da ted 28 October
2004 a nd Resolution No. 2005-05 da ted 25 April 2005,18 res pectively.

Subs equent events would give ri se to two ca ses before this Court, G.R. No. 171053 a nd G.R. No. 179127, the case a t bar.

G.R. No. 171053

On 29 October 2004, res pondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Moti on for Reconsideration.
Thus , on 18 November 2004, res pondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco).
However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day
regl ementary period to a ppeal.

Res pondents a ppealed to the Court of Appeals vi a a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 a nd
docketed a s CA-G.R. SP No. 88004, cha llenging the dismissal of their a ppeal by the IPO Director General, which effectively a ffirmed the Deci sion
da ted 22 December 2003 of the IPO Director for Legal Affairs ordering the ca ncellation of the registration of the disputed tra demark i n the name of
res pondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petiti on on the following
grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY

THE BUREAU OF LEGAL AFFAIR’S (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENT’S CERTIFICATE OF REGISTRATION FOR THE MA RK
"IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND
BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.

Res pondents thus prayed:

WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to thi s petition, and thereafter order the Office of the Director
General of the Intellectual Property Offi ce to reinstate a nd gi ve due course to *respondent+’s Appeal No. 14-2004-00004.

Other rel iefs, just and equitable under the premises, a re likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents’ Petition in CA-G.R SP No. 88004 a nd affirming the Order dated
7 December 2004 of the IPO Director General. The appellate court confirmed that respondents’ a ppeal before the IPO Director General was filed
out of ti me a nd that i t was only proper to ca ncel the registration of the disputed tra demark i n the name of respondent Sehwani, Incorporated a nd
to perma nently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise
a ffi rmed. On 10 November 2005, res pondents moved for the reconsideration of the said Decision. On 16 Ja nuary 2006, the Court of Appeals denied
thei r motion for reconsideration.

Di s mayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court i n a Petition for
Revi ew under Rule 45 of the Rules of Court, filed on 30 Ja nuary 2006, bearing the title Sehwani, Incorporated v. In -N-Out Burger and docketed as
G.R. No. 171053.19

Thi s Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 fi nding that herein respondents failed to file the ir Appeal
Memora ndum before the IPO Director General within the period prescribed by l aw a nd, consequently, they l ost their ri ght to a ppeal. The Court
further a ffirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the l egal capacity to
s ue for the protection of its trademarks, even though i t was not doing business in the Philippines, a nd ordering the cancella tion of the registration
obta ined by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to s top
us i ng the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court i n G.R. No. 171053, but i t was denied with
fi nality i n a Resolution dated 21 Ja nuary 2008.

G.R. No. 179127

Upon the denial of its Pa rtial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Lega l Affairs, petitioner
wa s able to file a timely a ppeal before the IPO Director General on 27 Ma y 2005.

Duri ng the pendency of petitioner’s appeal before the IPO Director General, the Court of Appeals a lready rendered on 21 October 2005 i ts D ecision
di s missing respondents’ Petition i n CA-G.R. SP No. 88004.

In a Decision dated 23 December 2005, IPO Di rector General Adrian Cristobal, Jr. found petitioner’s a ppeal meritorious a nd modified the Decision
da ted 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty o f unfair competition.
Des pite respondents’ claims that they had been using the mark since 1982, they only s tarted constructing their restaurant sometime i n 2000, a fter
peti tioner had already demanded that they desist from claiming ownership of the mark "IN -N-OUT." Moreover, the sole distinction of the mark
regi stered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the s tar inside the l etter "O," a minor difference
whi ch still deceived purchasers. Respondents were not even actually using the star i n their mark because i t wa s allegedly di fficult to print. The IPO
Di rector General expressed his disbelief over the respondents’ reasoning for the non-use of the star symbol. The IPO Director General a lso
cons idered respondents’ use of petitioner’s registered mark "Double-Double" a s a sign of bad faith a nd a n i ntent to mislead the public. Thus, the
IPO Di rector General ruled that petitioner was entitled to a n award for the a ctual damages it s uffered by reason of respondents’ acts of unfair
competition, exemplary damages, and attorney’s fees.21 The fallo of the Decision reads:

WHEREFORE, premises considered, the [herein respondents] a re held guilty of unfair competition. Accordingly, Decision No. 200 3-02 da ted 22
December 2003 i s hereby MODIFIED as follows:

[Herein Respondents] a re hereby ordered to jointly and severally pay [herein petitioner]:

1. Da mages in the a mount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28);
2. Exemplary da mages i n the a mount of FIVE HUNDRED THOUSAND PESOS (P500,000.00);

3. Attorney’s fees and expenses of l itigation i n the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00).

Al l products of [herein respondents] including the l abels, s igns, prints, packages, wrappers, receptacles and materials used by them i n committing
unfa ir competition s hould be without compensation of a ny s ort be seized and disposed of outside the channels of commerce.

Let a copy of thi s Decision be furnished the Director of Bureau of Legal Affairs for appropriate a ction, a nd the records be returned to her for proper
di s position. Further, l et a copy of this Decision be furnished the Documentation, Information and Technology Tra nsfer Bureau for their i nformation
a nd records purposes.22

Aggri eved, respondents were thus constrained to file on 11 Ja nuary 2006 before the Court of Appeals a nother Petition for Revi ew under Rule 43 of
the Rul es of Court, docketed as CA-G.R. SP No. 92785. Respondents based their s econd Petition before the a ppellate court on the following
grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO
PAY DAMAGES AND ATTORNEY’S FEES TO RESPONDENTS

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIR’S DECISION (1) CANCELLING PETITIONER’S
CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING
THE SUBJECT MARK ON ITS GOODS AND BUSINESS

Res pondents a ssailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that th eir use of
the di sputed mark was not ta inted with fraudulent i ntent; hence, they s hould not be held liable for damages. They a rgued that petitioner had
never entered i nto a ny tra nsaction involving its goods a nd s ervices in the Philippines a nd, therefore, could not claim that i ts goods a nd s ervices had
a l ready been i dentified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they ma intained that
peti tioner’s complaint was already barred by l aches.23

At the end of their Petition i n CA-G.R. SP No. 92785, res pondents presented the following prayer:

WHEREFORE, [respondents herein] respectfully pray tha t this Honorable Court:

(a ) upon the filing of this petition, issue a temporary res training order enjoining the IPO and [petitioner], their agents, s uccessors a nd a ssigns, from
executing, enforcing a nd i mplementing the IPO Director General’s Decision dated 23 December 2005, whi ch modified the Decision No. 2003-02
da ted 22 December 2003 of the BLA, until further orders from this Honorable Court.

(b) a fter notice a nd hearing, enjoin the IPO and [petitioner], their agents, successors a nd a ssigns, f rom executing, enforcing a nd i mplementing the
Deci sion dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 a nd to maintain the s tatus quo ante pending the
res olution of the merits of this petition; and

(c) a fter gi ving due course to this petition:

(i ) reverse a nd s et aside the Decision dated 23 December 2005 of the Director General of the IPO i n IPV No. 10-2001-00004 fi nding the
*res pondents+ guilty of unfair competition and awarding damages a nd a ttorney’s fees to the respondent

(i i ) in lieu thereof, a ffirm Decision No. 2003-02 of the BLA dated 22 December 2003 a nd Resolution No. 2005-05 of the BLA dated 25 Apri l 2005,
i ns ofar as it finds [respondents] not guilty of unfair competition and hence not l iable to the [petitioner] for damages and attorney’s fees;

(i i i) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, a nd Resolution No. 2005-05 of the BLA dated 25 Apri l 2005, i nsofar as it
upheld *petitioner+’s l egal ca pacity to s ue; that *petitioner+’s tra demarks are well-known; and that respondent has the exclusive ri ght to use the
s a me; a nd

(i v) ma ke the injunction permanent.

[Res pondents] also pray for other reliefs, as may deemed just or equitable.24

On 18 Jul y 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the
IPO Di rector General.

The Court of Appeals, i n its Decision, i nitially a ddressed petitioner’s assertion that respondents had committed forum s hopping by the i nstitution of
CA-G.R. SP No. 88004 a nd CA-G.R. SP No. 92785. It rul ed that respondents were not guilty of forum shopping, distinguishing between the
res pondents’ two Petitions. The s ubject of Respondents’ Petition i n CA-G.R SP No. 88004 wa s the 7 December 2004 Decision of the IPO Director
General dismissing respondents’ a ppeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents que stioned therein the
ca ncellation of the trademark registration of respondent Sehwani, Incorporated a nd the order permanently enjoining respondents from using the
di s puted trademark. Respondents’ Petition in CA-G.R. SP No. 92785 s ought the review of the 23 December 2005 Decision of the IPO Director
General partially modifyi ng the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in t heir s econd
peti tion before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition
a nd the a warding of a ctual a nd exemplary damages, as well as attorney’s fees, to petitioner.

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The a ppellate court
decl ared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA -IPO, s ole jurisdiction to
hea r a nd decide ca ses i nvolving provisions of the Intellectual Property Code, particularly tra demarks. Consequently, the IPO Director General had
no juri sdiction to rule in its Decision dated 23 December 2005 on s upposed vi olations of these provisions of the Intellectual Property Code.

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition i s GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office
of the Phi lippines in Appeal No. 10-05-01 i s REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Arti cle 168 of R.A. 8293 a nd other
s ecti ons enumerated in Section 163 of the same Code, respondent’s cl aims in its Complaint docketed as IPV No. 10-2001-00004 a re hereby
DISMISSED.26

The Court of Appeals, i n a Resolution dated 31 Jul y 2007,27 denied petitioner’s Motion for Reconsideration of i ts a forementioned Decision.

Hence, the present Petition, where petitioner ra ises the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY
2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY
2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON -FORUM
SHOPPING; AND (B) FORUM SHOPPING PROPER.28

As previ ously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision29 in
G.R. No. 171053 on 15 October 2007, whi ch affirmed the IPO Director General’s dismissal of respondents’ a ppeal for being file d beyond the
regl ementary period, a nd l eft the 22 December 2003 Decision of the IPO Director for Legal Affairs, ca nceling the trademark registration of
res pondent Sehwani, Incorporated and enjoining respondents from using the disputed marks.

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other.

Forma l Defects of the Petition

Res pondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza a nd Angangco, wh ich petitioner
a tta ched to the present Petition, is defective and should result in the dismissal of the said Petition.

Res pondents point out that the Secretary’s Certificate executed by Arnold M. Wensinger on 20 August 2007, s tating that petitioner had aut horized
the l a wyers of Villaraza a nd Angangco to represent i t in the present Petition and to sign the Verification a nd Certificati on a gainst Forum Shopping,
a mong other a cts, was not properly notarized. The jurat of the a forementioned Secretary’s Certificate reads:

Subs cribed a nd sworn to me this 20th day of August 2007 i n Irving California.

Ra chel A. Bl ake (Sgd.)

Nota ry Publ ic30

Res pondents a ver that the said Secretary’s Certificate ca nnot properly a uthorize Atty. Ba rranda to sign the Verification/Cert ification on behalf of
peti tioner because the notary public Rachel A. Blake failed to s tate that: (1) petitioner’s Corporate Secretary, Mr. Wensinger, was known to her; (2)
he wa s the same person who a cknowledged the i nstrument; a nd (3) he acknowledged the same to be his free act a nd deed, as required under
Secti on 2 of Act No. 2103 a nd La ndingin v. Republic of the Philippines.31

Res pondents l ikewise i mpugn the validity of the notarial certificate of Atty. Al drich Fitz B. Uy, on Atty. Ba randa’s Verification/Certification attached
to the i nstant Petition, noting the a bsence of (1) the serial number of the commission of the notary publi c; (2) the office address of the notary
public; (3) the roll of a ttorneys’ number a nd the IBP membership number; a nd (4) a s tatement that the Verification/Certification was notarized
wi thin the notary public’s territorial jurisdiction, as required under th e 2004 Rules on Notarial Pra ctice. 32

Secti on 2 of Act No. 2103 a nd La ndingin v. Republic of the Philippines are not applicable to the present ca se. The requiremen ts enumerated therein
refer to documents which require an a cknowledgement, a nd not a mere ju rat.

A jura t i s that part of a n a ffidavit i n which the notary certifies that before him/her, the document was subscribed a nd s worn to by the executor.
Ordi narily, the l anguage of the jurat should a vow that the document was s ubscribed and sworn to before the notary public. In contrast, an
a cknowledgment is the a ct of one who has executed a deed in going before some competent officer or court and declaring i t to be his a ct or deed.
It i nvolves a n extra step undertaken whereby the signor a ctually declares to the notary tha t the executor of a document has attested to the notary
tha t the same is his/her own free act a nd deed.33 A Secretary’s Certificate, as that executed by petitioner in favor of the l awyers of the Angangco
a nd Villaraza l aw office, only requires a jurat.34

Even a ssuming that the Secretary’s Certificate was flawed, Atty. Ba rranda may s till sign the Verification a ttached to the Pet ition a t bar. A pleading is
veri fi ed by a n a ffidavit that the affiant has read the pleading a nd that the a llegations therein a re true and correct of his personal knowledge or
ba s ed on a uthentic records. 35 The party i tself need not s ign the verification. A pa rty’s representative, l awyer or a ny other person who personally
knows the truth of the facts alleged i n the pleading may sign the verification.36 Atty. Ba rra nda, as petitioner’s counsel, was i n the position to verify
the truth a nd correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Ba rra nda substa ntially complies with the
forma l requirements for s uch.

Moreover, the Court deems it proper not to focus on the supposed technical i nfirmities of Atty. Ba randa’s Verification. It mu st be borne i n mind
tha t the purpose of requiring a verification is to s ecure a n assurance that the allegations of the petition has been made in good faith; or a re true
a nd correct, not merely s peculative. This requirement i s simply a condition a ffecting the form of pleadings, a nd non-compliance therewith does not
necessarily render i t fatally defective. I ndeed, verification is only a formal, not a jurisdictional requirement. In the interest of s ubstantial justice,
s tri ct observance of procedural rules may be dispensed with for compelling reasons.37 The vi tal issues raised i n the instant Petition on the
juri s diction of the IPO Director for Legal Affairs and the IPO Director General over tra demark cases justify the liberal applica tion of the rules, so that
the Court ma y gi ve the said Petition due course a nd resolve the same on the merits.
Thi s Court a grees, nevertheless, that the notaries public, Rachel A. Bl ake a nd Al drich Fitz B. Uy, were less than careful with their jurats or n otarial
certi ficates. Pa rties a nd their counsel s hould take care not to abuse the Court’s zeal to resolve ca ses on their merits. Notaries public in the
Phi l ippines a re reminded to exert utmost care a nd effort in complying with the 2004 Rules on Notarial Practice. Pa rties and t heir counsel are
further charged with the responsibility of ensuring that documents notarized abroad be i n their proper form before presenting s aid documents
before Philippine courts.

Forum Shopping

Peti ti oner next avers that respondents a re guilty of forum shopping i n filing the Petition in CA-G.R. SP No. 92785, fol lowing their earlier filing of the
Peti ti on i n CA-G.R SP No. 88004. Peti tioner a lso asserts that respondents were guilty of submitting to the Court of Appeals a patently false
Certi fi cation of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004.

Forum s hopping is the i nstitution of two or more actions or proceedings grounded on the s ame ca use on the s upposition that on e or the other
court woul d make a favorable disposition. It i s an a ct of malpractice and is prohibited and condemned as tri fling wi th courts and abusing their
processes. In determining whether or not there i s forum s hopping, what is i mportant is the vexa tion caused the courts a nd parties-litigants by a
pa rty who a sks different courts and/or a dministrative bodies to rule on the same or related ca uses a nd/or gra nt the same or s ubstantially the same
rel i efs and i n the process creates the possibility of conflicting decisions being rendered by the different bodies upon the s ame issues.38

Forum s hopping is present when, in two or more cases pending, there i s identity of (1) parties (2) ri ghts or ca uses of action and reliefs prayed for,
a nd (3) the i dentity of the two preceding particulars is such that any judgment rendered in the other a ction, will, regardles s of which party is
s uccessful, a mount to res judicata i n the a ction under consideration.39

After a curs ory l ook into the two Petitions i n CA-G.R. SP No. 88004 a nd CA-G.R. SP No. 92785, i t would a t first seem that respondents a re guilty of
forum s hopping.

There is no question that both Petitions involved i dentical parties, a nd ra ised at l east one s imilar ground for which they s ought the same relief.
Among the grounds s tated by the respondents for their Petition i n CA-G.R SP No. 88004 wa s that "*T+he Bureau of Legal Affair’s (sic) Decisio n and
Res olution (1) ca nceling *herein respondent Sehwani, Incorporated+’s certificate of registration for the mark ‘IN-N-OUT’ and (2) ordering *herein
res pondents] to permanently cease a nd desist from using the subject ma rk on its goods and business a re contrary to l aw and/or is (sic) not
s upported by evi dence."40 The same ground was again i nvoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows:
"The IPO Di rector General committed grave error i n a ffirming the Bureau of Legal Affair’s (sic) Decision (1) ca nceling *herein respondent Sehwani,
Incorporated+’s certificate of registration for the mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease a nd desist from
us i ng the subject mark on its goods and business."41 Both Petitions, i n effect, seek the reversal of the 22 December 2003 Decision of the IPO
Di rector of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of
Lega l Affairs based on the merits thereof would bar the Court of Appeals from making a contrary rul ing in the other Petition, under the p rinciple of
res judicata.

Upon a cl oser scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise i n CA-G.R. SP No. 88004,
but ca n be found i n CA-G.R. SP No. 92785, i .e., whether respondents are liable for unfair competition. Hence, respondents s eek a dditional reliefs i n
CA-G.R. SP No. 92785, s eeking the reversal of the finding of the IPO Director General that they a re guilty of unfair competition, and the nullification
of the a ward of damages i n favor of petitioner resulting from said fi nding. Undoubtedly, respondents could not have ra ised th e issue of unfair
competition i n CA-G.R. SP No. 88004 because a t the time they filed their Petition therein on 28 December 2004, the IPO Director General had not
yet rendered i ts Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof a nd a warded damages to petitioner.

In a rguing in their Petition i n CA-G.R. SP No. 92785 tha t they a re not liable for unfair competition, it is only predictable, although not necessarily
l egally tenable, for respondents to reassert their right to register, own, and use the disputed mark. R espondents again raise the issue of who has
the better ri ght to the disputed mark, because their defense from the a ward of damages for unfair competition depends on the resolution of said
i s sue i n their favor. While this reasoning may be l egally unsound, this Court ca nnot readily presume bad faith on the part of respondents in filing
thei r Petition i n CA-G.R. SP No. 92785; or hol d that respondents breached the rule on forum shopping by the mere filing of the s econd petition
before the Court of Appeals.

True, res pondents s hould have referred to CA-G.R. SP No. 88004 i n the Certification of Non-Forum Shopping, which they a ttached to their Petition
i n CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the juri sdictional and substantive issues
ra i sed herein, justify the relaxation of another procedural rule. Al though the submission of a certificate against forum s hop ping is deemed
obl igatory, i t is not jurisdictional.42 Hence, in this case i n which such a certification was in fact s ubmitted, only i t was defective, the Court may still
refus e to dismiss a nd, i nstead, give due course to the Petition in light of attendant exceptional ci rcumstances.

The pa rties and their counsel, however, a re once a gain warned against taking procedural rules lightly. It will do them well to remember that the
Courts ha ve ta ken a stricter s tance against the disregard of procedural rules, especially i n connection with the submission o f the certificate against
forum s hopping, a nd it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances.

The Juri sdiction of the IPO

The Court now proceeds to resolve an i mportant i ssue which a rose from the Court of Appeals Decision dated 18 July 200 6 i n CA-G.R. SP No. 92785.
In the a fore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs a nd the IPO Director General had no jurisdiction
over the a dministrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers
juri s diction over particular provisions i n the law on tra demarks on regular courts exclusively. According to the said provisi on:

Secti on 163. Jurisdiction of Court.–All a ctions under Sections 150, 155, 164, a nd 166 to 169 s hall be brought before the proper courts with
a ppropriate jurisdiction under existing laws.

The provi sions referred to in Section 163 a re: Section 150 on Li cense Contracts; Section 155 on Remedies on Infringement; Sec tion 164 on Notice of
Fi l ing Suit Given to the Director; Section 166 on Goods Bearing Infringing Ma rks or Tra de Names; Section 167 on Col lective Ma rks; Section 168 on
Unfa ir Competition, Rights, Regulation and Remedies; a nd Section 169 on False Designations of Ori gin, False Description or Representation.

The Court di sagrees with the Court of Appeals.

Secti on 10 of the Intellectual Property Code s pecifically i dentifies the functions of the Bureau of Legal Affairs, thus:

Secti on 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs s hall have the following functions:

10.1 Hea r a nd decide opposition to the application for registration of marks; cancellation of tra demarks; subject to the provisions of Section 64,
ca ncellation of patents a nd utility models, and industrial designs; a nd petitions for compulsory l icensing of patents;

10.2 (a ) Exercise original jurisdiction in administrative complaints for vi olations of l aws involving i ntellectual property r i ghts; Provi ded, That i ts
juri s diction i s limited to complaints where the total damages claimed a re not l ess than Two hundred thousand pesos (P200,000) : Provi ded, futher,
Tha t a vailment of the provisional remedies may be granted in a ccordance with the Rules of Court. Th e Director of Legal Affairs s hall have the power
to hol d and punish for contempt a ll those who disregard orders or wri ts issued in the course of the proceedings.

(b) After formal i nvestigation, the Director for Legal Affairs may i mpose one (1) or more of the following a dministrative penalties:

(i ) The issuance of a cease and desist order which s hall s pecify the acts that the respondent shall cease a nd desist from and shall require him to
s ubmit a compliance report wi thin a reasonable ti me which shall be fixed in the order;

(i i ) The acceptance of a voluntary a ssurance of compliance or discontinuance as may be i mposed. Such voluntary assurance may i nclude one or
more of the following:

(1) An a s surance to comply with the provisions of the intellectual property l aw vi olated;

(2) An a s surance to refrain from engaging in unlawful and unfair a cts and practices s ubject of the formal investigation

(3) An a s surance to recall, replace, repair, or refund the money va lue of defective goods distributed in commerce; a nd

(4) An a s surance to reimburse the complainant the expenses a nd costs incurred in prosecuting the case in the Bureau of Legal Affairs.

The Di rector of Legal Affairs may also require the respondent to s ubmit periodic compliance reports and file a bond t o guarantee compliance of his
undertaking.

(i i i) The condemnation or s eizure of products which a re subject of the offense. The goods seized hereunder s hall be disposed of in such manner as
ma y be deemed appropriate by the Director of Legal Affairs, s uch a s by sale, donation to distressed l ocal governments or to charitable or relief
i ns titutions, exportation, recycling into other goods, or a ny combination thereof, under s uch guidelines a s he may provide;

(i v) The forfeiture of paraphernalia and all real an d personal properties which have been used in the commission of the offense;

(v) The i mposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which s hall i n no case be less than
Fi ve thousand pesos (P5,000) nor more than One hundred fi fty thousand pesos (P150,000). In addition, a n additional fine of not more than One
thousand pesos (P1,000) s hall be i mposed for each day of continuing vi olation;

(vi ) The ca ncellation of any permit, l icense, authority, or registration which may have been granted by the Office, or the s uspension of the validity
thereof for s uch period of time as the Director of Legal Affairs may deem reasonable which s hall not exceed one (1) year;

(vi i ) The withholding of any permit, l icense, authority, or registration which is being secured by the respondent from the Of fice;

(vi i i) The assessment of damages;

(i x) Censure; and

(x) Other a nalogous penalties or s anctions.

10.3 The Di rector General may by Regulations establish the procedure to govern the implementation of this Section.43 (Emphasis provided.)

Unquestionably, petitioner’s complaint, which s eeks the cancellation of the disputed mark i n the name of respondent Sehwani, Incorporated, a nd
da mages for vi olation of petitioner’s intellectual property ri ghts, falls within the jurisdiction of the IPO Director of Lega l Affairs.

The Intellectual Property Code also expressly recognizes the a ppellate jurisdiction of the IPO Director General over the decisions of the IPO Director
of Lega l Affairs, to wit:

Secti on 7. The Director General and Deputies Director General. 7.1 Fuctions.–The Director General s hall exercise the following powers a nd
functi ons:

xxxx

b) Exerci se exclusive a ppellate jurisdiction over a ll decisions rendered by the Director of Legal Affairs, the Director of Pa tents, the Director of
Tra demarks, and the Director of Documentation, Information a nd Technology Tra nsfer Bureau. The decisions of the Director Gene ral i n the
exerci se of his appellate jurisdiction i n respect of the decisions of the Director of Patents, a nd the Director of Trademarks s hall be a ppealable to the
Court of Appeals i n a ccordance with the Rules of Court; and those i n respect of the decisions of the Director of Documentation, Information and
Technology Tra nsfer Bureau s hall be a ppealable to the Secretary of Tra de and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferri ng upon the BLA -IPO jurisdiction over
a dministrative complaints for vi olations of i ntellectual property ri ghts, is a general provision, over which the s pecific pro vision of Section 163 of the
s a me Code, found under Pa rt III thereof particularly governing tra demarks, servi ce marks, a nd tra denames, must prevail. Proceeding therefrom,
the Court of Appeals i ncorrectly concluded that all a ctions involving tra demarks, including charges of unfair competition, ar e under the exclusive
juri s diction of ci vil courts.
Such i nterpretation is not s upported by the provisions of the Intellectual Property Code. While Section 163 thereof vests i n ci vil courts jurisdiction
over ca s es of unfair competition, nothing in the said section states that the regular courts have s ole jurisdiction over unfa ir competition ca ses, to
the excl usion of a dministrative bodies. On the contrary, Sections 160 a nd 170, which a re also found under Part III of the Int ellectual Property Code,
recognize the concurrent jurisdiction of ci vil courts a nd the IPO over unfair competition cas es. These two provisions read:

Secti on 160. Ri ght of Foreign Corporation to Sue i n Tra demark or Servi ce Mark Enforcement Acti on.–Any foreign national or juridical person who
meets the requirements of Section 3 of this Act a nd does not engage in business i n the Philippines may bring a civil or a dministrative a ction
hereunder for opposition, ca ncellation, infringement, unfair competition, or false designation of origin and false description, whether or not i t is
l i censed to do business in the Philippines under existing laws.

xxxx

Secti on 170. Penalties.–Independent of the civil a nd a dministrative sanctions imposed by law, a cri minal penalty of i mprisonment from two (2)
yea rs to five (5) years a nd a fine ra nging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), s hall be imposed on a ny
pers on who is found guilty of committing any of the acts mentioned i n Section 155, Section168, a nd Subsection169.1.

Ba s ed on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner’s administrative case against
res pondents a nd the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Le gal Affairs.

Unfa ir Competition

The Court wi ll no longer touch on the issue of the va lidity or p ropriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which:
(1) di rected the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN -N-OUT" and (2) ordered
res pondents to permanently ce ase and desist from using the disputed mark on i ts goods and business. Such an issue has a lready been settled by
thi s Court in its final and executory Decision dated 15 October 2007 i n G.R. No. 171053, Sehwani, Incorporated v. In -N-Out Burger,44 ultimately
a ffi rming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the s uperior right to own a nd use the "IN-N-OUT"
tra demarks vi s-à-vis respondents is a finding which this Court ma y no l onger disturb under the doctrine of conclusi veness of judgment. In
concl usiveness of judgment, any ri ght, fact, or matter i n issue directly a djudicated or necessarily i nvolved i n the determina tion of an a ction before a
competent court i n which judgment i s rendered on the merits is conclusively s ettled by the judgment therein and cannot a gain be litigated
between the parties and their pri vies whether or not the claims, demands, purposes, or subject matters of the two a ctions are the s ame.45

Thus , the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair
competition for which he a warded damages to petitioner.

The essential elements of a n a ction for unfair competition are (1) confusing similarity i n the general appearance of the goods and (2) i ntent to
deceive the public and defraud a competitor. The confusing s imilarity ma y or ma y not result from similarity i n the marks, but may result from other
external factors in the packaging or presentation of the goods. The i ntent to deceive a nd defraud may be i nferred from the similarity of the
a ppearance of the goods as offered for sale to the public. Actual fraudulent i ntent need not be shown.46

In hi s Decision dated 23 December 2005, the IPO Director General ably explains the basis for his fi nding of the existence of unfair competition in
thi s case, vi z:

The evi dence on record shows that the [herein respondents] were not using their registered tra demark but that of the [petitioner]. [Respondent]
SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in
1993. The res taurant opened only i n 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] s tarted constructing the
res ta urant only a fter the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily ca ncel their
tra demark registration. Moreover, *respondents+ a re also using *petitioner’s+ registered mark Double-Double for use on hamburger products. In
fa ct, the burger wrappers and the French fries receptacles the [respondents] a re using do not bear the mark registered by the [respondent], but
the *petitioner’s+ IN-N-OUT Burger’s name a nd tra demark IN-N-OUT wi th Arrow design.

There is no evi dence that the *respondents+ were authorized by the *petitioner+ to use the latter’s marks in the business. *Respondents’+
expl anation that they a re not using their own registered tra demark due to the difficulty i n printing the "star" does not just ify the unauthorized use
of the *petitioner’s+ tra demark i nstead.

Further, [respondents] are givi ng their products the general appearance that would likely i nfluence purchasers to believe tha t these products are
thos e of the [petitioner]. The intention to deceive may be inferred from the s imilarity of the goods as packed a nd offered for sale, a nd, thus, action
wi l l lie to restrain such unfair competition. x x x.

xxxx

*Res pondents’+ use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit "GG," which shows the
bus iness establishment of *respondents+ illustrates the i mitation of *petitioner’s+ corporate name IN -N-OUT and signage IN-N-OUT BURGER. Even
the Di rector noticed i t and held:

"We a lso note that In-N-Out Burger is likewise, *petitioner’s+ corporate name. It has used the "IN-N-OUT" Burger name i n its restaurant business i n
Ba l dwin Pa rk, Ca lifornia in the United States of America since 1948. Thus i t has the exclusive ri ght to use the tra denems "In -N-Out" Burger i n the
Phi l ippines a nd the respondents’ a re unlawfully using a nd appropriating the same."

The Offi ce cannot gi ve credence to the *respondent’s+ claim of good faith and that they have openly a nd continuously used the s ubject ma rk since
1982 a nd i s (sic) i n the process of expanding its business. They contend that assuming that there is va lue i n the foreign registrations presented as
evi dence by the [petitioner], the purported exclusive right to the use of the subject mark based on s uch foreign registrations is not essential to a
ri ght of a ction for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason
of res pondents’ practices must always a ppear, a nd i n the present ca se, the BLA has found none. This Office finds the a rguments untenable.

In contrast, the [respondents] have the burden of evi dence to prove that they do not have fra udulent intent in using the mark IN-N-OUT. To prove
thei r good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they cl aimed to be using as early a s
1982, but di d not.
[Res pondents] also failed to explain why they a re using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN -N-OUT Burger a nd
Arrow Des ign. Even in their listing of menus, *respondents+ used *Appellants’+ marks of DOUBLE DOUBLE a nd IN -N-OUT Burger and Arrow Design.
In a ddition, in the wra ppers a nd receptacles being used by the [respondents] which also contained the marks of the [petitione r], there is no notice
i n s uch wrappers and receptacles that the hamburger a nd French fri es a re products of the [respondents]. Furthermore, the receipts issued by the
[res pondents] even indicate "representing IN-N-OUT." These acts ca nnot be considered a cts i n good faith. 47

Admi nistrative proceedings are governed by the "substantial evidence rule." A fi nding of guilt in an administrative case would have to be sustained
for a s l ong as i t is supported by s ubstantial evidence that the respondent has committed acts s tated in the complaint or form al charge. As defined,
s ubstantial evidence is such relevant eviden ce as a reasonable mind may a ccept as a dequate to s upport a conclusion.48 As recounted by the IPO
Di rector General i n his decision, there i s more than enough s ubstantial evidence to support his finding that respondents a re guilty of unfair
competition.

Wi th s uch finding, the a ward of damages in favor of petitioner i s but proper. This is in accordance with Section 168.4 of the I ntellectual Property
Code, which provides that the remedies under Sections 156, 157 a nd 161 for i nfringement shall apply mutatis mutandis to unfair competition. The
remedies provided under Section 156 i nclude the ri ght to damages, to be computed i n the following manner:

Secti on 156. Acti ons, and Damages a nd Injunction for Infringement.–156.1 The owner of a registered mark may recover damages from any person
who i nfringes his rights, and the measure of the damages s uffered shall be either the reasonable profit which the complaining party would have
ma de, had the defendant not i nfringed his rights, or the profit which the defendant a ctually ma de out of the i nfringement, or i n the event such
mea sure of damages cannot be readily ascertained with reasonable certainty, then the court may a ward as damages a reasonable percentage
ba s ed upon the amount of gross sales of the defendant or the va lue of the services i n connection with which the mark or tra de name was used in
the i nfringement of the ri ghts of the complaining party.

In the present case, the Court deems it just a nd fair that the IPO Director General computed the damages due to petitioner by a pplying the
rea s onable percentage of 30% to the respondents’ gross sales, and then doubling the amount thereof on a ccount of respondents’ a ctual intent to
mi s lead the public or defraud the petitioner,49 thus, a rriving at the a mount of a ctual damages of P212,574.28.

Ta ki ng into account the deliberate i ntent of respondents to engage in unfair competition, it is only proper that petitioner b e awarded exemplary
da mages. Article 2229 of the Ci vil Code provides that such damages may be imposed by way of example or correction for the public good, s uch as
the enhancement of the protection a ccorded to i ntellectual property a nd the prevention of similar a cts of unfair competition. However, exemplary
da mages are not meant to enrich one party or to i mpoverish another, but to s erve as a deterrent against or a s a negative incentive to curb socially
del eterious a ction.50 While there is no hard and fast rule i n determining the fair amount of exemplary damages, the award of exemplary da mages
s hould be commensurate with the actual loss or i njury s uffered.51 Thus, exemplary damages of P500,000.00 s hould be reduced to P250,000.00
whi ch more closely a pproximates the a ctual damages awarded.

In a ccordance with Arti cle 2208(1) of the Ci vil Code, a ttorney’s fees may l ikewise be awarded to petitioner since exemplary damages are a warded
to i t. Peti tioner was compelled to protect i ts rights over the disputed mark. The a mount of P500,000.00 i s more than reasonable, given the fact that
the ca s e has dragged on for more than seven years, despite the respondent’s failure to present countervailing evi dence. Considering moreover the
reputa tion of petitioner’s counsel, the actual a ttorney’s fees paid by petitioner would far exceed the amount that was a warde d to i t.52

IN VIEW OF THE FOREGOING, the i nstant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated
on 18 Jul y 2006, i s REVERSED. The Decision of the IPO Director General, dated 23 December 2005, i s hereby REINSTATED IN PART, with the
modi fication that the a mount of exemplary da mages awarded be reduced to P250,000.00.

SO ORDERED.
SECOND DIVISION
G.R. No. 167715 : November 17, 2010
PHIL PHARMAWEALTH, INC., Petitioner, v. PFIZER, INC. and PFIZER (PHIL.) INC., Respondents.

DE CI SI ON

PERALTA, J.:

Before the Court i s a petition for review on Certiorari seeking to a nnul a nd s et aside the Resolutions dated Ja nuary 18, 2005 [1] a nd April 11,
2005[2] by the Court of Appeals (CA) i n CA-G.R. SP No. 82734.

The i nstant case arose from a Complaint[3] for patent infringement filed a gainst petitioner Phil Pharmawealth, Inc. by respondent companies,
Pfi zer, Inc. and Pfizer (Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Offi ce (BLA -IPO).craThe Complaint alleged as
fol l ows:chanroblesvirtuallawlibrary

x x x

6. Pfi zer i s the registered owner of Philippine Letters Patent No. 21116 (the “Pa tent”) which was issued by this Honorable Of fice on July 16, 1987.
The pa tent is va lid until July 16, 2004. The cl aims of this Pa tent a re directed to “a method of increasing the effectiveness of a beta -lactam a ntibiotic
i n a ma mmalian subject, which comprises co-administering to said s ubject a beta-lactam a ntibiotic effectiveness increasing amount of a compound
of the formula IA.” The scope of the claims of the Patent extends to a combination of penicillin such as a mpicillin sodium a nd beta-lactam antibiotic
l i ke sulbactam sodium.

7. Pa tent No. 21116 thus covers ampicillin sodium/sulbactam sodium (hereafter “Sulbactam Ampicillin”).craAmpicillin sodium is a s pecific example
of the broad beta-lactam antibiotic disclosed a nd cl aimed i n the Pa tent. It is the compound which efficacy is being enhanced by co -administering
the s ame with s ulbactam s odium. Sulbactam sodium, on the other hand, is a specific compound of the formula IA disclosed a nd cl aimed i n the
Pa tent.

8. Pfi zer i s marketing Sulbactam Ampicillin under the brand name “Unasyn.” Pfizer's “Unasyn” products, which come i n oral and IV formulas, are
covered by Certi ficates of Product Registration (“CPR”) i ssued by the Bureau of Food and Drugs (“BFAD”) under the name of compla inants. The sole
a nd exclusive distributor of “Unasyn” products i n the Philippines is Zuellig Pharma Corporation, pursuant to a Dis tribution Services Agreement it
executed with Pfi zer Phils. on Ja nuary 23, 2001.

9. Sometime in Ja nuary a nd February 2003, compl ainants came to know that respondent [herein petitioner] submitted bids for th e s upply of
Sul bactam Ampicillin to several hospitals without the consent of complainants a nd i n vi olation of the complainants' intellectual property ri ghts. x x
x

x x x

10. Compl ainants thus wrote the above hospitals and demanded that the latter i mmediately cease and desist from accepting bids for the supply
[of] Sul bactam Ampicillin or a warding the same to entities other than complainants. Complainants, in the same l etters sent th rough undersigned
couns el, a lso demanded that respondent immediately wi thdraw its bids to supply Sulbactam Ampicillin.

11. In gros s and evident bad faith, respondent a nd the hospitals named in paragraph 9 hereof, willfully i gnored complainants' just, plain a nd va lid
dema nds, refused to comply therewith and continued to i nfringe the Pa tent, a ll to the damage a nd prejudice of complainants. As registered owner
of the Pa tent, Pfizer is entitled to protection under Section 76 of the IP Code.

x x x[4]cra l aw

Res pondents prayed for permanent i njunction, damages a nd the forfeiture a nd i mpounding of the a lleged i nfringing produc ts. They a lso asked for
the i ssuance of a temporary restraining order a nd a preliminary i njunction that would prevent herein Petitioner, i ts agents, representatives and
a s signs, from i mporting, distributing, s elling or offering the subject product for s ale to any entity i n the Philippines.

In a n Order[5] dated July 15, 2003 the BLA-IPO issued a preliminary i njunction which was effective for ninety days from petitioner's receipt of the
s a id Order.

Pri or to the expiration of the ninety-day period, respondents filed a Moti on for Extension of Writ of Preliminary Injunction[6] which, however, was
denied by the BLA-IPO i n an Order[7] dated October 15, 2003.

Res pondents filed a Motion for Reconsideration but the same was also denied by the BLA-IPO in a Resolution[8] dated January 23, 2004.

Res pondents then filed a s pecial ci vil action for Certiorari with the CA a ssailing the October 15, 2003 a nd January 23, 2004 Res olutions of the BLA-
IPO. Res pondents a lso prayed for the issuance of a preliminary mandatory i njunction for the reinstatement and extension of the writ of preliminary
i njunction issued by the BLA-IPO.

Whi le the ca se was pending before the CA, res pondents filed a Complaint[9] with the Regional Trial Court (RTC) of Ma kati Ci ty for i nfringement a nd
unfa ir competition with damages against herein petitioner. In said ca se, respondents prayed for the issuance of a temporary res training order and
prel iminary i njunction to prevent herein petitioner from importing, distributing, s elling or offering for sale sulbactam ampi cillin products to a ny
enti ty i n the Philippines. Respondents asked the tri al court that, after tri al, judgment be rendered a warding damages i n their favor a nd making the
i njunction permanent.

On Augus t 24, 2004, the RTC of Ma kati Ci ty issued an Order[10] directing the issuance of a temporary restraining order condit ioned upon
res pondents' filing of a bond.

In a s ubsequent Order*11+ dated April 6, 2005, the s ame RTC directed the i ssuance of a writ of preliminary i njunction “prohibiting and restraining
[peti tioner], its a gents, representatives a nd assigns from i mporting, distributing or s elling Sul bactam Ampicillin products to any entity i n the
Phi l ippines.”
Mea nwhile, on November 16, 2004, peti tioner filed a Motion to Dismiss[12] the petition filed with the CA on the ground of forum s hopping,
contending that the case filed with the RTC has the same objective as the petition filed with the CA, which is to obtain an injunction prohibiting
peti tioner from i mporting, distributing and selling Sulbactam Ampicillin products.

On Ja nuary 18, 2005, the CA i s sued its questioned Resolution[13] a pproving the b ond posted by respondents pursuant to the Resolution issued by
the a ppellate court on March 23, 2004 whi ch directed the issuance of a temporary restraining order conditioned upon the filing of a bond. On even
da te, the CA i ssued a temporary restraining order*14+ which prohibited petitioner “from importing, distributing, selling or offering for sale
Sul bactam Ampicillin products to any hospital or to any other entity i n the Philippines, or from i nfringing Pfi zer Inc.'s Phi lippine Pa tent No. 21116
a nd i mpounding all the sales i nvoices a nd other documents evidencing sales by *petitioner+ of Sulbactam Ampicillin products.”

On February 7, 2005, peti tioner again filed a Motion to Dismiss[15] the case for being moot and academic, contending that res pondents' patent
ha d a lready lapsed. In the same manner, petitioner also moved for the reconsideration of the temporary restraining order issued by the CA on the
s a me basis that the patent ri ght s ought to be protected has been extinguished due to the lapse of the patent license and on the ground that the CA
ha s no jurisdiction to review the order of the BLA-IPO a s said jurisdiction is vested by l aw i n the Office of the Director General of the IPO.

On Apri l 11, 2005, the CA rendered its presently a ssailed Resolution denying the Motion to Dismiss, dated November 16, 2004, a nd the motion for
reconsideration, as well as Motion to Dismiss, both dated February 7, 2005.

Hence, the present petition ra ising the following issues:chanroblesvirtuallawlibrary

a ) Ca n a n i njunctive relief be issued based on a n a ction of patent infringement when the patent allegedly i nfringed has a lready lapsed?

b) Wha t tri bunal has jurisdiction to review the decisions of the Director of Legal Affairs of the Intellectual Property Offic e?

c) Is there forum s hopping when a party files two a ctions with two s eemingly different causes of a ction a nd yet pray for the same relief?[ 16]cralaw

In the first i ssue raised, petitioner a rgues that respondents' exclusive right to monopolize the subject ma tter of the patent exists only within the
term of the patent. Petitioner claims that since respondents' patent expired on July 16, 2004, the l atter no longer possess a ny ri ght of monopoly
a nd, a s such, there is no more basis for the issuance of a restraining order or i njunction a gainst petitioner i nsofar as the disputed patent i s
concerned.

The Court a grees.

Secti on 37 of Republic Act No. (RA) 165,[17] which was the governing law a t the time of the issuance of respondents' patent,
provi des:chanroblesvirtuallawlibrary

Secti on 37. Ri ghts of patentees. A pa tentee shall have the exclusive right to make, use a nd sell the patented machine, a rticle or product, and to
us e the patented process for the purpose of industry or commerce, throughout the terri tory of the Philippines for the term of the patent; a nd s uch
ma ki ng, using, or s elling by a ny person without the authorization of the patentee constitutes infringement of the patent.[18] cralaw

It i s cl ear from the a bove -quoted provision of law that the exclusive right of a patentee to ma ke, use and sell a patented product, article or process
exi s ts only during the term of the patent. In the instant case, Philippine Letters Pa tent No. 21116, which was the basis of respondents in filing their
compl aint with the BLA-IPO, was issued on July 16, 1987. Thi s fact was a dmitted by respondents themselves i n their complaint. They a lso admitted
tha t the va lidity of the said patent is until July 16, 2004, whi ch is in conformity with Section 21 of RA 165, provi ding that the term of a patent shall
be s eventeen (17) years from the date of issuance thereof. Section 4, Rule 129 of the Rules of Court provides that an a dmission, verbal or wri tten,
ma de by a party i n the course of the proceedings i n the same case, does not require proof a nd that the admission may be contradicted only by
s howing that i t was made through palpable mistake or that no such admission was made. In the present case, there is no disput e as to
res pondents' admission that the term of their patent expired on July 16, 2004. Nei ther is there evidence to s how that their a dmission was made
through palpable mistake. Hence, contrary to the pronouncement of the CA, there is no longer a ny need to present evidence on the issue of
expi ration of respondents' patent.

On the ba sis of the foregoing, the Court a grees with petitioner that after July 16, 2004, res pondents no l onger possess the exclusive ri ght to make,
us e and sell the articles or products covered by Philippine Letters Pa tent No. 21116.

Secti on 3, Rule 58, of the Rules of Court l ays down the requirements for the issuance of a writ of preliminary i njunction,
vi z:cha nroblesvirtuallawlibrary

(a ) Tha t the applicant i s entitled to the relief demanded, and the whole or part of s uch relief consists in restraining the c ommission or continuance
of the a cts complained of, or i n requiring the performance of an act or a cts, either for a limited period or perpetually;

(b) Tha t the commission, continuance or non-performance of the act or a cts complained of during the litigation would probably work injustice to
the a pplicant; or

(c) Tha t a party, court, or a gency or a person is doing, threatening, or a ttempting to do, or is procuring or s uffering to be done, some a ct or acts
proba bly i n vi olation of the ri ghts of the a pplicant respecting the subject of the a ction or proceeding, and tending to render the judgment
i neffectual.

In thi s connection, pertinent portions of Section 5, Rule 58 of the same Rules provide that if the matter is of extreme urgency a nd the a pplicant will
s uffer gra ve i njustice and irreparable injury, a temporary restraining order may be issued ex parte.

From the foregoing, i t can be inferred that two requisites must exist to warrant the issuance of an i njunctive relief, namely: (1) the existence of a
cl ea r and unmistakable ri ght that must be protected; a nd (2) a n urgent a nd paramount necessity for the writ to prevent s erious damage.[19]cralaw

In the i nstant case, i t is clear that when the CA i ssued i ts January 18, 2005 Res olution approving the bond filed by res ponde nts, the latter no longer
ha d a right that must be protected, considering that Philippine Letters Pa tent No. 21116 which was issued to them already expired on July 16,
2004. Hence, the issuance by the CA of a temporary restraining order i n favor of the respondents is not proper.
In fa ct, the CA s hould have gra nted petitioner's motion to dismiss the petition for Certiorari filed before it as the only issue ra ised therein i s the
propri ety of extending the wri t of preliminary i njunction issued by the BLA-IPO. Since the patent which was the basis for issuing the injunction, was
no l onger va lid, a ny i ssue as to the propriety of extending the life of the injunction was already rendered moot and academic .

As to the s econd issue ra ised, the Court, i s not persuaded by petitioner's argument that, pursuant to the doctrine of primary jurisdiction, the
Di rector General of the IPO and not the CA ha s jurisdiction to review the questioned Orders of the Director of the BLA -IPO.

It i s true that under Section 7(b) of RA 8293, otherwise known as the Intellectual Property Code of the Philippines, which is the presently prevailing
l a w, the Director General of the IPO exercises exclusive appellate jurisdiction over all decisions rendered by the Director o f the BLA-IPO. However,
wha t i s being questioned before the CA i s not a decision, but an interlocutory order of the BLA-IPO denying respondents' motion to extend the life
of the preliminary i njunction i ssued in their fa vor.

RA 8293 i s s ilent with respect to a ny remedy a vailable to litigants who i ntend to question an interlo cutory order issued by the BLA-IPO. Moreover,
Secti on 1(c), Rule 14 of the Rules and Regulations on Administrative Complaints for Violation of La ws Involving Intellectual Property Rights simply
provi des that interlocutory orders shall not be appealable. Th e said Rules a nd Regulations do not prescribe a procedure within the a dministrative
ma chinery to be followed in assailing orders issued by the BLA-IPO pending final resolution of a case filed with them. Hence, in the a bsence of such
a remedy, the provisions of the Rules of Court shall apply i n a s uppletory manner, as provided under Section 3, Rule 1 of the same Rules a nd
Regulations. Hence, in the present case, respondents correctly resorted to the filing of a special civil a ction for Certiorari with the CA to question
the a ssailed Orders of the BLA-IPO, a s they ca nnot appeal therefrom a nd they have no other plain, s peedy a nd adequate remedy i n the ordinary
cours e of l aw. This i s consistent wi th Sections 1[20] a nd 4,[21] Rule 65 of the Rules of Court, a s amended.

In the first place, respondents' a ct of filing their complaint originally with the BLA-IPO is already i n consonance wi th the doctrine of primary
juri s diction.

Thi s Court has held that:chanroblesvirtuallawlibrary

[i ]n ca ses i nvolving specialized disputes, the practice has been to refer the same to a n a dministrative a gency of special com petence i n observance
of the doctrine of primary jurisdiction. The Court has ratiocinated that i t ca nnot or wi ll not determine a co ntroversy i nvolving a question which is
wi thin the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tri buna l, where the question
dema nds the exercise of s ound administrative discretion requiring the s pecial knowledge, experience and servi ces of the administrative tri bunal to
determine technical and intricate ma tters of fact, a nd a uniformity of ruling i s essential to comply with the premises of the regulatory s tatute
a dministered. The objective of the doctrine of primary juri sdiction is to guide a court i n determining whether i t should refrain from exercising i ts
juri s diction until a fter a n a dministrative a gency has determined some question or some aspect of s ome question a rising in the proceeding before
the court. It a pplies where the claim i s originally cognizable i n the courts a nd comes into play whenever enforcement of the cl aim requires the
res olution of i ssues which, under a regulatory s cheme, has been placed wi thin the special competence of an a dministrative body; i n such case, the
judi cial process is suspended pending referral of such issues to the administrative body for i ts vi ew.[22]cralaw

Ba s ed on the foregoing, the Court finds that respondents' initial filing of their complaint with the BLA -IPO, i nstead of the regular courts, is i n
keeping with the doctrine of primary jurisdiction owing to the fact that the determination of the basic issue of whether peti tioner vi olated
res pondents' patent ri ghts requires the exercise by the IPO of sound administrative discretion which i s based on the agency's special competence,
knowledge a nd experience.

However, the propriety of extending the life of the writ of preliminary i njunction issued by the BLA-IPO i n the exercise of i ts quasi-judicial power is
no l onger a matter that falls within the jurisdiction of the said administrative agency, pa rticularly tha t of i ts Director General. The resolution of this
i s sue which was raised before the CA does not demand the exercise by the IPO of sound a dministrative dis cretion requiring s pecial knowledge,
experience and servi ces i n determining technical a nd i ntricate matters of fact. It is settled that one of the exceptions to the doctrine of primary
juri s diction i s where the question involved is purely l egal a nd will ultimately ha ve to be decided by the courts of justice.[23] This is the case with
res pect to the issue ra ised in the petition filed with the CA.

Moreover, a s discussed earlier, RA 8293 a nd its i mplementing rules a nd regulations do not provide for a procedural remedy to question
i nterlocutory orders issued by the BLA-IPO. In this regard, i t bears to reiterate that the judicial power of the courts, a s provided for under the
Cons ti tution, i ncludes the a uthority of the courts to determine in an a ppropriate a ctio n the va lidity of the acts of the political departments.[24]
Judi cial power a lso includes the duty of the courts of justice to settle actual controversies i nvolving ri ghts which are l ega lly demandable and
enforceable, a nd to determine whether or not there has been a gra ve abuse of discretion amounting to l ack or excess of jurisdiction on the part of
a ny bra nch or i nstrumentality of the Government.[25] Hence, the CA, a nd not the IPO Director General, has jurisdiction to det ermine whether the
BLA-IPO committed grave a buse of discretion i n denying respondents' motion to extend the effectivity of the writ of preliminary i njunction which
the s aid office earlier issued.

La s tly, petitioner a vers that respondents a re guilty of forum s hopping for having filed separa te actions before the IPO a nd the RTC praying for the
s a me relief.

The Court a grees.

Forum s hopping is defined a s the act of a party a gainst whom an adverse judgment has been rendered i n one forum, of seeking a nother (and
pos sibly favorable) opinion in a nother forum (other than by a ppeal or the s pecial ci vil action of Certi orari), or the institution of two (2) or more
a cti ons or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition.[26]cralaw

The el ements of forum shopping are: (a) identity of parties, or a t least such parties that represent the same i nterests i n bo th actions; (b) identity of
ri ghts asserted and reliefs prayed for, the reliefs being founded on the same facts; (c) identity of the two preceding particulars, s uch that a ny
judgment rendered in the other a ction will, regardless of which party i s successful, amount to res judicata in the action under
cons ideration.[27]cralaw

There is no question as to the i dentity of parties in the complaints filed with the IPO a nd the RTC.

Res pondents a rgue that they ca nnot be held guilty of forum shopping because their complaints a re based on different causes of action as shown by
the fa ct that the s aid complaints are founded on vi olations of different patents.

The Court i s not persuaded.

Secti on 2, Rule 2 of the Rules of Court defines a ca use of a ction as the a ct or omission by which a party vi olates a ri ght of another. In the i nstant
ca s e, respondents' ca use of a ction i n their complaint filed with the IPO is the alleged act of petitioner i n i mporting, distributing, selling or offering
for s a le Sulbactam Ampicillin products, acts that are s upposedly vi olative of respondents' ri ght to the exclusive sale of the s aid products which are
covered by the latter's patent. However, a careful reading of the complaint filed with the RTC of Ma kati Ci ty would show that responde nts have the
s a me ca use of a ction as i n their complaint filed with the IPO. They cl aim that they have the exclusive ri ght to make, use a nd s ell Sulbactam
Ampi cillin products and that petitioner vi olated this right. Thus, i t does not matter that the patents upon which the complai nts were based are
di fferent. The fact remains that in both complaints the rights vi olated and the acts vi olative of such ri ghts a re identical.

In fa ct, respondents s eek s ubstantially the s ame reliefs in their s eparate complaints with the IPO a nd the RTC for the purpos e of accomplishing the
s a me objective.

It i s s ettled by this Court i n s everal cases that the filing by a party of two apparently different actions but with the s ame objective constitutes forum
s hopping.[28] The Court discussed this species of forum shopping as follows:chanroblesvirtuallawlibrary

Very s i mply s tated, the original complaint in the court a quo which gave rise to the i nstant petition was filed by the buyer (herein private
res pondent a nd his predecessors-in-interest) a gainst the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the
other ha nd, the complaint in the Second Case s eeks to declare such purported s ale i nvolving the same real property “a s unenforceable as a gainst
the Ba nk,” which is the petitioner herein. In other words, in the Second Ca se, the majority s tockholders, i n representation of the Bank, are s eeking
to a ccomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relie f being sought, though worded
di fferently, is the same, namely, to enable the petitioner Ba nk to escape from the obligation to s ell the property to Respondent.[29]cralaw

In Da nville Ma ritime, Inc. v. Commi ssion on Audit,[30] the Court rul ed as follows:chanroblesvirtuallawlibrary

In the a ttempt to make the two actions appear to be different, petitioner i mpleaded different respondents therein – PNOC i n the case before the
l ower court a nd the COA i n the ca se before this Court a nd s ought what seems to be different reliefs. Petitioner asks this Court to s et aside the
questioned letter-directive of the COA dated October 10, 1988 a nd to direct said body to a pprove the Memorandum of Agreement entered i nto by
a nd between the PNOC a nd Petitioner, while in the complaint before the l ower court petitioner seeks to enjoin the PN OC from conducting a
rebi dding and from s elling to other parties the vessel “T/T Andres Bonifacio,” a nd for a n extension of ti me for i t to comply wi th the paragraph 1 of
the memorandum of agreement and damages. One ca n s ee that a lthough the relief prayed f or i n the two (2) actions a re ostensibly di fferent, the
ul ti mate objective in both a ctions is the same, that i s, the approval of the sale of vessel in fa vor of Petitioner, a nd to overturn the l etter directive of
the COA of October 10, 1988 di s approving the sale.[31]cralaw

In the i nstant case, the prayer of respondents i n their complaint filed with the IPO is as follows:chanroblesvirtuallawlibrary

A. Immediately upon the filing of this action, issue an ex parte order (a) temporarily restraining respondent, i ts a gents, representatives and assigns
from i mporting, distributing, s elling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of this Complaint or to
a ny other entity i n the Philippines, or from otherwise i nfringin g Pfi zer Inc.'s Philippine Pa tent No. 21116; a nd (b) impounding all the sales invoices
a nd other documents evidencing s ales by respondent of Sulbactam Ampicillin products.

B. After hea ring, issue a wri t of preliminary i njunction enjoining respondent, its a gents, representatives a nd assigns from importing, distributing,
s elling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of the Complaint or to a ny o ther entity i n the
Phi l ippines, or from otherwise i nfringing Pfi zer Inc.'s Philippine Pa tent No. 21116; a nd

C. After tri a l, render judgment:chanroblesvi rtuallawlibrary

(i ) declaring that respondent has infringed Pfizer Inc.'s Philippine Pa tent No. 21116 a nd that respondent has no ri ght whatsoever over
compl ainant's patent;

(i i ) ordering respondent to pay complainants the followingamounts:chanroblesvirtuallawlibrary

(a ) a t l east P1,000,000.00 a s a ctual damages;

(b) P700,000.00 a s a ttorney's fees a nd litigation expenses;

(d) P1,000,000.00 a s exemplary damages; and

(d) cos ts of this s uit.

(i i i) ordering the condemnation, seizure or forfeiture of respondent's i nfringing goods or products, wherever they may be found, i ncluding the
ma terials a nd implements used i n the commission of infringement, to be disposed of in s uch manner a s may be deemed appropriate by
thi s Honorable Office; a nd

(i v) ma king the injunction permanent.[32]cralaw

In a n almost identical manner, respondents prayed for the following i n their complaint filed with the RTC:chanroblesvirtuallawlibrary

(a ) Immediately upon the filing of this action, issue an ex parte order:chanroblesvirtuallawlibrary

(1) temporarily restraining Pharmawealth, its agents, representatives and assigns from importing, distributing, selling or of fering for sale infringing
s ul bactam a mpicillinproducts to va rious government and privatehospitals or to any other entity i n thePhilippines, or from otherwise infringing
Pfi zer Inc.'s Philippine Pa tent No. 26810.

(2) i mpounding all the sales i nvoices a nd other documents evidencing s ales by pharmawealth of s ulbactam a mpicillin products; and

(3) di s posing of the infringing goods outside the channels of commerce.

(b) After hearing, issue a wri t of preliminary i njunction:chanroblesvirtuallawlibrary

(1) enjoining Pharmawealth, i ts a gents, representatives a nd assigns from i mporting, distributing, selling or offering for sale infringing sulbactam
a mpicillin products to va rious government hospitals or to a ny other entity i n the Philippines, or from otherwise infringing Pa tent No. 26810;

(2) i mpounding all the sales i nvoices a nd other documents evidencing s ales by Pha rmawealth of s ulbactam a mpicillinproducts; a nd

(3) di s posing of the infringing goods outside the channels of commerce.

(c) After tri a l, render judgment:chanroblesvi rtuallawlibrary

(1) fi nding Pharmawealth to have infringed Patent No. 26810 a nd declaring Pharmawealth to have no right whatsoever over plaintiff's patent;

(2) orderi ng Pharmawealth to pay plaintiffs the following a mounts:chanroblesvirtuallawlibrary

(i ) a t l east P3,000,000.00 a s a ctual damages;

(i i ) P500,000.00 a s attorney's fees and P1,000,000.00 a s litigation expenses;

(i i i) P3,000,000.00 a s exemplary damages; and

(i v) cos ts of this s uit.

(3) orderi ng the condemnation, seizure or forfeiture of Pharmawealth's infringing goods or products, wherever they ma y be found, including the
ma terials a nd implements used i n the commission of infringement, to be disposed of in s uch manner a s may be deeme d appropriate by this
Honorable Court; a nd

(4) ma ki ng the injunction permanent.[33]cralaw

It i s cl ear from the foregoing that the ultimate objective which respondents s eek to a chieve i n their separate complaints fil ed with the RTC a nd the
IPO, i s to a sk for damages for the alleged vi olation of their ri ght to exclusively s ell Sulbactam Ampicillin products a nd to permanently pre vent or
prohi bit petitioner from selling s aid products to any entity. Owing to the s ubstantial i dentity of parties, reliefs a nd i ssues i n the IPO and RTC cases, a
deci sion i n one ca se will necessarily a mount to res judicata in the other action.

It bea rs to reiterate that what i s truly i mportant to consider i n determining whether forum shopping exists or not is the vexation ca used the courts
a nd parties-litigant by a party who asks different courts and/or a dministrative a gencies to rule on the s ame or related ca uses a nd/or to gra nt the
s a me or s ubstantially the same reliefs, in the process creating the possibility of conflicting decisi ons being rendered by the different fora upon the
s a me issue.[34]cralaw

Thus , the Court a grees with petitioner that respondents a re i ndeed guilty of forum shopping.

Juri s prudence holds that i f the forum shopping i s not considered willful and deliberate, the subsequent ca se shall be dismissed without prejudice,
on the ground of either litis pendentia or res judicata.[35] However, if the forum shopping is willful and deliberate, both ( or all, if there a re more
tha n two) actions s hall be dismissed with preju dice.[36] In the present ca se, the Court fi nds that respondents did not deliberately vi olate the rule
on non-forum shopping. Respondents may not be totally blamed for erroneously believing that they ca n file s eparate actions s imply on the basis of
di fferent patents. Moreover, i n the suit filed with the RTC of Ma kati Ci ty, respondents were ca ndid enough to i nform the trial court of the
pendency of the complaint filed with the BLA-IPO as well as the petition for Certiorari filed with the CA. On these bases, o nly Ci vil Ca se No. 04-754
s hould be dismissed on the ground of litis pendentia.

WHEREFORE, the petition i s PARTLY GRANTED. The assailed Resolutions of the Court of Appeals, dated January 18, 2005 a nd April 11, 2005, i n CA-
G.R. No. 82734, a re REVERSED and SET ASIDE. The petition for Certiorari filed with the Court of Appeals is DISMISSED for being moot a nd a cademic.

Ci vi l Ca se No. 04-754, fi led with the Regional Trial Court of Ma kati Ci ty, Branch 138, i s l ikewise DISMISSED on the ground of litis pendentia.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 121867 July 24, 1997
SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner,
vs.
COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and DOCTORS PHARMACEUTICALS, INC. respondents.

DAVIDE, JR., J.:

Thi s is an appeal under Rule 45 of the Rules of Court from the decision1 4 November 1994 of the Court of Appeals in CA-G.R. SP No. 33520, which
a ffi rmed the 14 February 1994 decision2 of the Director of the Bureau of Patents, Tra demarks and Technology Tra nsfer (BPTTT) gra nting a
compulsory non-exclusive and non-transferable license to private respondent to manufacture, u se a nd sell i n the Philippines i ts own brands of
pha rmaceutical products containing petitioner's patented pharmaceutical product known as Ci metidine.

Peti ti oner i s a foreign corporation with principal office at Welwyn Garden Ci ty, England. It owns Philipp ine Letters Pa tent No. 12207 i ssued by the
BPTTT for the pa tent of the drug Ci metidine.

Pri va te respondent i s a domestic corporation engaged i n the business of manufacturing and distributing pharmaceutical product s. On 30 Ma rch
1987, i t fi l ed a petition for compulsory licensing3 with the BPTTT for a uthorization to manufacture its own brand of medicine from the drug
Ci metidine and to market the resulting product i n the Philippines. The petition was filed pursuant to the provisions of Secti on 34 of Republic Act
No. 165 (An Act Crea ti ng a Patent Office Prescribing Its Powers a nd Duties, Regulating the Issuance of Pa tents, and Appropria ting Funds Therefor),
whi ch provides for the compulsory l icensing of a particular patent a fter the expiration of two years from the grant of the latter i f the patented
i nvention relates to, i nter alia, medicine or that which is necessary for public health or public safety. Pri va te respondent alleged that the grant of
Phi l ippine Letters Pa tent No. 12207 wa s issued on 29 November 1978; tha t the petition was filed beyond the two-year protective period provided
i n Section 34 of R.A. No. 165; a nd that i t had the ca pability to work the patented product or make use of it i n i ts manufactu re of medicine.

Peti ti oner opposed, a rguing that private respondent had no ca use of action and lacked the capability to work the patented product; the petition
fa i led to s pecifically divulge how private respondent would use or improve the patented product; a nd that private respondent was motiva ted by
the pecuniary ga in a ttendant to the grant of a compulsory l icense. Petitioner a lso maintained that it was ca pable of s atisfying th e demand of the
l oca l market i n the manufacture and marketing of the medicines covered by the patented product. Finally, petitioner challenged the
cons titutionality of Sections 34 a nd 35 of R.A. No. 165 for vi olating the due process and equal protection clauses of the Constitution.

After a ppropriate proceedings, the BPTTT handed down its decision on 14 February 1994, wi th the dispositive portion thereof providing:

NOW, THEREFORE, by vi rtue of the powers vested in this Office by Republic Act No. 165, a s amended by Presidential Decree No. 1263, there is
hereby issued a license i n favor of the herein [private respondent], United Laboratories, Inc., [sic] under Letters Patent No. 12207 i ssued on
November 29, 1978, s ubject to the following terms and conditions:

1. Tha t [priva te respondent] be hereby gra nted a non-exclusive a nd non-transferable license to ma nufacture, use and sell in the Philippines i ts own
bra nds of pharmaceutical products containing [petitioner's] patented invention which is disclosed a nd cl aimed i n Letters Pate nt No. 12207;

2. Tha t the license granted herein s hall be for the remaining life of said Letters Pa tent No. 12207 unless this l icense is terminated i n the manner
hereinafter provided a nd that no right or l icense is hereby gra nted to [priva te respondent] under a ny patent to [petitioner] or [sic] other than
reci ted herein;

5. By vi rtue of this l icense, [private respondent] s hall pay [petitioner] a royalty on all license products containing the patented s ubstance made and
s ol d by [private respondent] i n the amount equivalent to TWO AND ONE HALF PERCENT (2.5%) of the net sales in Philippine curre ncy. The term
"net s cale" [sic] means the gross amount billed for the product pertaining to Letters Pa tent No. 12207, l ess —

(a ) Tra nsportation charges or allowances, if any, i ncluded in s uch amount;

(b) Tra de, quantity or cash discounts and broker's or agent's or distributor's commissions, i f a ny, a llowed or paid;

(c) Credi ts or a llowances, i f a ny, gi ven or ma de on a ccount of rejection or return of the patented product previ ously delivered; a nd

(d) Any ta x, exci se or government charge i ncluded in such amount, or measured by the production sale, transportation, use of deli very of the
products.

In ca s e [private respondent's] product containing the patented s ubstance shall contain one or more active i ngredients admixed therewith, said
product hereinafter i dentified as a dmixed product, the royalty to be paid s hall be determined in a ccordance with the following formula:

Net Sa les on Value of Patented

ROYALTY = Admi xed Product x 0.025 x Subs tance

—————————— ————————

Va l ue of Pa tented Value of Other

Subs tance Active Ingredients

4. The roya lties shall be computed a fter the end of each ca lendar quarter to a ll goods containing the patented substance here in i nvolved, made
a nd s old during the precedent quarter and to be paid by [private respondent] at i ts place of business on or before the thirtieth day of the month
fol l owing the end of each calendar quarter. Pa yments should be made to [petitioner's] authorized representative in the Philippines;
5. [Pri va te respondent] shall keep records in s ufficient detail to enable [petitioner] to determine the royalties paya ble and shall furth er permit i ts
books a nd records to be examined from time to time at [private respondent's] premises during office hours, to the extent necessary to be made a t
the expense of [petitioner] by a certified public a ccountant a ppointed by [petitioner] a nd a cceptable to [private respondent] .

6. [Pri va te respondent] shall adopt a nd use its own tra demark or labels on a ll i ts products contain ing the patented substance herein involved;

7. [Pri va te respondent] shall comply wi th the laws on drugs and medicine requiring previous cl inical tests a nd a pproval of proper government
a uthorities before s elling to the public i ts own products manufactured under the license;

8. [Peti tioner] shall have the ri ght to terminate the license granted to [private respondent] by givi ng the l atter thirty (30) days notice in wri ting to
tha t effect, i n the event that [private respondent] default [sic] in the payment o f royalty provided herein or if [private respondent] shall default in
the performance of other convenants or conditions of this agreement which a re to be performed by [priva te respondent]:

(a ) [Pri va te respondent] shall have the right provided it is not in default to payment or roya lties or other obligations unde r this a greement, to
termi nate the license granted to its, [sic] giving [petitioner] thirty (30) da ys-notice i n writing to that effect;

(b) Any termi nation of this license as provided for a bove shall not i n a ny way operate to deny [petitioner] its rights or rem edies, either a t laws [sic]
or equi ty, or relieve [private respondent] of the payment of royalties or satisfaction of other o bligations i ncurred prior to the effective date of such
termi nation; a nd

(c) Noti ce of termination of this license shall be filed with the Bureau of Pa tents, Trademarks and Technology Tra nsfer.

9. In ca se of dispute as to the enforcement of the provisions of this license, the matter s hall be s ubmitted for a rbitration before the Director of
Burea u of Patents, Tra demarks and Technology Tra nsfer or a ny ra nking official of the Bureau of Pa tents, Trademarks a nd Technology Tra nsfer duly
del egated by him.

10. Thi s License shall i nure to the benefit of each of the parties herein, to the subsidiaries and assigns of [petitioner] and to the successors a nd
a s signs of [private respondent]; a nd

11. Thi s license take [sic] effect i mmediately.4

Peti ti oner then appealed to the Court of Appeals by way of a petition for review, which was docketed a s CA-G.R. SP No. 33520. Peti tioner claimed
tha t the a ppealed decision was erroneous because:

. . . [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THE PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND MUST
ACCORDINGLY BE SET ASIDE AND MODIFIED.

II

. . . [IT] IS AN INVALID EXERCISE OF POLICE POWER.

III

CONCEDING ARGUENDO THE QUESTIONED DECISION'S VALIDITY, THE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY AT 2.5% OF THE NET
WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPROPRIATION OF PRIVATE
PROPERTY WITHOUT JUST COMPENSATION WHICH IS VIOLATE OF THE CONSTITUTION.

IV

. . . [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THE CASE BELOW FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE
JURISDICTIONAL FACT OF PUBLICATION.5

In i ts decision of 4 November 1994,6 the Court of Appeals a ffirmed i n toto the challenged decision. We quote its findings a nd conclusion upon
whi ch the a ffirmance i s anchored, viz.:

An a s siduous scrutiny of the i mpugned decision of the public respondent reveals that the same is s upported by s ubstantial evidence. It a ppears
tha t a t the time of the filing of the petition for compulsory l icense on Ma rch 24, 1987, the s ubject l etters Patent No. 12207 i s sued on November 29,
1978 ha s been i n effect for more than two (2) years. The patented i nvention relates to compound and compositions used in inhibiting certain
a cti ons of the histamine, hence, it relates to medicine. Moreover, a fter hearing a nd ca reful consideration of the evidence presented, the Director
of Pa tents ruled that — "there is a mple evidence to s how that [private respondent] possesses such ca pability, havi ng competent personnel,
ma chines a nd equipment as well as permit to ma nufacture different drugs containing patented active ingredients s uch a s etham butol of American
Cya na mid a nd Ampicillin a nd Amoxicillin of Beecham Groups, Ltd."

As to the cl aim by the petitioner that it has the ca pacity to work the patented product although it was not shown that a ny pretended abuse has
been committed, thus the reason for granting compulsory l icense "is i ntended not only to gi ve a chance to others to s upply the public with the
qua ntity of the patented article but especially to prevent the building up of patent monopolities [sic]." [Parke Davis v. Doc tors Pharmaceuticals,
Inc., 14 SCRA 1053].

We fi nd that the gra nting of compulsory l icense is not simply because Sec. 34 (1) e, RA 165 a l lows it i n cases where the i nve ntion relates to food
a nd medicine. The Director of Pa tents also considered in determining that the applicant has the ca pability to work or make use of the patented
product i n the manufacture of a useful product. In this ca se, the applicant was a ble to show that Ci metidine, (subject matter of latters Pa tent No.
12207) i s necessary for the manufacture of a n a nti-ulcer drug/medicine, which is necessary for the promotion of public health. Hence, the award of
compulsory l icense is a va lid exercise of police power.

We do not a gree to [sic] petitioner's contention that the fixing of the royalty a t 2.5% of the net wholesale price amounted to expropriation of
pri va te property wi thout just compensation.
Pa ra graph 3, Section 35-B, R.A. No. 165, a s amended by P.D. No. 1267, s ta tes:

Sec. 35-B. Terms and Conditions of Compulsory Li cense.

(1) . . .

(2) . . .

(3) A compulsory l icense shall only be granted s ubject to the payment of a dequate roya lties commensurate with the extent to which the invention
i s worked. However, royalty payments s hall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products
ma nufactured under the license.

If the product, substance, or process subject of the compulsory l icense is involved in an i ndustrial project a pproved by the Board of Investments,
the roya lty pa yable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined i n Section 34-A) of the
pa tented commodity a nd/or commodity manufactured under the patented process, the s ame ra te of roya lty shall be distributed to the patentees
i n ra tes proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest s ubsisting product
pa tent.

The foregoing provision grants the Director of Pa tents the use of his sound discretion in fixing the percentage for the roya lty ra te. In the instant
ca s e, the Director of Pa tents exercised his discretion and ruled that a rate of 2.5% of the net wholesale price is fair enoug h for the parties. In Pa rke
Da vi s & Co. vs . DPI a nd Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] i t wa s held that — "liberal treatment in trade relations s hould be
a fforded to l ocal industry for as reasoned out by respondent company, i t is so difficult to compete with the industrial grant s [sic] of the drug
i ndustry, a mong them being the petitioner herein, that i t always is necessary that the l ocal drug companies s hould sell a t much lower (than) the
pri ces of said foreign drug entities." Besides, foreign produce licensor ca n later on ask for a n increase i n percentage ra te of roya lty fixed by the
Di rector of Patents i f l ocal sales of license s hould increase. Further, i n Pri ce vs . UNILAB, the award of royalty ra te of 2.5% was deem ed to be just
a nd reasonable, to wit [166 SCRA 133]:

Moreover, what UNILAB has with the compulsory l icense is the bare right to use the patented chemical compound in the manufacture of a s pecial
product, wi thout any technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB will only
be us ed, distributed, and disposed locally. Therefore, the royalty ra te of 2.5% is just and reasonable.

It a ppearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee may manufacture us ing a ny or a ll of the
pa tented compounds, the petitioner ca nnot complain of a deprivation of property ri ghts without just compensation [Pri ce v. UNILAB, L-82542,
September 19, 1988].

We ta ke note of the well-crafted petition s ubmitted by petitioner albeit the l egal milieu and a good number of decided cases militate a gainst the
grounds posited by petitioner. In sum, considering the well-entrenched jurisprudence sustaining the position of respondents, We reiterate the rule
i n Ba say Mi ning Corporation vs . SEC, to the effect that —

The l egal presumption is that official duty has been performed. And it is particularly s trong as regards administrative agenc ies vested with powers
s a id to be quasi-judicial i n nature, i n connection with the enforcement of laws a ffecting particular fi elds of a ctivi ty, the proper regulation and/or
promoti on of which requires a technical or s pecial tra ining, aside from a good knowledge a nd grasp of the overall conditions, releva nt to said field,
obta ining i n the nations. The policy a nd practice underlying our Administrative Law is that courts of justice should respect the fi ndings of fact of
s a id administrative agencies, unless there is a bsolutely no evidence i n support thereof or s uch evidence is clearly, ma nifestly a nd patently
i ns ubstantial. [G.R. No. 76695, October 3, 1988, Mi nute Resolution; Beautifont, Inc., et al. v. Court of Appeals, et al., G.R . No. 50141, Ja nuary 29,
1988]

Its motion for reconsideration having been denied in the resolution7 of 31 August 1995, petitioner filed the instant petition for revi ew on certiorari
wi th the following assignment of errors:

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION VIOLATES INTERNATION AL LAW AS EMBODIED IN (A) THE
PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND (B) THE GATT TREATY, URUGUAY ROUND, AND MUST ACCORDINGLY BE
SET ASIDE AND MODIFIED.

II

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION I S AN INVALID EXERCISE OF POLICE POWER, ABSENT ANY
SHOWING BY EVIDENCE OF AN OVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE OVER CIMETIDINE IN FAVOR OF PRIVATE
RESPONDENT.

III

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S PRONOUNCEMEN T FIXING THE ROYALTY FOR AN INVOLUNTARY LICENSE
AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO
EXPORTATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION AND IS IN VIOLATION OF THE CONSTITUTIO NAL RIGHT TO DUE PROCESS.

IV

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE BPTTT'S ACTION WAS RENDERED NULL AND VOID FOR FAILURE OF PRIVATE
RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY LAW.

We res olved to give due course to the petition a nd required the parties to submit their respective memoranda, which they di d, with that of p ublic
res pondent filed only on 7 February 1997.

After a ca reful perusal of the pleadings a nd evaluation of the a rguments a dduced b y the parties, we find this petition to be without merit.
In i ts first assigned error, petitioner i nvokes Arti cle 5 of the Pa ris Convention for the Protection of Industrial Property,8 or "Pa ris Convention," for
s hort, of which the Philippines became a party thereto only i n 1965.9 Perti nent portions of said Arti cle 5, Section A, provide:

A. . . .

(2) Ea ch country of the union shall have the ri ght to take legislative measures provi ding for the gra nt of compulsory l icense s to prevent the a buses
whi ch might result from the exercise of the exclusive ri ghts conferred by the patent, for example, failure to work.

xxx xxx xxx

(4) A compulsory l icense may not be applied for on the ground of failure to work or i nsufficient working before the expiration of a period of four
yea rs from the date of filing of the patent a pplication or three years from the date o f the gra nt of the patent, whichever period expires last; i t shall
be refused i f the patentee justifies his i naction by l egitimate reasons. Such a compulsory l icense shall be non-exclusive a nd s hall not be
tra ns ferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits s uch l icense.

In i s thus clear that Section A (2) of Arti cle 5 a bove unequivocally a nd explicitly respects the ri ght of member countries to a dopt legislative
mea sures to provide for the grant of compulsory licenses to prevent a buses which might result from the exercise of the excl usive rights conferred
by the pa tent. An example provided of possible abuses is "failure to work;" however, as s uch is merely s upplied by wa y of an example, it i s plain
tha t the treaty does not preclude the i nclusion of other forms or categories of abuses.

Secti on 34 of R.A. No. 165, even if the Act wa s enacted prior to the Philippines' adhesion to the Convention, fits well withi n the aforequoted
provi sions of Arti cle 5 of the Pa ris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the l egislative intent
i n the grant of a compulsory l icense was not only to a fford others a n opportunity to provide the public wi th th e quantity of the patented product,
but a l so to prevent the growth of monopolies.10 Certainly, the growth of monopolies was a mong the abuses which Section A, Art i cle 5 of the
Conventi on foresaw, a nd which our Congress l ikewise wished to prevent i n enacting R.A. No. 165.

R.A. No. 165, a s a mended by Presidential Decree No. 1263, promulgated on 14 December 1977, provi des for a system of compulsory l icensing
under a particular patent. Sections 34 a nd 35, Arti cle Two, of Cha pter VIII read as follows:

Sec. 34. Grounds for Compulsory Li censing — (1) Any person may a pply to the Director for the grant of a license under a particular patent a t any
ti me a fter the expiration of two years from the date of the grant of the patent, under a ny of the following ci rcumstance s:

(a ) If the patented invention is not being worked within the Philippines on a commercial s cale, a lthough capable of being so worked, without
s a tisfactory reason;

(b) If the demand for the patented a rticle i n the Philippines is not being met to an adeq uate extent and on reasonable terms;

(c) If, by rea s on of refusal of the patentee to grant a license or l icenses on reasonable terms, or by reason of the conditio ns attached by the
pa tentee to l icensee or to the purchase, l ease or use of the patented a rticle or working of the patented process or machine for production, the
es tablishment of any new trade or industry i n the Philippines is prevented, or the trade or industry therein is unduly restra ined;

(d) If the working of the invention within the country i s being prevented or hindered by the i mportation of the patented a rticle; or

(e) If the patented i nvention or a rticle relates to food or medicine or manufactured products or substances which ca n be used as food or medicine,
or i s necessary for public health or public safety.

(2) In a ny of the a bove cases, a compulsory l icense s hall be granted to the petitioner provided that he has proved his capabi lity to work the
pa tented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this s ection means the manufacture and sale of the patented article, of the pat ented machine, or
the a pplication of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines
a nd on a s cale which is reasonable and adequate under the circumstances. Importation s hall not constitute "working."

xxx xxx xxx

Sec. 35. Gra nt of Li cense. — (1) If the Director finds that a case for the grant is a license under Section 34 hereof has been made out, he s hall,
wi thin one hundred eighty days from the date the petition was filed, order the gra nt of an a ppropriate licens e. The order shall state the terms and
condi tions of the license which he himself must fi x in default of an a greement on the matter manifested or s ubmitted by the p arties during the
hea ring.

(2) A compulsory l icense sought under Section 34-B shall be issued within one hundred twenty days from the filing of the proponent's a pplication
or recei pt of the Board of Investment's endorsement.

The ca se a t bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34 — the patented invention or a rticle relates to food or
medi cine or manufactured products or s ubstances which ca n be used as food or medicine, or i s necessary for public health or p ublic safety. And i t
ma y not be doubted that the a forequoted provisions of R.A. No. 165, a s amended, a re not i n derogation of, but are consistent with, the recognized
ri ght of treaty s ignatories under Arti cle 5, Section A (2) of the Paris Convention.

Pa renthetically, i t must be noted that paragraph (4) of Section A, Arti cle 5 of the Paris Convention setting ti me limitations i n the a pplication for a
compulsory l icense refers only to a n i nstance where the ground therefor i s "failure to work or i nsufficient working," and not to a ny ground or
ci rcums tance as the treaty signatories may reasonably determine.

Nei ther may petitioner validly i nvoke what i t designates a s the GATT Treaty, Uruguay Round. This a ct is better known as the Uruguay F inal Act
s i gned for the Philippines on 15 April 1994 by Tra de and Industry Secretary Ri zalino Nava rro.11 Forming integral parts th ereof a re the Agreement
Es ta blishing the World Trade Organization, the Mi nisterial Declarations and Decisions, a nd the Understanding on Commitments i n Financial
Servi ces.12 The Agreement establishing the World Trade Orga nization includes various agreements and associated legal i nstruments. It was only on
14 December 1994 tha t the Philippine Senate, in the exercise of its power under Section 21 of Arti cle VII of the Constitution , adopted Senate
Res olution No. 97 concurring in the ra tification by the President of the Agreement. The President signed the instrument of ra tification on 16
December 1994.13 But pl ainly, this treaty has no retroactive effect. Accordingly, s ince the challenged BPTTT decision was ren dered on 14 February
1994, peti tioner ca nnot a vail of the provisions of the GATT treaty.

The s econd and third assigned errors relate more to the factual findings of the Court of Appeals. Well -established i s the principle that the findings
of fa cts of the latter a re conclusive, unless: (1) the conclusion is a finding grounded entirely on s peculation or conjecture; (2) the inference made i s
ma nifestly absurd; (3) there is grave abuse of discretion i n the appreciation of facts; (4) the judgment is premised on a mis apprehension of facts; (5)
the fi ndings of fact a re conflicting; a nd (6) the Court of Appeals, in making its findings, went beyond the issues of the case a nd the same is contrary
to the a dmissions of both the a ppellant and a ppellee.14 Petitioner has not convi nced us that the instant ca se falls under a ny of the exceptions. On
the contra ry, we find the findings of fact a nd conclusions of respondent Court of Appeals and that of the BPTTT to be fully s upported by the
evi dence and the applicable l aw a nd jurisprudence on the matter.

Peti ti oner's claim of vi olations of the due process a nd eminent domain clauses of the Bill of Rights a re mere conclusions which i t failed to
convi ncingly s upport. As to due the process argument, s uffice i t to say that full-blown a dversarial proceedings were conducted before the BPTTT
purs uant to the Pa tent Law. We a gree with the Court of Appeals that the BPTTT exhaustively s tudied the fa cts a nd i ts findings were fully s upported
by s ubstantial evidence.

It ca nnot likewise be cl aimed that petitioner was unduly deprived of its property ri ghts, as R.A. No. 165 not only gra nts the patent holder a
protecti ve period of two years to enjoy his exclusive rights thereto; but s ubsequently, the law recognizes just compensation i n the form of
roya l ties.15

In Pa rke, Davis & Co. v. Doctors ' Pharmaceuticals, Inc.,16 we held:

The ri ght to exclude others from the manufacturing, using, or vending a n i nvention relating to, food or medicine s hould be co nditioned to allowing
a ny person to manufacture, use, or vend the s ame a fter a period of three [now two] years from the date of the grant of the l etters patent. After all,
the pa tentee i s not entirely deprived of any proprietary ri ght. In fact, he has been given the period of three years [now two years] of complete
monopoly over the patent. Compulsory licensing of a patent on food or medicine without regard to the other conditions imposed in Section 34
[now Section 35] is not an undue deprivation of proprietary i nterests over a patent right because the law sees to it that eve n after three years of
compl ete monopoly s omething i s awarded to the i nventor i n the form of bilateral a nd workable l icensing a greement and a reasonable roya lty to be
a greed upon by the parties and in default of such an agreement, the Director of Pa tents may fix the terms and conditions of the license.

As to the fourth assigned error, we hold that petitioner ca n no longer a ssail the jurisdiction of the BPTTT, raising this iss ue only for the first time on
a ppeal. In Pa ntranco North Express, Inc. v. Court of Appeals,17 we ruled that where the issue of jurisdiction is ra ised for the first time on a ppeal,
the pa rty i nvoking i t is so barred on the ground of laches or estoppel under the circumstances therein stated. It is now s ett led that this rule applies
wi th equal force to quasi-judicial bodies18 s uch as the BPTTT. Here, petitioner have not furnished a ny cogent reason to depart from this rule.

WHEREFORE, the petition i s hereby DENIED and the challenged decision of the Court of Appeals in CA-G.R. SP No. 33520 i s AFFIRMED in toto.

Cos ts a gainst petitioner.

SO ORDERED.
THIRD DIVISION
G. R. No. 126627. August 14, 2003]
SMITH KLINE BECKMAN CORPORATION, Petitioner, vs. THE HONORABLE COURT OF APPEALS and TRYCO PHARMA CORPORATION, Respondents.

DE CI SI ON

CARPIO-MORALES, J.:

Smi th Kl ine Beckman Corporation (petitioner), a corporation existing by vi rtue of the laws of the s tate of Pennsylva nia, Unit ed States of America
(U.S.) a nd licensed to do business i n the Philippines, filed on October 8, 1976, a s assignee, before the Phili ppine Patent Office (now Bureau of
Pa tents, Trademarks a nd Technology Tra nsfer) a n application for patent over a n i nvention entitled Methods and Compositions fo r Producing
Bi phasic Pa rasiticide Acti vity Using Methyl 5 Propylthio -2-Benzimidazole Ca rbamate. The application bore Serial No. 18989.

On September 24, 1981, Letters Pa tent No. 145611 for the a foresaid i nvention was issued to petitioner for a term of seventeen (17) years.

The l etters patent provides i n i ts cl aims2 that the patented invention consisted of a new compound named methyl 5 propylthio-2-benzimidazole
ca rba mate a nd the methods or compositions utilizing the compound as an active i ngredient i n fighting infections ca used by ga s trointestinal
pa ra sites a nd l ungworms i n a nimals s uch as swine, sheep, cattle, goats, horses, a nd even pet animals.

Tryco Pha rma Corporation (private respondent) is a domestic corporation that manufactures, distributes and sells veterinary p roducts i ncluding
Impregon, a drug that has Al bendazole for i ts a ctive ingredient and is claimed to be effective a gainst gastro-intestinal roundworms, lungworms,
ta peworms a nd fluke i nfestation in ca rabaos, ca ttle a nd goats.

Peti ti oner s ued priva te respondent for i nfringement of patent and unfair competition before the Caloocan Ci ty R egional Tri al Court (RTC).3 It
cl a imed that its patent covers or includes the substance Albendazole such that priva te respondent, by manufacturing, selling, using, and causing to
be s old a nd used the drug Impregon without i ts authorization, infringed Claims 2, 3, 4, 7, 8 a nd 9 of Letters Pa tent No. 145614 a s well a s committed
unfa ir competition under Arti cle 189, pa ragraph 1 of the Revised Penal Code and Section 29 of Republic Act No. 166 (The Trade mark La w) for
a dvertising and selling as its own the drug I mpregon although the same contained petitioners patented Albendazole.5cräläwvirtualibräry

On moti on of petitioner, Bra nch 125 of the Ca loocan RTC i ssued a temporary restraining order a gainst private respondent enjoi ning i t from
commi tting a cts of patent i nfringement a nd unfair competition.6 A wri t of preliminary i njunction was s ubsequently issued.7cräläwvirtualibräry

Pri va te respondent i n i ts Answer8 averred that Letters Pa tent No. 14561 does not cover the substance Albendazole for nowhere in it does that
word a ppear; that even if the patent were to i nclude Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed it to
ma nufacture and market Impregon with Al bendazole as i ts known i ngredient; that there is no proof that i t pass ed off i n a ny way i ts veterinary
products as those of petitioner; tha t Letters Pa tent No. 14561 i s null a nd void, the application for the i ssuance thereof having been filed beyond the
one year period from the filing of a n application abroad for the same invention covered thereby, i n vi olation of Section 15 of Republic Act No. 165
(The Pa tent Law); a nd that petitioner is not the registered patent holder.

Pri va te respondent l odged a Counterclaim a gainst petitioner for such a mount of actual damages as may be proven; P1,000,000.00 i n moral
da mages; P300,000.00 i n exemplary damages; and P150,000.00 i n a ttorneys fees.

Fi nding for priva te respondent, the trial court rendered a Decision dated July 23, 1991,9 the di spositive portion of which re ads:

WHEREFORE, i n vi ew of the foregoing, plaintiffs complaint should be, as i t is hereby, DISMISSED. The Writ of i njunction issued i n connection with
the ca s e is hereby ordered DISSOLVED.

The Letters Patent No. 14561 i ssued by the then Philippine Pa tents Office is hereby declared null and void for being in violation of Sections 7, 9 a nd
15 of the Pa tents Law.

Purs uant to Sec. 46 of the Patents La w, the Director of Bureau of Pa tents is hereby directed to ca ncel Letters Patent No. 14561 i ssued to the
pl a intiff and to publish s uch ca ncellation in the Official Gazette.

Defendant Tryco Pharmaceutical Corporation is hereby a warded P330,000.00 a ctual damages a nd P100,000.00 a ttorneys fees a s pra yed for in its
counterclaim but s aid amount awarded to defendant is subject to the lien on correct payment of filing fees.

SO ORDERED. (Underscoring supplied)

On a ppeal, the Court of Appeals, by Decision of April 21, 1995,10 upheld the trial courts finding that private respondent was not liable for a ny
i nfri ngement of the patent of petitioner i n light of the latters failure to s how that Albendazole is the same as the compound subject of Letters
Pa tent No. 14561. Noti ng petitioners admission of the i ssuance by the U.S. of a patent for Al bendazole i n the name of Smith Kline and French
La boratories which was petitioners former corporate name, the appellate court considered the U.S. patent a s implying that Albendazole is different
from methyl 5 propylthio-2-benzimidazole carbamate. It l ikewise found that private respondent was not guilty of deceiving the public by
mi s representing that Impregon is i ts product.

The a ppellate court, however, declared that Letters Pa tent No. 14561 wa s not void as it s ustained petitioners explanation that Pa tent Application
Seri al No. 18989 which was filed on October 8, 1976 wa s a divisional a pplication of Patent Application Serial No. 17280 fi led on June 17, 1975 wi th
the Phi lippine Pa tent Office, well within one year from petitioners filing on June 19, 1974 of i ts Foreign Application Pri ority Data No. 480,646 i n the
U.S. coveri ng the same compound subject of Pa tent Application Serial No. 17280.

Appl yi ng Section 17 of the Patent Law, the Court of Appeals thus ruled that Pa tent Application Serial No. 18989 was deemed filed on June 17, 1995
or s ti ll within one year from the filing of a patent a pplication a broad in compliance with the one-year rule under Section 15 of the Patent Law. And
i t rejected the submission that the compound i n Letters Patent No. 14561 wa s not patentable, citing the jurisprudentially established presumption
tha t the Pa tent Offices determination of patentability is correct. Finally, it ruled that petitioner established i tself to be the one a nd the same
a s signee of the patent notwithstanding changes in its corporate name. Thus the a ppellate court disposed:

WHEREFORE, the judgment appealed from i s AFFIRMED with the MODIFICATION that the orders for the nullification of Letters Pa te nt No. 14561
a nd for i ts ca ncellation are deleted therefrom.
SO ORDERED.

Peti ti oners motion for reconsideration of the Court of Appeals decision havi ng been denied11 the present petition for revi ew on certiorari12 was
fi l ed, a ssigning as errors the following:

I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCOS IMPREGON DRUG, IS
INCLUDED IN PETITIONERS LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT.

II. THE COURT OF APPEALS GRAVELY ERRED IN AWARD ING TO PRIVATE RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL
DAMAGES AND P100,000.00 ATTORNEYS FEES.

Peti ti oner a rgues that under the doctrine of equivalents for determining patent i nfringement, Albendazole, the a ctive i ngredi ent i t alleges was
a ppropriated by pri vate respondent for its drug Impregon, is s ubstantially the same a s methyl 5 propylthio -2-benzimidazole ca rbamate covered by
i ts patent since both of them a re meant to combat worm or parasite infestation in animals. It cites the unrebutte d testimony of i ts witness Dr.
Godofredo C. Ori nion (Dr. Ori nion) that the chemical formula i n Letters Pa tent No. 14561 refers to the compound Albendazole. Petitioner adds that
the two s ubstances s ubstantially do the same function i n s ubstantially the s ame way to a chieve the same results, thereby ma king them truly
i dentical. Petitioner thus submits that the appellate court should have gone beyond the literal wordings used i n Letters Pate nt No. 14561, beyond
merely a pplying the literal infringement test, for i n s pite of the fact that the word Albendazole does not appear in petitioners letters patent, it has
a bl y s hown by evi dence i ts sameness with methyl 5 propylthio-2-benzimidazole carbamate.

Peti ti oner l ikewise points out that i ts application with the Philippine Pa tent Office on a ccount of which i t was gra nted Letters Pa tent No. 14561 was
merely a divisional application of a prior a pplication i n the U. S. which gra nted a patent for Albendazole. Hence, petitioner concludes that both
methyl 5 propylthio-2-benzimidazole ca rbamate a nd the U.S.-patented Albendazole a re dependent on each other and mutually contribute to
produce a single result, thereby making Albendazole a s much a part of Letters Pa tent No. 14561 a s the other substance is.

Peti ti oner concedes in its Sur-Rejoinder13 tha t although methyl 5 propylthio-2-benzimidazole ca rbamate is not i dentical with Albendazole, the
former i s a n improvement or i mproved version of the latter thereby making both s ubstances still s ubstantially the same.

Wi th respect to the award of actual damages in fa vor of private respondent i n the a mount of P330,000.00 representing lost pro fits, petitioner
a s sails the same as highly s peculative and conjectural, hence, wi thout basis. It assails too the a ward of P100,000.00 i n a ttorneys fees as not falling
under a ny of the instances enumerated by l aw where recovery of a ttorneys fees is allowed.

In i ts Comment,14 pri vate respondent contends that a pplication of the doctrine of equivalents would not alter the outcome of the case,
Al bendazole a nd methyl 5 propylthio-2-benzimidazole ca rbamate being two different compounds with different chemical and physical properties.
It s tresses that the existence of a s eparate U.S. patent for Albendazole indicates that the same and the compound in Letters Pa tent No. 14561 a re
di fferent from each other; and that since i t was on account of a divisional a pplication that the patent for methyl 5 propyl thio-2-benzimidazole
ca rba mate was issued, then, by definition of a divisional application, such a compound is just one of s everal independent i nventions alongside
Al bendazole under petitioners original patent a pplication.

As ha s repeatedly been held, only questions of law may be ra ised in a petition for review on certiorari before this Court. Un less the factual findings
of the a ppellate court are mistaken, absurd, s peculative, conjectural, conflicting, tainted wi th grave abuse of discretion, o r contrary to the fi ndings
cul l ed by the court of origin,15 this Court does not review them.

From a n examination of the evidence on record, this Court fi nds nothing infirm i n the a ppellate courts conclusions with respect to the principal
i s sue of whether private respondent committed patent infringement to the prejudice of petitioner.

The burden of proof to s ubstantiate a charge for patent infringement rests on the plaintiff.16 In the case at bar, petitioners evidence consists
pri ma rily of i ts Letters Pa tent No. 14561, a nd the testimony of Dr. Ori nion, i ts general manager in the Philippines for i ts A nimal Health Products
Di vi sion, by which it s ought to s how that its patent for the compound methyl 5 propylthio-2-benzimidazole carbamate also covers the substance
Al bendazole.

From a rea ding of the 9 cl aims of Letters Pa tent No. 14561 i n relation to the other portions thereof, no mention is made of the compound
Al bendazole. All that the claims disclose are: the covered invention, that i s, the compound methyl 5 propylthio-2-benzimidazole carbamate; the
compounds being anthelmintic but nontoxic for a nimals or i ts a bility to destroy parasites without harming the host animals; a nd the patented
methods, compositions or preparations involving the compound to maximize its efficacy a gainst certain kinds of parasites i nfe cting s pecified
a ni mals.

When the l anguage of its claims i s clear and distinct, the patentee is bound thereby a nd may not claim anything beyond them.17 And s o a re the
courts bound which may not a dd to or detract from the cl aims matters not expressed or necessarily i mplied, nor may they enlarge the patent
beyond the scope of that which the i nventor claimed and the patent office a llowed, even if the patentee may have been entitled t o something
more tha n the words it had chosen would include.18cräläwvi rtualibräry

It bea rs stressing that the mere absence of the word Al bendazole i n Letters Patent No. 14561 i s not determinative of Albendazoles non -inclusion i n
the cl aims of the patent. While Albendazole is admittedly a chemical compound that exists by a name different from that cover ed i n petitioners
l etters patent, the language of Letter Pa tent No. 14561 fa ils to yield anything at a ll regarding Albendazole. And no extrinsic evidence had been
a dduced to prove that Albendazole inheres in petitioners patent in s pite of its omission therefrom or that the meaning of the claims of the patent
embra ces the same.

Whi le petitioner concedes that the mere literal wordings of its patent ca nnot establish priva te respondents i nfringement, it urges this Court to
a pply the doctrine of equivalents.

The doctri ne of equivalents provides that an infringement also ta kes place when a device appropriates a prior i nvention by i ncorporating i ts
i nnovative concept and, although with s ome modification a nd change, performs substantially the same function i n substantially the same way to
a chi eve s ubstantially the same result.19 Yet again, a scrutiny of petitioners evidence fails to convince this Court of the s ubstant ial s ameness of
peti tioners patented compound and Albendazole. While both compounds have the effect of neutralizing parasites in animals, identity of result
does not amount to infringement of patent unless Al bendazole operates i n substantially the same way or by s ubstantially the s ame means as the
pa tented compound, even though it performs the same function a nd a chieves the same result.20 In other words, the principle or mode of
opera tion must be the same or s ubstantially the same.21cräläwvirtualibräry

The doctri ne of equivalents thus requires satisfaction of the function-means-and-result test, the patentee having the burden to show that all three
components of such equivalency test are met.22cräläwvirtualibräry

As s ta ted early on, petitioners evidence fails to explain how Albendazole is in every essential detail i dentical to methyl 5 propylthio-2-
benzimidazole ca rbamate. Apart from the fact that Albendazole is an anthelmintic a gent l ike methyl 5 propylthio-2-benzimidazole carbamate,
nothi ng more i s asserted and a ccordingly s ubstantiated regarding the method or means by which Al bendazole weeds out parasites in a nimals, thus
gi vi ng no information on whether that method is s ubstantially the same as the ma nner by which petitioners compound works. The testimony of Dr.
Ori ni on lends no support to petitioners cause, he not havi ng been presented or qualified as an expert witness who has the kn owledge or expertise
on the ma tter of chemical compounds.

As for the concept of divisional applications proffered by petitioner, i t comes i nto play when two or more inventions a re cla imed in a single
a pplication but a re of such a nature that a single patent may not be issued for them.23 The applicant thus is required to divide, that i s, to limit the
cl a ims to whichever invention he may elect, whereas those i nventions not elected may be made the subject of s eparate applicat ions which are
ca l led divisional a pplications.24 What this only means i s that petitioners methyl 5 propylthio -2-benzimidazole ca rbamate i s an i nvention distinct
from the other i nventions claimed in the original application divi ded out, Albendazole being one of those other inventions. O therwise, methyl 5
propyl thio-2-benzimidazole ca rbamate would not have been the s ubject of a divisional a pplication if a single patent could have been i ssued for it as
wel l as Al bendazole.

The foregoing discussions notwithstanding, this Court does not sustain the award of actual damages and attorneys fees i n favor of private
res pondent. The cl aimed a ctual damages of P330,000.00 representing l ost profits or revenues i ncurred by pri vate respondent as a result of the
i s suance of the i njunction a gainst it, computed at the ra te of 30% of its alleged P100,000.00 monthly gross sales for eleven months, were
s upported by the testimonies of priva te respondents President25 and Executive Vice-President that the a verage monthly sale of Impregon was
P100,000.00 a nd that sales plummeted to zero after the issuance of the i njunction.26 While i ndemnification for actual or compensatory da mages
covers not only the loss suffered (damnum emergens) but also profits which the obligee failed to obtain (lucrum cessans or ga nacias frustradas), it
i s necessary to prove the a ctual amount of damages with a reasonable degree of certainty based on competent proof a nd on the best evidence
obta inable by the injured party.27 The testimonies of private respondents officers a re not the competent pro of or best evidence obtainable to
es tablish i ts ri ght to a ctual or compensatory damages for such damages a lso require presentation of documentary evi dence to s ubstantiate a claim
therefor.28crä läwvirtualibräry

In the s ame vein, this Court does not s ustain the gra nt by the a ppellate court of a ttorneys fees to private respondent anchored on Arti cle 2208 (2)
of the Ci vi l Code, private respondent having been allegedly forced to l itigate as a result of petitioners suit. Even if a cl aimant is compelled to litigate
wi th third persons or to i ncur expenses to protect i ts rights, still attorneys fees may not be awarded where no sufficient s howing of bad faith could
be refl ected in a partys persistence in a case other than a n erroneous conviction of the righteousness of his ca use.29 There exists no evidence on
record i ndicating that petitioner was moved by malice in suing private respondent.

Thi s Court, however, grants priva te respondent temperate or moderate damages in the a mount of P20,000.00 whi ch i t finds reasonable under the
ci rcums tances, it having suffered s ome pecuniary l oss the amount of which ca nnot, from the nature of the case, be established with
certa i nty.30cräläwvirtualibräry

WHEREFORE, the assailed decision of the Court of Appeals i s hereby AFFIRMED with MODIFICATION. The a ward of a ctual or compensatory
da mages and attorneys fees to private respondent, Tryco Pharma Corporation, is DELETED; i nstead, i t is hereby a warded the a mo unt of P20,000.00
a s temperate or moderate damages.

SO ORDERED.

Puno, (Cha irman), Pa nganiban, Sandoval-Gutierrez, a nd Corona, JJ., concur.

FIRST DIVISION
[G.R. No. 113388. September 5, 1997]
ANGELITA MANZANO, Petitioner, v. COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY MANUFACTURING
CORPORATION, Respondents.

DE CI SI ON

BELLOSILLO, J.:

The pri mary purpose of the patent system is not the reward of the individual but the a dvancement of the a rts and sciences. Th e function of a
pa tent i s to add to the sum of useful knowledge a nd one of the purposes of the patent system is to encourage dissemination of i nformation
concerning discoveries and inventions. This is a matter which is properly wi thin the competence of the Pa tent Office the offi cial action of which has
the presumption of correctness and may not be interfered with i n the absence of new evidence carryi ng thorough conviction tha t the Office has
erred. Si nce the Pa tent Office is an expert body preeminently qualified to determine questions of patentability, i ts findings must be a ccepted if they
a re consistent with the evidence, with doubts as to patentability resolved i n favor of the Patent Office.1chanroblesvi rtualla wlibrary

Peti ti oner Angelita Ma nzano filed with the Philippine Pa tent Office on 19 February 1982 a n a ction for the ca ncellation of Letters Pa tent No. UM-
4609 for a ga s burner registered in the name of respondent Melecia Ma dolaria who subsequently a ssigned the l etters patent to New United
Foundry a nd Ma nufacturing Corporation (UNITED FOUNDRY, for brevity). Petitioner alleged that (a) the utility model covered by the l etters patent,
i n thi s case, an LPG gas burner, was not inventive, new or useful; (b) the s pecification of the l etters patent did not comply with the requirements of
Sec. 14, RA No. 165, a s a mended; (c) respondent Melecia Ma dolaria was not the original, true a nd a ctual inventor nor did s he derive her ri ght s
from the ori ginal, true a nd a ctual inventor of the utility model covered by the l etters patent; and, (d) the l etters patent w as secured by means of
fra ud or misrepresentation. In support of her petition for cancellation petitioner further alleged that (a) the utility model covered by the letters
pa tent of respondent had been known or used by others i n the Philippines for more than one (1) year before s he filed her a pplication for letters
pa tent on 9 December 1979; (b) the products which were produced in accordance with the utility model covered by the letters p atent had been in
public use or on sale in the Philippines for more than one (1) year before the application for patent therefor was filed.

Peti ti oner presented the following documents which she correspondingly marked as exhibits: (a) affidavi t of petitioner a llegi ng the existence of
pri or a rt, marked Exh. A; (b) a brochure distributed by Ma nila Gas Corporation disclosing a pictorial representation of Ransome Burner ma de by
Ra nsome Torch and Burner Company, USA, ma rked Exh. D; a nd, (c) a brochure distributed by Es so Gasul or Esso Standard Eastern, Inc., of the
Phi l ippines s howing a picture of another s imilar burner with top elevation view and a nother perspective vi ew of the same burner, marked Exh. E .

Tes tifying for herself petitioner narra ted that her husband Ong Bun Tua worked as a helper in the UNITED FOUNDRY where respon dent Melecia
Ma dolaria used to be affiliated with from 1965 to 1970; tha t Ong helped i n the casting of an LPG burner which was the same ut ility model of a
burner for which Letters Patent No. UM-4609 wa s issued, a nd that a fter her husbands separation from the s hop she organized Besco Metal
Ma nufacturing (BESCO METAL, for brevity) for the casting of LPG burners one of which had the configuration, form a nd componen t parts similar to
thos e being manufactured by UNITED FOUNDRY. Petitioner presented in evi dence a n alleged model of a n LPG burner ma rked Exh. K a nd covered
by the Letters Pa tent of respondent, a nd testified that it was given to her i n January 1982 by one of her customers who allegedly a cquired i t from
UNITED FOUNDRY. Petitioner also presented in evi dence her own model of an LPG burner called Ransome burner marked Exh. L, which was
a l legedly manufactured i n 1974 or 1975 a nd s old by her in the course of her business operation i n the name of BESCO METAL. Pe titioner claimed
tha t thi s Ransome burner (Exh. L) had the same configuration and mechanism a s that of the model which was patented in fa vor of private
res pondent Melecia Madolaria. Also presented by petitioner was a burner cup of a n i mported Ransome burner marked Exh M whi ch was allegedly
exi s ting even before the patent application of private respondent.

Peti ti oner presented two (2) other witnesses, namely, her husband Ong Bun Tua a nd Fidel Francisco. Ong testified that he worked as a helper in the
UNITED FOUNDRY from 1965 to 1970 where he helped in the ca sting of LPG burners with the same form, configuration a nd mechanism as that of
the model covered by the Letters Pa tent issued to private respondent. Francisco testified that he had been employed with the Ma nila Gas
Corpora tion from 1930 to 1941 a nd from 1952 up to 1969 where he retired a s supervisor a nd that Ma nila Gas Corporation imported Ransome
burners way back in 1965 which were advertised through brochures to promote their sale.

Pri va te respondent, on the other hand, presented only one witness, Rolando Ma dolaria, who testified, a mong others, that he was the General
Supervisor of the UNITED FOUNDRY i n the foundry, machine and buffing section; that in his early years with the company, UNITE D FOUNDRY was
enga ged in the manufacture of different kinds of gas s toves as well as burners based on sketches and specifications furnished by customers; that
the company ma nufactured early models of single-piece types of burners where the mouth and throat were not detachable; that in the latter part
of 1978 res pondent Melecia Ma dolaria confided i n him that complaints were being brought to her attention concerning the early models being
ma nufactured; that he was then i nstructed by private respondent to ca st several experimental models based on revised s ketches a nd
s pecifications; that private respondent a gain made some innova tions; that after a few months, priva te respondent discovered the s olution to a ll
the defects of the earlier models a nd, based on her l atest s ketches a nd s pecifications, he was able to cast several m odels incorporating the
a dditions to the i nnovations introduced i n the models. Va rious tests were conducted on the l atest model in the presence and u nder the supervision
of Mel ecia Ma dolaria and they obtained perfect results. Rolando Ma dolaria testified that priva te respondent decided to file her a pplication for
uti l ity model patent in December 1979.

On 7 Jul y 1986 the Di rector of Patents Cesar C. Sa ndiego i ssued Decision No. 86-56 denying the petition for cancellation and holding that the
evi dence of petitioner was not able to establish convincingly that the patented utility model of private respondent was anticipated. Not one of the
va ri ous pictorial representations of business cl early a nd convincingly showed that the devices presented by petitioner was id entical or s ubstantially
i dentical with the utility model of the respondent. The decision also s tated that even assuming that the brochures depicted clearly each a nd every
el ement of the patented gas burner devi ce so that the prior art a nd patented device became identical although i n truth they w ere not, they could
not s erve as anticipatory bars for the reason that they were undated. The dates when they were distributed to the public were not indicated a nd,
therefore, were useless prior a rt references. The records a nd evidence also do not support the petitioners contention that Le tters Pa tent No. UM-
4609 wa s obtained by means of fraud and/or misrepresentation. No evidence whatsoever was presented by petitioner to show that t he then
a pplicant Melecia Ma dolaria withheld with intent to deceive material facts which, i f disclosed, would have resulted i n the refusal by the Philippine
Pa tent Office to issue the Letters Pa tent under inquiry.

Peti ti oner elevated the decision of the Director of Pa tents to the Court of Appeals which on 15 October 1993 a ffirmed the decision of the Director
of Pa tents. Hence, this petition for review on certiorari alleging that the Court of Appeals erred (a) i n relyi ng on imaginary di fferences which in
a ctua lity di d not exist between the model of private respondent covered by Letters Pa tent No. UM-4609 a nd the previously known model of Esso
Sta ndard Eastern, Inc., and Ma nila Gas Corporation, making such imaginary di fferences grounded entirely on speculation, surmi ses a nd
conjectures; (b) i n rendering judgment based on misapprehension of facts; (c) i n relying mainly on the testimony of private respondents sole
wi tness Rolando Ma dolaria; and, (d) i n not ca nceling Letters Pa tent No. UM-4609 i n the name of private respondent.

Peti ti oner s ubmits that the differences cited by the Court of Appeals between the utility model of private respondent a nd the models of Manila Gas
Corpora tion and Esso Standard Eastern, Inc., are more i maginary than real. She alleges that based on Exhs. E, E -1, F a nd F-1 or the brochures of
Ma ni la Gas Corporation and Esso Standard Eastern, Inc., presented by petitioner, the cup-shaped burner mouth and threaded hole on the side are
s hown to be similar to the utility model of private respondent. The exhibits also show a detachable burner mouth having a plu rality of upwardly
exi s ting undulations adopted to act as gas passage when the cover i s attached to the top of said cup-shaped mouth all of which are the same as
thos e i n the patented model. Petitioner a lso denies a s substantial difference the s hort cyl indrical tube of the burner mouth appearing i n the
brochures of the burners being s old by Ma nila Gas Corporation a nd the long cyl indered tube of private respondents model of the gas burner.

Peti ti oner a rgues that the actual demonstration made during the hearing disclosed the similarities in form, operation and mec hanism a nd parts
between the utility model of private respondent and those depicted i n the brochures. The findings of the Patent Office and th e Court of Appeals
tha t the brochures of Ma nila Gas Corporation and Esso Standard Eastern, Inc., a re undated cannot overcom e the fact of their circulation before
pri va te respondent filed her application for utility model patent. Petitioner thus a sks this Court to ta ke judicial notice of the fa ct that Esso Standard
Ea s tern, Inc., disappeared before 1979 a nd reappeared only during the Ma rtial Law years as Petrophil Corporation. Petitioner also emphasizes that
the brochures i ndicated the telephone number of Ma nila Gas Corporation as 5-79-81 which is a five (5) numbered telephone number existing
before 1975 because telephones in Me tro Ma nila s tarted to have six (6) numbers only a fter that year.

Peti ti oner further contends that the utility model of private respondent is absolutely similar to the LPG burner being sold b y petitioner i n 1975 a nd
1976, a nd a lso to the Ransome burner depicted i n the old brochures of Manila Gas Corporation a nd Esso Standard Eastern, Inc., fabricated by
Ra nsome Torch and Burner Company of Oa kland, Ca lifornia, USA, especially when considered through a ctual physical examination, assembly a nd
di s assembly of the models of petitioner a nd private respondent. Petitioner faults the Court of Appeals for disregarding the testimonies of Ong Bun
Tua a nd Fidel Francisco for their failure to produce documents on the a lleged i mportation by Ma nila Gas Corporation of Ransom e burners in 1965
whi ch had the same configuration, form a nd mechanism as that of the private respondents patented model.

Fi nally, i t is argued that the testimony of private respondents l one witness Rolando Ma dolaria should not have been given wei ght by the Pa tent
Offi ce a nd the Court of Appeals because i t contained mere after-thoughts a nd pretensions.

We ca nnot s ustain petitioner. Section 7 of RA No. 165, a s a mended, which is the law on patents, expressly provi des -

Sec. 7. Inventions patentable. Any i nvention of a new a nd useful machine, manufactured product or s ubstance, process or a n improvement of a ny
of the foregoing, shall be patentable.

Further, Sec. 55 of the s ame law provi des -

Sec. 55. Des ign patents and patents for utility models. - (a) Any new, original a nd ornamental design for a n article of manufacture a nd (b) any new
model of implements or tools or of a ny i ndustrial product or of part of the same, which does not possess the quality of invention, but which is of
pra cti cal utility by reason of its form, configuration, construction or composition, may be protected by the author thereof, the former by a patent
for a design a nd the latter by a patent for a utility model, i n the same manner and subject to the same provisions a nd requirements as relate to
pa tents for inventions insofar as they a re a pplicable except as otherwise herein provi ded.

The el ement of novelty is a n essential requisite of the patentability of an i nvention or discovery. If a devi ce or process ha s been known or used by
others prior to i ts i nvention or discovery by the applicant, a n a pplication for a patent therefor should be denied; and if the a ppli cation has been
gra nted, the court, in a judicial proceeding in which the validity of the patent is drawn i n question, will hold i t void a nd ineffective.2 It has been
repeatedly held that an i nvention must possess the essential elements of novelty, originality a nd precedence, a nd for the pat entee to be entitled to
the protection the i nvention must be new to the world.3chanroblesvirtuallawlibrary

In i ssuing Letters Pa tent No. UM-4609 to Melecia Madolaria for a n LPG Burner on 22 Jul y 1981, the Philippine Pa tent Office found her invention
novel and patentable. The issuance of such patent creates a presumption which yi elds only to cl ear a nd cogent evi dence that the patentee was the
ori gi nal a nd first inventor. The burden of proving want of novelty is on him who avers it a nd the burden is a heavy one which is met only by cl ear
a nd s atisfactory proof which overcomes every reasonable doubt.4 Hence, a utility model shall not be considered new if before the application for a
pa tent i t has been publicly known or publicly used i n this country or ha s been described i n a printed publication or publications circulated within
the country, or i f i t is substantially similar to a ny other utility model s o known, used or described within the country.5chanroblesvirtuallawlibrary

As found by the Director of Pa tents, the standard of evidence sufficient to overcome the presumption of legality of the i ssua nce of UM-4609 to
res pondent Ma dolaria was not l egally met by petitioner in her action for the cancellation of the patent. Thus the Director of Pa tents explained his
rea s ons for the denial of the petition to ca ncel private respondents patent -

Scruti ny of Exhs. D a nd E rea dily reveals that the utility model (LPG Burner) is not a nticipated. Not one of the va rious pictorial represent ations of
burners clearly a nd convincingly s how that the device presented therein is i dentical or substantially i dentical i n construction with the aforesaid
uti l ity model. It i s relevant and material to s tate that i n determining whether novelty or newness is negatived by a ny prior a rt, only one item of the
pri or a rt may be used at a time. For anticipation to occur, the prior art must show that each element i s found either expressly or described or under
pri nciples of inherency i n a single prior a rt reference or that the cl aimed i nvention was probably known in a single prior a rt device or practice.
(Ka l man v. Ki mberly Cl ark, 218 USPQ 781, 789)

Even a ssuming gratia arguendi that the aforesaid brochures do depict cl early on a ll fours each a nd every element of the patented gas burner device
s o tha t the prior a rt and the said patented device become identical, a lthough i n truth they a re not, they ca n not s erve as a nticipatory ba rs for the
rea s on that they a re undated. The dates when they were distributed to the public were not i ndicated a nd, therefore, they a re useless prior art
references.

xxxx

Furthermore, and more s ignificantly, the model marked Exh. K does not s how whether or not it was manufactured and/or cast before the
a pplication for the issuance of patent for the LPG burner was filed by Mel ecia Ma dolaria.

Wi th respect to Exh. L, petitioner claimed it to be her own model of LPG burner a llegedly ma nufactured sometime i n 1974 or 1975 a nd s old by her
i n the course of her business operation i n the name of Besco Metal Ma nufacturing, which burner was denominated as Ransome bur ner
xxxx

But a ca reful examination of Exh. L would show that i t does not bear the word Ransome which is the burner referred to as the product being sold
by the Peti tioner. This i s not the way to prove that Exh. L a nticipates Letters Pa tent No. UM-4609 through Exhs. C a nd D. Another factor working
a ga inst the Petitioners claims is that a n examination of Exh. L would disclose that there is no indication of the time or date it was manufactured.
Thi s Office, thus has no way of determining whether Exh. L wa s really manufactured before the filing of the aforesaid applica tion which matured
i nto Letters Pa tent No. UM-4609, s ubject ma tter of the cancellation proceeding.

At thi s juncture, i t is worthwhile to point out that petitioner a lso presented Exh. M whi ch is the alleged burner cup of a n i mported Ransome burner.
Aga i n, this Office finds the same as unreliable evidence to s how a nticipation. It observed that there is no date indicated therein as to when i t was
ma nufactured a nd/or i mported before the filing of the a pplication for issuance of patent of the subject utility model. What i s more, some
component parts of Exh. M a re missing, as only the cup was presented so that the s ame could not be compared to the utility mo del (subject matter
of thi s ca se) which consists of several other detachable parts in combination to form the complete LPG burner.

xxxx

It mus t l ikewise be pointed out that Ong Bun Tua testified on the brochures a llegedly of Ma nila Gas a nd of Esso Gasul marked Exhs. E a nd F and on
the a lleged fact that Ma nila Gas Corporation was importing from the United States Ransome burners. But the s ame could not be given credence
s i nce he himself a dmitted during cross- examination that he has never been connected with Ma nila Gas Corporation. He could not even present
a ny i mportation papers relating to the alleged imported ransome burners. Neither did his wife.6chanroblesvirtuallawlibrary

The a bove findings and conclusions of the Director of Pa tent were reiterated and affirmed by the Court of Appeals.7chanrobles virtuallawlibrary

The va l idity of the patent issued by the Philippine Pa tent Office in favor of private respondent and the question over the inventiveness, novelty and
us efulness of the i mproved model of the LPG burner a re matters which are better determined by the Pa tent Office. The technica l staff of the
Phi l ippine Pa tent Office composed of experts i n their field has by the issuance of the patent i n question a ccepted private respondents model of gas
burner as a discovery. There is a presumption that the Office has correctly determined the patentability of the model8 a nd s uch a ction must not be
i nterfered with in the absence of competent evidence to the contrary.

The rul e is s ettled that the findings of fa ct of the Director of Patents, especially when a ffirmed by the Court of Appeals, a re conclusive on this Court
when s upported by s ubstantial evidence. Petitioner has failed to s how compelling grounds for a reversal of the findings a nd conclusions of t he
Pa tent Office a nd the Court of Appeals.

The a lleged failure of the Director of Pa tents and the Court of Appeals to a ccord evidentiary weight to the testimonies of the witnesses of
peti tioner s howing anticipation is not a justification to grant the petition. Pursuant to the requirement of cl ear and convi ncing evidence to
overthrow the presumption of validity of a patent, it has been held that oral testimony to s how a nticipation is open to suspicion and if
uncorroborated by cogent evidence, as what occurred i n this case, it may be held insufficient.9chanroblesvirtuallawlibrary

Fi nally, petitioner would want this Court to revi ew all over again the evi dence s he presented before the Pa tent Office. She argues that contrary to
the decision of the Pa tent Office and the Court of Appeals, the evidence s he presented clearly proves that the patented model of priva te
res pondent i s no longer new a nd, therefore, fraud attended the a cquisition of patent by private respondent.

It ha s been held that the question on priority of invention is one of fact. Novelty a nd utility a re likewise questions of fac t. The validity of patent is
deci ded on the basis of factual inquiries. Whether evi dence presented comes within the scope of prior art i s a factual issue to be resolved by the
Pa tent Office.10 There is question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query
necessarily i nvi tes ca libration of the whole evidence considering mainly the credibility of witnesses, existence a nd relevanc e of specific surrounding
ci rcums tances, their relation to each other and to the whole and the probabilities of the s ituation.11chanroblesvirtuallawlibrary

Ti me a nd a gain we have held that i t is not the function of the Supreme Court to a nalyze or weigh all over a gain the evidence a nd credibility of
wi tnesses presented before the l ower tri bunal or office. The Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing a nd revising
errors of law i mputed to the l ower court, i ts fi ndings of fact being conclusive and not reviewable by this Court.

WHEREFORE, the Petition i s DENIED. The Decision of the Court of Appeals a ffirming that of the Philippine Pa tent Office is AFFIRMED. Costs against
peti tioner.

SO ORDERED.

Vi tug, Ka punan, a nd Hermosisima, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-27793 March 15, 1928
PATRICK HENRY FRANK and WILLIAM HENRY GOHN, plaintiff-appellees,
vs.
CONSTANCIO BENITO, defendant-appellant.

STATEMENT

Pl a intiffs allege that they a re the owners of a patent covering hemp-stripping machine No. 1519579 i s sued to them by the United States Patent
Offi ce of December 16, 1924, a nd duly registered in the Bureau of Commerce a nd Industry of the Philippine Islands under the p rovisions of Act No.
2235 of the Phi lippine Legislature on Ma rch 17, 1925. Tha t the i mportant feature of the machine "is a spindle upon which the hemp to be stripped
i s wound in the process of s tripping." That plaintiffs have for s ome ti me been manufacturing the machine under the patent. That the defendant
ma nufactured a hemp-stripping machine in which, without a uthority from the plaintiffs, he has embodied and used such spindles a nd their method
of a pplication and use, and is exhibiting his machine to the public for the purpose of i nducing i ts purchase. That the use by the defendant of such
s pi ndles and the principle of their application to the stripping of hemp is i n vi olation of, and in conflict with, plaintiffs ' patent, together with its
condi tions and specifications. That the defendant's machine is an infringement upon th e patent granted the plaintiffs, a nd plaintiffs pray for an
i njunction that the defendant be required to account to plaintiffs for any profits he may have ma de by reason of such infringement, a nd for a
temporary i njunction restraining him i n the manufacture of other machines of the same kind of its exhibition, a nd that upon the final hearing, the
i njunction be made permanent.

The defendant demurred to the complaint upon the ground that the facts alleged therein do not constitute a cause of action, t hat it is a mbiguous
a nd va gue, a nd that i t was error to make William Henry Gohn plaintiff.

After the demurrer was overruled, the defendant filed an a nswer i n which he denied a ll of the material allegations of the com plaint, except those
whi ch are hereinafter a dmitted, and as a special defense alleges:

Fi rs t. That the defendant has never had a t any ti me nor does he have any knowledge of any suppose i nvention of the plaintiffs of whatever kind of
hemp-stripping machine, whether patented or not, which has circulated or not i n the Philippine Islands for the sale thereof or i ts private
expl oitation.

Second. That not havi ng had any knowledge of any ki nd of hemp-stripping machine supposed to have been i nvented by the plaintiffs, it never
occurred to the defendant to imitate the unknown invention of the plaintiffs.

Thi rd. That the hemp-stripping machine of the plaintiffs, known as "La Constancia," patent of which is duly registered, has i ts characteristics and
ori gi nal i nvention belonging to the defendant which consist of two pinions with horizontal grooves whi ch form the tool for extracting the fibers
between a straight knife upon another which is cyl indrical and provided with teeth and on the center of said two pinions there i s a flying wheel i ts
tra ns mission belt connecting i t with the motor.

As a counterclaim, the defendant a lleges:

Fi rs t. That he reproduces in this paragraph each and every a llegation contained in the preceding special defense, as though t he same were literally
copi ed here.

Second. That by the filing of the complaint of the plaintiffs and the issuance, as a consequence thereof, of a writ of i njunction in this case, unduly
obta ined by the said plaintiffs through false a nd fra udulent representations, the defendant has suffered damages in the s um o f five thousand pesos
(P5,000), Phi lippine currency.

Wherefore, the defendant prays this court that he be absolved from the herein complaint, a nd that the plaintiffs be ordered j ointly a nd severally to
pa y the s um of five thousand pesos (P5,000), Philippine currency, a s damages, with l egal interest thereon from the filing of this action until fully
pa i d; with the costs of this ca se, as well as any other remedy that ma y be proper in law and equity.

The l ower court rendered judgment in legal effect gra nting the plaintiffs the i njunction prayed for i n their complaint, and absolving them from
defendant's counterclaim, and judgment against the defendant for costs.

The defendant's motion for a new trial was overruled, and on a ppeal, he contends that the court erred i n holding the same spi ndles used by the
pa rti es in this case, though different i n material and form, have the s ame utility a nd efficiency a nd that they a re the s ame, a nd i n finding that
s pi ndles used by the defendant are a n imitation of those of the plaintiffs, and in finding that the defendant i nfringed upon plaintiffs' patent, and in
not rendering judgment against the plaintiffs, requiring them to pay defendant P5,000 a s damages, and i n enjoining the appellant from the
ma nufacture, use and sale of this hemp-stripping machine.

JOHNS, J.:

It i s conceded that on December 16, 1924, the Uni ted States Pa tent Office issued to the plaintiffs the patent in question No. 1519579, a nd i t was
dul y registered i n the Bureau of Commerce a nd Industry of the Philippine Islands on Ma rch 17, 1925. After s uch registration the patent laws, a s
they exi st i n the United States for s uch patent, a re then a pplied to a nd a re i n force and effect in the Philippine Islands. ( Vargas vs . F. M. Ya ptico &
Co., 40 Phi l ., 195.) In the i nstant case, the original patent is i n eviden ce, and that decision further holds that:

The burden of proof to s ubstantiate a charge of infringement is with the plaintiff. Where, however, the plaintiff i ntroduces the patent in evi dence,
i f i t i s i n due form, it a ffords a prima facie presumption of i ts correctness and va lidity. The decision of the Commissioner of Pa tents in granting the
pa tent i s always presumed to be correct. The burden the shifts to the defendant to overcome by competent evidence this legal presumption.

Tha t i s to say, the patent, which in the i nstant case is i n due form, having been i ntroduced i n evidence, "affords a prima facie presumption of i ts
correctness and validity." Hence, this i s not a ca se of a conflict between two different patents. In the recent of Temco Elec tric Motor Co. vs . Apco
Mfg. Co., deci ded by the Supreme Court of the United States on January 3, 1928, Adva nce Sheet No. 5, p. 192, the s yllabus says :
An i mproper ca nnot a ppropriate the basic patent of another, a nd if he does so without l icense is an infringer, a nd may be used as such.

And on pa ge 195 of the opinion, it is s aid:

It i s well established that a n improver ca nnot appropriate the basic patent of another a nd that the i mprover wi thout a licens e is a n i nfringer and
ma y be s ued as such.

Ci ti ng a number of Federal decisions.

The pl ans and specifications upon which the patent was issued recite:

Our i nvention relates to hemp s tripping machines a nd i t consists i n the combinations, constructions and arrangements herein d escribed a nd
cl a imed.

An object of our invention is to provi de a machine affording facilities whereby the operation of stripping hemp leaves may be a ccomplished
mecha nically, thereby obviating the s train incident to the performance of hemp stripping operations manually.

And on pa ge 3 of the application for patent, it is said:

Obvi ously, our i nvention i s susceptible of embodiment in forms other than the i llustrated herein and we therefore consider as our own a ll
modi fications of the form of device herein disclosed which fairly fall within the s pirit and scope of our i nvention as cl aimed.

We cl a im:

1. In a hemp stripping machine, a s tripping head having a s upporting portion on which the hemp leaves may rest a nd having als o a n upright bracket
porti on, a lever of a ngular formation pivotally a ttached substantially at the juncture of the arms thereof of the bracket portion of the stripping
hea d, whereby one a rm of the l ever overlies the supporting portion of the s tripping head, a blade ca rried by s aid one a rm of the l ever for
cooperating with said s upporting, means connected with the other arm of the lever and actuating the l atter to continously urge th e blade toward
s a id supporting portion of the stripping head, and a rotatable spindle positioned a djacent to said s tripping head, s aid s pindle being adapted to be
enga ged by hemp leaves extending a cross said s upporting portion of the s tripping head underneath said blade a nd being operabl e to draw said
hemp l eaves i n the direction of their l ength between said s upporting portion of the s tripping head a nd said blade.

2. In a hemp stripping machine, a s tripping head having a horizontal ta ble portion, a rest supported upon said ta ble portion, a s tripping knife
s upported upon the ta ble for movement into and out of position to cooperate with the rest to strip hemp leaves drawn between the knife and the
res t, a nd power driven means adapted to be engaged with said hemp leaves a nd to pull the latter between the knife a nd rest, s aid power driven
mea ns i ncluding a rotating s pindle, said s pindle being free at one end and tapering regularly toward its free end.

3. In a hemp stripping machine, a s tripping head having a horizontal ta ble portion and a n upright bracket portion a rest holder a djustably on the
ta bl e portion, a rest resiliently s upported by the holder, a knife carryi ng lever of a ngular formation and being pivotally a ttached substantially a t the
juncture of the arms thereof to the bracket portion of the s tripping head, whereby one arm of the lever overlies the rest, a blade a djustably
s upported on said one a rm, for cooperating with said rest a nd gravi ty means connected with the other a rm of the l ever a nd a ctuating the latter to
conti nously urge the blade toward the rest.

The s pindle upon which the patent was obtained, together with the spindle upon which the defendant relies a re exhibits in the record a nd were
before the court a t the time this case was a rgued. The spindle of the plaintiffs was made of wood, conical in s hape a nd with a smooth surface. That
of the defendant was somewhat similar i n shape, but was made of metal with rough surface, and the defendant cl aims that his spindle was more
effective and would do better work than that of the plaintiffs. Be that as it may, the plaintiffs have a patent for their ma c hine, a nd the defendant
does not have a patent, a nd the basic principle of plaintiffs' patent is the spindle upon which they rely, together with its spe cified manner and
mode of operation, and in the fi nal a nalysis, i t must be conceded that the basic principle of the s pindle upon which the defendant relies is founded
upon the basic pri nciple of the s pindle for which the plaintiffs have a patent. Assuming, without deciding, that the defendan t's s pindle is a n
i mprovement upon a nd is a better s pindle than that of the plaintiffs, yet, un der the a uthority above ci ted, the defendant had no l egal right to
a ppropriate the basic principle upon which the plaintiffs obtained their patent. The plaintiffs having obtained their patent, which was duly
regi stered in the Philippines Islands, the defen dant cannot i nfringe upon its basic principle.

The defendant contends that the basic principle of the s pindle was a very ol d one i n mechanics, a nd that there was nothing ne w or novel in the
a pplication of it by the plaintiffs. Be that as i t may, the plaintiffs applied for a nd obtained their patent with its specifications which a re attached to,
a nd made part of, the patent, a nd the proof is conclusive that the defendant is i nfringing upon the basic principle of the s pindle as i t is defined and
s pecified in plaintiffs' patent.

The judgment of the lower court is affirmed, with costs. So ordered.

Johnson, Ma lcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 14101 September 24, 1919
ANGEL VARGAS, plaintiff-appellant,
vs.
F. M. YAPTICO & CO. (Ltd.), defendant-appellee.

MALCOLM, J.:

Rude wooden implements for tilling the soil have been in use i n the Philippines, possibly not since the Israelites "went down to sharpen every ma n
hi s share a nd his coulter," but certainly for many years. Iron plows called "Urquijo" and "Pony" have latterly been the vogue .

Angel Vargas, a farmer acquainted with l ocal conditions a nd a live to the commercial possibilities, took i t upon himself to produce, with the native
pl ow as the model, an improved, a djustable plow. On July 22, 1910, he ma de application for a United States patent to cover hi s so-called invention.
On Ma rch 12, 1912, l etters patent were i ssued by the United States Patent Office in favor of Vargas .On April 24, 1912, a certi fied copy of the
pa tent was filed i n the Division of Pa tents, Copyri ghts, a nd Tra demarks of the Executive Bureau, Gove rnment of the Philippine Islands. The patent
a nd i ts registry was also published in the newspaper, El Tiempo.

Si nce 1910, Va rgas has engaged i n the manufacture of these plows i n the ci ty of Iloilo, Philippine Islands. On the plows there was first s tamped the
words "Pa tent Applied For," later after the patent had been granted, changed to "Patented Ma r. 12, 1912." Ni nety per cent of the plows in use i n
the Vi sayas (Iloilo a nd vi cinity) a re said to be Vargas plows.

Duri ng this same period, the fi rm of F. M. Ya ptico & Co. (Ltd.), wa s engaged in the foundry business i n the Ci ty of Iloilo. It openly held itself out as a
ma nufacturer of plow parts. It has i n fact produced points, s hares, s hoes, a nd heel pieces i n a considerable amount adapted t o replace worn-out
pa rts of the Vargas plow.

Such wa s the existing situation when, in the early part of 1918, the owner of the patent, and thus the proper party to i nstit ute judicial proceedings,
bega n action in the Court of First Instance of Iloilo to enjoin the alleged in fringement of U.S. Patent No. 1020232 by the defendant F. M Ya ptico &
Co. (Ltd.), a nd to recover the damages suffered by reason of this infringement. The court i ssued the preliminary i njunction a s prayed for. The
defendant, in a ddition to a general denial, alleged, as special defenses, that the patent l acked novelty or i nvention, that there was no priority of
i deas or device in the principle and construction of the plow, a nd that the plow, whose manufacture i t was sought to have enj oined by the plaintiff,
ha d a lready been in public use for more than two years before the application of the plaintiff for his patent. The parties subsequently entered i nto
a s ti pulation that the court should first resolve the question of whether or not there had been an infraction of the patent, reserving the resultant
question of damages for later decision. After the taking of evidence, i ncluding the presentation of exhibits, the tri al judge , the Honorable Antonio
Vi l lareal, i n a very exhaustive and learned decision, rendered jud gment i n favor of the defendant a nd a gainst the plaintiff, declaring null and
wi thout effect the patent in question and dismissing the suit with costs a gainst the plaintiff .The preliminary i njunction th eretofore issued was
di ssolved.

From thi s judgment the plaintiff has a ppealed, specifying five errors. The principal assignment No. 1 i s, that the trial court erred i n finding that the
pa tented invention of the plaintiff is lacking in novelty a nd i nvention. Defendant, in reply, relies on three propositions, namely: (1) The judgment of
the tri al court i n finding the patent gra nted plaintiff void for l ack of novelty a nd invention should be a ffirmed; (2) The pa tent granted plaintiff i s
voi d from the public use of his plow for over two years prior to his a pplication for a patent, a nd (3) If the patent is va lid, there has been no
contri butory i nfringement by defendant.

Before resolving these ri val contentions, we should have before us the relevant l aw. Act No. 2235 of the Philippine Legislature, enacted on
February 10, 1913, i n effect ma kes the United States Pa tent La ws applicable i n the Philippine Islands. It provides that "owne rs of patents, including
des ign patents, which have been issued or may hereafter be issued, duly registered in the United States Pa tent Office under the laws of the United
Sta tes relating to the grant of patents, s hall receive i n the Philippine Islands the protection accorded them in the United S tates under said laws."
(Sec. 1.) Turni ng to the United States Pa tent La ws, we fi nd the Act of Congress of Ma rch 3, 1897, a mendatory of s ection 4886 of the United States
Revi sed Statutes, reading as follows:

Any pers on who has invented or discovered a ny new a nd useful art, machine, manufacture, or composition of matter, or a ny ne w an useful
i mprovements thereof, not known or used by others i n this country, before his invention or discovery thereof, and not patente d or described in any
pri nted publication i n this or any foreign country, before his invention or discovery thereof, or more than two years prior to his a pplication, and not
i n public use or on sale i n this country for more than two years prior to his a pplication, unless the same i s proved to have been a bandoned, may
upon payment of the fees required by law, a nd other due proceeding had, obtain a patent therefor. (29 Stat. L., 692, 7 Fed .Stat. Ann. [2d Ed.], p.
23.)

When a patent is sought to be enforced, "the question of invention, novelty, or pri or use, and each of them, a re open to judi cial examination." The
burden of proof to substantiate a charge of infringement is with the plaintiff. Where, however, the plaintiff i ntroduces the patent i n evidence, if it is
i n due form, it a ffords a prima fa cie presumption of its correctness and va lidity. The decision of the Commissioner of Patents i n granting the patent
i s a lways presumed to be correct. The burden then s hifts to the defendant to overcome by competent evidence this legal presumption .With all
due respect, therefore, for the cri tical and expert examination of the invention by the United States Pa tent Office, the question of the va lidity of
the pa tent i s one for judicial determination, a nd since a patent has been submitted, the exact question is whether the defendant has assumed the
burden of proof as to anyone of his defenses. (See Agawan Co. vs . Jordan [1869], 7 Wa ll., 583; Bl anchard vs .Putnam [1869], 8 Wa ll., 420; Seymour
vs . Os borne [1871], 11 Wa ll., 516; Reckendorfer vs . Faber [1876], 92 U.S., 347; 20 R. C. L., 1112, 1168, 1169.)

As herein before stated, the defendant relies on three s pecial defenses. One such defense, on which the judgment of the lower court is principally
grounded, a nd to which a ppellant devotes the major portion of his vi gorous a rgument, concerns the element of novelty, i nventi on, or discovery,
tha t gi ves existence to the ri ght to a patent. On this point the tri al court reached the conclusion that "the patented plow of the plaintiff, Exhibit D,
i s not different from the native plow, Exhibit 2, except i n the material, in the form, i n the weight and the grade of the result, the said differences
gi vi ng it neither a new function nor a new result distinct from the function and the result obtained from the native plow; co nsequently, i ts
production does not presuppose the exercise of the i nventive faculty but merely of mechanical skill, which does not give a right to a patent of a n
i nvention under the provisions of the Pa tent La w." In thus finding, the court may ha ve been ri ght, since the Va rgas plow does not a ppear to be such
a "combination" as contains a novel assemblage of parts exhibiting invention. (See Stimpson vs . Woodman [1870], 10 Wa ll., 117 — rol lers; Hicks vs.
Kel s ey [1874], 20 Wa ll., 353 — s toves; Wa shburn & Moen Mfg. Co. vs . Beat 'Em All Barbed Wire Co. [1892], 143 U.S., 275 — ba rbed wire; Lynch vs
.Dryden [1873], C. D., 73 — wa l king cultiva tors; Torrey vs . Hancock [1910], 184 Fed., 61 — rota ry pl ows.)

A s econd l ine of defense relates to the fact that defendant has never made a complete Va rgas plow, but only points, shares, s hoes, and heel pieces,
to s erve as repairs. Defendant's contention is, that in common with other foundries, he has for years cast large numbers of p low points and shares
s ui table for use either on the native wooden plow, or on the Va rgas plow. A di fference has l ong been recognized between repairing and
recons tructing a machine. If, for i nstance, partial injuries, whether they occur from a ccident or from wear a nd tear, to a ma chine for agricultural
purposes, are made this is only re -fitting the machine for use, and thus permissible. (Wilson vs. Simpson [1850], 9 How., 109.) Even under the more
ri gorous doctrine of Leeds & Ca tlin Co. vs . Vi ctor Talking Machine Co. ([1909], 213 U.S., 325), i t ma y be possible that all t he defendant has done is
to ma nufacture and sell isolated parts to be used to replace worn-out parts.

The thi rd defense is, that under the provisions of the statute, an i nventor's creation must not have been in public use or on sale i n the United
Sta tes (and the Philippine Islands) for more than two years prior to his application .Without, therefore, committing ourselves as to the fi rst two
defenses, we propose to base our decision on the one just suggested as more easily disposing of the case. (See 20 R. C. L., 1 140-1142.) We do s o
wi th full consciousness of the doubt which a rose in the mind of the tri al court, but with the belief that since i t has been s hown that the i nvention
wa s used in public at Iloilo by others than Vargas, the inventor, more than two years before the application for the patent, the patent is i nvalid.

Al though we have spent some ti me i n a rriving at this point, yet having reached it, the question in the ca se is single and can be brought to a narrow
compa ss. Under the English Statute of Monopolies (21 Jac. Ch., 3), a nd under the United States Paten t Act of February 21, 1793, l a ter amended to
be a s herein quoted, it was always the rule, a s stated by Lord Coke, Justice Story a nd other a uthorities, that to entitle a m an to a patent, the
i nvention must be new to the world. (Pennock a nd Sellers vs . Dialogue [1829], 2 Pet., 1.) As s aid by the United States Supreme Court, "it has been
repeatedly held by this court that a single i nstance of public use of the i nvention by a patentee for more than two years bef ore the date of his
a pplication for his patent will be fatal to the va lidity of the patent when issued." (Worley vs . Lower Tobacco Co .[1882], 104 U. S., 340; McCl urg vs .
Ki ngsland [1843], I How., 202; Cons olidated Fruit Ja r Co. vs . Wri ght [1877], 94 U. S., 92; Egbert vs . Li ppmann [1881], 104 U. S., 333; Coffi n vs . Ogden
[1874], 18 Wa l l., 120; Ma nning vs. Ca pe Ann Isinglass and Glue Co. [1883], 108 U. S., 462; Andrews vs . Hovey [1887], 123 U. S ., 267; Ca mpbell vs .
Ci ty of New York [1881], 1 L. R. A., 48.)

On the fa cts, we think the testimony s hows s uch a public use of the Va rgas plow as to render the patent invalid Ni colas Roces, a farmer, testified
tha t he had bought twenty Va rgas plows, of which Exhibit 5 wa s one, i n December, 1907; a nd Exhibit 5, the court found, was a plow completely
i dentical with that for which the plaintiff had received a patent. The minor exception, and this i n i tself corroborative of Roces' testimony, i s that the
ha ndle of plow Exhibit 5 i s marked with the l etters "A V" a nd not with the words "Patent Applied For" or "Pa tented Mar.12, 1912." Sa lva dor
Li za rraga, a cl erk i n a business house, testified that he had received plows similar to Exhibits D, 5, a nd 4, for s ale on com mission on Ma y, 1908, from
Boni facio Araneta, partner of Va rgas in the plow business. Ko Pa o Ko, a blacksmith, testified that he had made fi fty plow fra mes in 1905 for Va rgas
a nd Ara neta, of which Exhibit 4 i s one; Exhibit 4, the court found, is a plow i dentical with that patented by Va rgas, but wit hout share a nd mould-
boa rd. Alfred Berwin, an employee i n the office of Attorney John Bordman, testified that on September 21, 1908, he had knowledge of a
tra ns action wherein Vargas and Araneta desired to obtain money to i nvest in a plow factory. George Ramon Saul, a mechanic of the "Taller
Vi s ayas" of Stra chan a nd Ma cMurray, testified that he had made Vargas plow points and shares of the present form upon order of Araneta a nd
Va rga s in 1906 a nd 1907 .Wi lliam MacMurray, proprietor of the "Taller Visayas," corroborated the evidence of the witness Saul by the exhibition of
the a ccount against Vargas a nd Ara neta wherein, under date of December 13, 1906, a ppears the item "12 new soft s teel plow s hare s forged a nd
bored for ri vets as per sample." Against all this, was the testimony of the plaintiff Angel Va rgas who denied that Saul could have been seen the
Va rga s plow in 1907 a nd 1907, who denied that Roces purchased the Vargas plow in 1907, who denied that Lizarraga could have a cted as an a gent
to s ell two plows i n November, 1908, who denied any remembrance of the l oan mentioned b y Berwin as having been negotiated in September,
1908, who denied that Ko Pa o Ko made fifty plows one of which is Exhibit 4, for Ara neta a nd Va rgas in 1905. Pl aintiff i ntroduced his books to
s ubstantiate his oral testimony .It i s hardly believable that five or s ix witnesses for the defense would deliberately perjure themselves under oath.
One mi ght, but that a ll together, of different nationalities, would enter into such a conspiracy, is to s uppose the improbabl e.

Tes ted by the principles which go to make the law, we think a preponderance of the evi dence is to the effect that for more than two years before
the a pplication for the original l etters patent, or before July 22, 1908, there was, by the consent and allowance of Vargas, a public use of the
i nvention covered by them.

To concl ude, we a re not certain but that a ppellee has proved every one of his defenses. We a re certain that he has a t least d emonstrated the
public use of the Vargas plow over two years prior to the application for a patent. Such being the case, although on a different ground, we must
s us tain the judgment of the lower court, without prejudice to the determination of the damages resulting from the granting of the injunction, with
the cos ts of this i nstance against the a ppellant. So ordered.

Arel lano, C.J. Torres, Johnson, Araullo, Street, Ava nceña a nd Moir, JJ., concur.
EN BANC
G.R. No. L-4720 January 19, 1909
CARLOS GSELL,Plaintiff-Appellee, vs. VALERIANO VELOSO YAP-JUE,Defendant-Appellant.

CARSON, J. :cha nrobles vi rtual law library

Thi s an a ppeal from a final order of the Court of First Instance of the ci ty of Ma nila, i n contempt proceedings prosecuted under the provisions of
s ecti on 172 of the Code of Ci vil Procedure. The principal case to which these proceedings a re ancillary, was an action to enjoin i nfringement of a
pa tented process for the manufacture of curved handles for ca nes, parasols, a nd umbrellas. In that ca se plaintiff established his title to a valid
pa tent covering the process in question, and obtained against this defendant a judgment, gra nting a perpetual i njunction rest raining i ts
i nfri ngement, which judgment was affirmed by this court on a ppeal (6 Phil. Rep., 143.) The order was couched in the following terms:

It i s ordered that the defendant a bstain from manufacturing canes a nd umbrellas with a curved handle by means of a lamp or bl owpipe fed with
mi neral oil or petroleum, which process was protected by patent No. 19228, i ssued in fa vor of Henry Gsell, and by him transferred to Ca rlos Gsell -

a nd the process therein mentioned is fully described in the following statement which a ccompanied the a pplication for the pat ent:

After the ca nes have been cut for cane or umbrella handles, the outsides are thoroughly cl eaned. This operation havi ng been performed, they a re
then tri mmed and the interior cl eaned by means of a gimlet of about 15 centimeters i n l ength operated by a wheel, by means of which the knots
i ns ide are broken. There is then i ntroduced to a depth of a bout 15 centimeters a piece of very cl ean bamboo, which completely fills the hole made
by the gi mlet, thereby giving to the ca ne the necessary s trength to resist the heat of the lamp or blowpipe without breaking or
cra cki ng.chanroblesvirtualawlibrary cha nrobles vi rtual law library

Thi s operation having been performed, the cane, the end of which is a ttached to a fixed point, is given the shape of a hook o r s ome other form by
mea ns of fire a nd pressure. Once the cane has been shaped as desired, i t is allowed to cool, a nd i s then cleaned, va rnished, a nd ornamented a t
wi l l.chanroblesvirtualawlibrary chanrobles vi rtual law library

Thi s industry requires s killful, handiwork, owing to the great risk engendered by the treatment of such fragi le ma terial as a light cane. On the other
ha nd, however, i t affords large profits to the workman.chanroblesvi rtualawlibrary chanrobles vi rtual law l ibrary

NOTE. - The patent applied for s hall be for the i ndustrial product "ca ne handles for walking sticks and umbrellas, curved by means of a small lamp
or bl owpipe, fed by petroleum or mineral fuel."

Thereafter the defendant continued to manufacture curved ca ne handled for walking s ticks and umbrellas by a process in a ll re spectes identical
wi th that used by the plaintiff under his patent, except only tha t he be substituted for a lamp fed with petroleum or mi neral oil, lamp fed wit h
a l cohol, as a ppears from a s tipulation entered i nto between plaintiff and defendant i n the following terms:

The pl aintiff and defendant a gree upon the fa ct that the defendant has used a nd i s still using a process for curvi ng handles of ca nes and umbrel las
i dentical with that described i n the application for the patent by the plaintiff with the exception that he has s ubstituted f or the l amp fed with all
other l amp fed with alcohol.

Contempt proceedings were instituted against the defendant in the month of February, 1904, the plaintiff i n the original a cti on a lleging that the -

Defendant in disobediencce of the judgment of the same was and is now engaged i n the unlawful manufacture of umbrella handles by the i dentical
process described in a nd protected said patent, No. 19228, or a process s o like the patented process as to be i ndistinguishable.

The tri al court found the defendant "not guilty" of contempt as charged; and this court, on appeal, held that - a character that it could be made
pa tent by the mere a nnunciation of the acts performed by the defendant, which are a lleged to constitute the said vi olation. T hese a cts were not
cl ea rly a nd manifestly contrary to the precise terms of the prohibition. According to the express language of the judgment, the prohibition is
a ga inst the manufacture of ca nes and umbrellas with curved handles by means of the use of a cool or mi neral oil -burning lamp or blowpipe and the
pa rti es have stipulated that the defendant did not use a coal or mineral oil-burning lamp but an a lcohol-burning lamp.

The question, however, arises as to whether that prohibition included the substitution of a lcohol for coal or mineral oil. In more abstract a nd
general terms, the appellant propounds this question i n his brief, as follows: "The question presented by this a ppeal is whether or not the use of a
pa tented process by a third person, without l icense or authority therefor, constitutes an infringement when the alleged infri nger has substituted in
l i eu of some unessential part of the patented process a well-known mechanical equivalent." It has s een that by i ts very terms this question i mplies
i n the present case the existence of two fundamental facts which must first be duly established, vi z: (1) That the use of the lamp fed with
petrol eum or mi neral oil was an unessential part of the patented process the use of which by the accused was prohibited by the said judgment; and
(2) tha t a lcohol is a n equivalent a nd proper s ubstitute, well known as such, for mineral oil or petroleum in connection with the said process. The
a ppellant has failed to a ffirmatively establish either of these two essential fa cts. He has merely a ssumed their existence, wi thout proving the same,
thus begging the whole question. Consequently the contempt with which the accused i s charged has not been f ully a nd s atisfactorily proved, and
the order appealed from s hould accordingly be a ffirmed in s o far a s it holds that the defendant i s not guilty of contempt. (7 Phil. Rep., 130).

Thereafter the plaintiff continued the use of the patented process, s ave only for the substitutions of a lamp fed by a lcohol for a lamp fed by
petrol eum or mi neral oil, a nd new proceedings were instituted under the provisions of section 172 for the purpose of enforcing the original
i njunction a bove cited. Substantially the same q uestion is submitted in these new proceedings as that submitted in the former case, but at the trial
of thi s ca se testimony was i ntroduced which, i n our opinion, l eaves no room for doubt, first, that alcohol is a n equivalent o r s ubstitute, well known
a s s uch at the ti me when the patent was issued, for mineral oil or petroleum, i n connection with blast lamps or blowpipes such as that which
pl a intiff uses i n the patented process, and, second, that the use of a blast lamp or blowpipe fed with petroleum or mine ral oil, ra ther than one fed
wi th a lcohol, is an unessential part of the patented process the use of which was prohibited by the said judgment.chanroblesvirtualawlibrary
cha nrobles vi rtual law l ibrary

It wa s clearly proven at the tri al, that kerosene and alcohol blast lamps are agencies for producing a nd a pplying heat, well known throughout the
worl d l ong prior to 1906, the date of the issue of the patent; that it i s and for ma ny years has been known that one may for all ordinary purposes
be us ed i n the place of the other, and especially for the purpose of applyi ng heat i n the manner described i n the patent; that the only consideration
whi ch determines the employment of one in place of the other is the convenience of the user a nd the question of relative co st; and that the
pri nciple upon which both lamps work is substantially i dentical, the only difference in construction being occasioned by the a pplication of this
pri nciple to oils of different physical and chemical composition.chanroblesvirtualawlibrary ch a nrobles vi rtual law library
The pl aintiff does not a nd ca n not claim a patent upon the particular l amp used by him. The patent, however, gives him the exclusive ri ght to the
us e of "la lamparilla o soplete, alimentada de petroleo o esencia mineral" (the small lamp or blowpipe fed with petroleum or mineral oil) in
ma nufacturing curved handles for umbrellas a nd ca nes, to which reference is made i n the a bove -cited descriptive statement and annexed note.
"The s mall lamp or blowpipe" mentioned in the descriptive statement and annexed note which a ccompanied the a pplication for the patent,
evi dently referred to the design of a blast lamp which was attached thereto; a nd i n our opinion both plaintiff and defendant make use of a blast
l a mp s ubstantially s imilar, in principle and design, to that referred to i n the descriptive s tatement a nd the annexed note, for the exclusive use of
whi ch in the manufacture of curved handles, plaintiff holds a patent. True, defendant's blast l amp i s fed with alcohol, and i ts shape va ries i n
uni mportant details, for the purpose of a ccommodating the principle, by which the flame i s secured, to the different physical a nd chemical
composition of the fuel used therein; but the principle on which it works, i ts mode of application, and its gen eral design distinguish it in no essential
pa rti cular from that used by the plaintiff. If the original design accompanying the statement had shown a blast l amp made of brass or delf, he
woul d be a reckless a dvocate who would claim that the patent might law fully be evaded by the use of a lamp made of iron or ti n; or i f the original
des ign had shown a blast l amp 6 i nches high with a nozzle 4 i nches long it would hardly be seriously contended that the use o f lamp 8 i nches high
wi th a nozzle 3 i nches l ong would protect the ingenious indivi dual, who in a ll other respects borrowed the patented process, from the
cons equences of an action for damages for infringement. But i n the l ight of the evidence of record i n this ca se, the reasonin g upon which these
hypothetical claims s hould be rejected applies with equal force to the contentions of the defendant, the ground for the rejection of the claims in
ea ch case being the same, and resting on the fact that unessential changes, which do not affect the principle of the bla st lamp used in the patented
process, or the mode of a pplication of heat a uthorized by the patent, a re not s ufficient to s upport a contention that the process in one case is in
a ny es sential particular different from that used in the other.chanroblesvirtualawlibrary cha nrobles vi rtual law library

Couns el for plaintif invokes the doctrine of "mechanical equivalents" i n s upport of his contention, a nd i ndeed that doctrine is s trikingly a pplicable
to the fa cts i n this case. This doctri ne is founded upon sound rules of reason and logic, a nd unless restrained or modified by l aw i n particular
juri s diction, i s of universal a pplication, so that i t matters not whether a patent be issued by one s overeignty or a nother, t he doctrine may properly
be i nvoked to protect the patentee from colorable invasions of his patent under the guise of substitution of some part of his i nvention by s ome
wel l known mechanical equivalent. Our a ttention has not been called to any provision of the patent law of Spain, which denies to patentees
thereunder the just a nd equitable protection of the doctrine; and indeed a patent law which failed to recognize this doctrine would a fford scant
protecti on to i nventors, for it i s difficult if not i mpossible to conceive an invention, which is i ncapable of alteration or change i n s ome unessential
pa rt, s o as to bring that part outside of the express terms of a ny form of language which might be used i n gra nting a patent for the i nvention; and
ha s been well said by counsel for plaintiff, human i ngenuity would be ta xed beyond its powers in preparing a grant of a patent so comprehensive in
i ts terms, "as to include within the express terms of its detailed description every possible a lternative of form, size, s hape, material, l ocation, color,
wei ght, etc., of every wheel, rod, bolt, nut, screw, plate, and other component parts of an i nvention." chanrobles vi rtual l aw library

The following ci tations from va rious decisions of the Federal Courts of the United States i llustrate the a pplication of the d octrine in that jurisdiction,
a nd cl early point the wa y to the proper solution of the questions i nvolved i n the case a t bar:

Ca n the defendant have the ri ght of i nfringement, by substituting in l ieu of some parts of the combination well-known mechanical equivalents? I
a m quite cl ear that be can not, both on principle a nd a uthority. It is not to be disputed that the inventor of a n ordinary ma chine is, by his letters
pa tent, protected a gainst all mere formal a lterations and against the s ubstitution of mere mechanical equivalents. Why should not the inventor of
a new combination receive the same protection? If he ca n not, then will his patent not be worth the parchment on which it i s
wri tten.chanroblesvirtualawlibrary chanrobles vi rtual law library

If no one ca n be held to i nfringe a patent for a combination unless he uses all the parts of the combination a nd the i dentical machinery a s that of
the pa tentee, then will no patent for a combination be i nfringed; for certainly no one capable of operating a ma chine ca n be incapable of a dopting
s ome formal alteration i n the machinery, or of s ubstituting mechanical equivalents. No one infringes a patent for a combinati on who does not
empl oy a ll of the i ngredients of the combination; but i f he employs all the i ngredients, or a dopts mere formal alterations, or s ubstitutes, for one
i ngredient a nother which was well known at the date of the patent as a proper s ubstitute for the one withdrawn, a nd which per forms substantially
the s ame function as the one withdrawn, he does infringe. (Kin g vs . Louisville Cement Co., Fed. Cas., 7798.) cha nrobles vi rtual law library

Bona fide i nventors of a combination a re as much entitled to equivalents as the i nventors other patentable i mprovements; by w hich is meant that
a pa tentee in such a case may s ubstitute another i ngredient for a ny one of the i ngredients of his i nvention, i f the i ngredient s ubstituted performs
the s ame function as the one omitted and as well known a t the date of his patent as a proper s ubstitute for the one omitted i n the patented
combi nation. Apply that rule and it i s clear that an alteration i n a patented combination which merely s ubstitutes another old ingredient for one of
the i ngredients in the patented combination, i s an i nfringement of the patent, i f the s ubstitute performs th e same function a nd was well known a t
the da te of the patent as a proper s ubstitute for the omitted ingredient. (Gould vs. Rees, 82 U.S., 187, 194.) cha nrobles vi rtual law library

Mere formal a lterations in a combination i n letters patent a re no defense to the charge of i nfringement and the withdrawal of one i ngredient from
the s ame and the s ubstitution of a nother which was well known at the date of the patent as a proper s ubstitute for the one wi thdrawn is a mere
forma l alteration of the combination if the ingredient substituted performs substantially the same function as the one
wi thdrawn.chanroblesvirtualawlibrary chanrobles vi rtual law library

Bona fide i nventors of a combination a re as much entitled to s uppress every other combination of the same ingredients to produce the same
res ult, not s ubstantially different from what they have invented a nd ca used to be patented as to any other class of i nventors . All alike have the
ri ght to s uppress every colorable invasion of that which is s ecured to them by l etters patent. (Seymour vs . Osborne, 78 U.S., 516, 556.) cha nrobles
vi rtua l law library

A cl a im for the particular means a nd mode of operation described in the specification extends, by operation of law, to the equivalent of such
mea ns - not equivalent s imply because the s ame result is thereby produced - but equivalent a s being s ubstantially the same devi ce in s tructure,
a rra ngement and mode of operation. (Burden vs . Corning, Fed. Ca s., 2143. Gottfried vs . Philip Best Brewing Co., Fed. Cas., 56 33.) cha nrobles vi rtual
l a w library

An equivalent device is such as a mechanic of ordinary s kill in construction of similar machinery, ha ving the forms, specific ations and machine
before him, could s ubstitute i n the place of the mechanism described without the exercise of the inventive faculty. (Burden vs . Corning, s upra.)
cha nrobles vi rtual law l ibrary

Al l the elements of the i nvention i n this ca se are old, a nd the rule i n s uch cases, as before explained, undoubtedly i s that a purpose can not invoke
the doctri ne of equivalents to suppress all other i mprovements of the old machine, but he is entitled to treat everyone as an infringer who makes,
us es, or vends his patented i mprovement without a ny other change than the employment of a s ubstitute for one of its elements, well known as
s uch a t the date of his invention, and which any constructor acquainted with the art will know how to comply. The reason for the qualification of
the rul e as s tated is, that such change - that is, the mere substitution of a well- known element for a nother - where i t appears that the substituted
el ement was well known as a usual substitute for the element left out - is merely a formal one, a nd nothing better than a colorable evasion of the
pa tent. (Union Sugar Refining Co. vs . Ma tthieson, Fed. Ca s., 14399.)

Couns el for the defendant insists that, under Spanish law, none of the steps of the process described i n the descriptive s tat ement, save those
menti oned in the "note" thereto attached are i ncluded in the patent, and that the patent rights s ecured thereunder a re s trictly l imited to the
preci se language of the "note" attached to the descriptive statement; while counsel for plaintiff appears to think that the l anguage of the patent
covers a ny process or device whereby wood or ca ne may be bent or curved by the use of heat. But for the purpose of this decision i t is not
necessary to consider these questions, further than to hold, as we do, that under the doctrine of equivalents, the language o f the note in the
des criptive s tatement applies to the operation of a pplying heat for the purpose of curvi ng handles or canes a nd umbrellas by means of a blast lamp
fed wi th a lcohol, a s well as by means of a blast l amp fed with petroleum or mineral oil; a nd the defendant having a dmitted th e fact that he applied
hea t for the purpose of curvi ng handles for ca nes a nd umbrellas by means of a blast lamp fed with a lcohol, he must be deemed to have contempt
of vi ol ating the terms and the injunction issued in the principal case, wherein plaintiff was declared the owner of the patent i n question, a nd
defendant enjoined from its infringement.chanroblesvirtualawlibrary cha nrobles vi rtual law library

The a rgument of counsel for defendant and appellant, based on the theory that the questions herein discussed a nd decided to h ave been
heretofore settled by this court, and that the subject-matter of this proceeding is res adjudicata between the parties thereto is s ufficiently refuted
by the s i mple reading of the decision of this court i n the ca se relied upon. (Gsell vs . Veloso, 7 Phil. Rep., 130.) cha nrobles vi rtual law library

The judgment of the lower court should be a nd is hereby a ffirmed, with the costs of this i nstance against the a ppellant.chanroblesvirtualawlibrary
cha nrobles vi rtual law l ibrary

Arel lano, C.J., Torres, Ma pa, Willard, and Tracey, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-32160 January 30, 1982
DOMICIANO A. AGUAS, petitioner,
vs.
CONRADO G. DE LEON and COURT OF APPEALS, respondents.

FERNANDEZ, J.:

Thi s is a petition for certiorari to review the decision of the Court of Appeals in CA G.R. NO. 37824-R enti tled "Conrado G. de Leon, plaintiff-appelle
vs . Domi nciano Aguas and F.H. Aquino a nd Sons, defendants-appellants," the dispositive portion of which reads:

WHEREFORE, with the modification that plintiff-applee's award of moral damages is hereby redured to P3,000.00, the a ppealed judgment is hereby
a ffi rmed, in all othe respects, with costs against a ppellants. 1

On Apri l 14, 1962, Conra do G. de Leon filed i n the Court of First Instance of Rizal a t Quezon Ci ty a complaint for i nfringement of patent a gainst
Domi ciano A. Aguas a nd F. H. Aquino a nd Sons alleging that being the original first and s ole inventor of certain new and usef ul i mprovements in the
process of making mosaic pre-cast ti les, he l awfully filed a nd prosecuted a n a pplication for Philippine patent, and having complied in all respects
wi th the statute a nd the rules of the Philippine Patent Office, Patent No. 658 wa s lawfully gra nted and issued to him; that s aid invention was new,
us eful, not known or used by others in this country before his invention thereof, not patented or described i n a ny printed publication a nywhere
before his invention thereof, or more than one year prior to his application for patent thereof, not patented i n any foreign country by him or his
l egal representatives on a pplication filed more than one year prior to his application i n this country; tha t plaintiff has th e exclusive license to make,
us e and sell throughout the Philippines the i mprovements s et forth in said Patent No. 658; tha t the invention patented by s aid Patent No. 658 i s of
grea t utility a nd of great va lue to plaintiff a nd of great benefit to the public who has demanded and purchased tiles embodyi ng the said i nvention
i n very l a rge quantities a nd in very ra pidly i ncreasing quant ies; that he has complied with the Philippine statues relating to marking pat ented tiles
s ol d by him; that the public has in general acknowledged the va lidity of s aid Patent No. 658, a nd has respected plaint iff's ri ght therein a nd
thereunder; tha t the defendant Domiciano A. Aguas infringed Letters of Patent No. 658 by ma king, using and selling tiles embodyi ng said patent
i nvention a nd that defendant F. H. Aquino & Sons is guilty of i nfringement by making a nd furnishing to the defendant Domiciano A. Aguas the
engra vings, castings a nd devi ces designed a nd i ntended of tiles embodying plaintiff;s patented invention; that he has given d irect and personal
noti ce to the defendants of their said a cts of i nfringement and requested them to desist, but nevertheless, defendants have refused a nd neglected
to des ist a nd have disregarded such request, and continue to so infringe causing great a nd i rreparable damage to plaintiff; t hat if the aforesaid
i nfri ngement i s permitted to continue, further losses and damages a nd i rreparable i njury will be s ustained by the plaintiff; that there is a n urgent
need for the i mmediate issuance of a preliminary i njunction; that as a result of the defendants' wrongful conduct, plaintiff has s uffered and the
defendants a re liable to pay him, in a ddition to actual damages a nd loss of profits which would be determined upon proper acc ounting, moral a nd
exemplary or corrective damages in the s um of P90,000.00; tha t plaintiff has been compelled to go to court for the protection and enforcement of
hi s and to engage the servi ce of counsel, thereby i ncurring attorney's fees and expenses of litigation i n the s um of P5,000.00. 2

On Apri l 14, 1962, a n order gra nting the plaintiff's petition for a Wri t of Preliminary Injunction was issued. 3

On Ma y 23, 1962, the defendant Domiciano A. Aguas filed his a nswer denying the allegations of the plaintiff and alleging that : the plaintiff is
nei ther the original first nor s ole inventor of the improvements i n the process of making mosaic pre-cast ti les, the s ame having been used by
s everal tile-making factories i n the Philippines and a broad years before the a lleged i nvention by de Leon; that Letters Patent No. 658 wa s
unl awfully a cquired by ma king it a ppear i n the application in relation thereto that the process is new a nd that the plaintiff is the owner of the
process when i n truth a nd in fact the process incorporated in the patent application has been known and used i n the Philippines by almost all tile
ma kers long before the alleged use a nd registration of patent by plaintiff Conrado G. de Leon; that the registration of the alleged invention did not
confer a ny ri ght on the plaintiff because the registration was unlawfully s ecured and was a result of the gross misrepresenta tion on the part of the
pl a intiff that his alleged i nvention is a new a nd i nventive process; that the allegation of the plaintiff that Pa tent No. 658 i s of great va lue to plaintiff
a nd of great benefit to the public i s a mere conclusion of the plaintiff, the truth being that a) the invention of plaintiff is neither i nventive nor new,
hence, it is not patentable, b) defendant has been gra nted va lid patents (Patents No. 108, 109, 110 i s s ued on December 21, 1961) on designs for
concrete decorative wall tiles; a nd c) that he ca n not be guilty of i nfringement because his products a re different from those of the plaintiff. 4

The tri al court rendered a decision dated December 29, 1965, the di spositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff a nd a gainst the defendants:

1. Decl aring plaintiff's patent valid and infringed:

2. Gra nting a perpetual i njunction restraining defendants, their officers, a gents, employees, associates, confederates, and a ny a nd all persons
a cti ng under their a uthority from making and/or using and/or vending tiles embodyi ng s aid patented i nvention or a dapted to be used i n
combi nation embodying the same, and from making, manufacturing, using or s elling, engravings, castings a nd devises designed a nd intended for
us e in apparatus for the ma king of ti les embodying plaintiff's patented i nvention, and from offering or a dvertising so to do, and from a iding a nd
a betting or in any way contributing to the i nfringement of said patent;

3. Orderi ng that each and all of the infringing tiles, engravings, castings and devices, which a re in the possession or under the control of defendants
be delivered to plaintiff;

4. Orderi ng the defendants to jointly a nd severally pay to the plaintiff the following sums of money, to wit:

(a ) P10,020.99 by wa y of a ctual damages;

(b) P50,000.00 by wa y of mora l damages;

(c) P5,000.00 by wa y of exemplary damages;

(d) P5,000.00 by wa y of a ttorney's fees and

(e) cos ts of s uit. 5

The defendant Domiciano Aguas appealed to the Court of Appeals, assigning the foll owing errors. 6

THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF'S PATENT FOR THE 'PROCESS OF MAKING MOSAIC PRE -CAST TILE' IS INVALID BECAUSE
SAID ALLEGED PROCESS IS NOT AN INVENTION OR DISCOVERY AS THE SAME HAS ALREADY LONG BEEN USED BY TILE MANUFA CTURERS BOTH
ABROAD AND IN THIS COUNTRY.

II

THE TRIAL COURT ERRED IN HOLDING THAT THE PATENT OF PLAINTIFF IS VALID BECAUSE IT IS AN IMPROVEMENT OR THE AGE -OLD TILE MAKING
SYSTEM.

III

THE TRIAL COURT ERRED IN NOT ORDERING THE CANCELLATION OF PLAINTIFF -APPELLEE'S LETTERS PATENT NO. 658, EXHIBIT L, IN ACCORDANCE
WITH THE PERTINENT PROVISIONS OF THE PATENT LAW, REPUBLIC ACT 165.

IV

THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT DOMICIANO A. AGUAS IS GUILTY OF INFRINGEMENT DESPITE THE FACT THAT PLAINTIFF'S
PATENT IS NOT A VALID ONE.

THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEFENDANT COULD NEVER BE GUILTY OF INFRINGEMENT OF PLAINTIFF'S PATENT BECAUSE
EVEN IN MATTERS NOT PATENTED BY THE PLAINTIFF - LIKE THE COMPOSITION AND PROPORTION OF INGREDIENTS USED AND THE STRUCTURAL
DESIGNS OF THE MOULD AND THE TILE PRODUCED - THAT OF THE DEFENDANT ARE DIFFERENT.

VI

THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT AND IN HOLDING THE DEFENDANT, INSTEAD OF THE PLAINTIFF, LIABLE FOR
DAMAGES, AND ATTORNEY'S FEES.

On Augus t 5, 1969, the Court of Appeals affirmed the decision of the tri al court, with the modification that plaintiff-appellee's a ward of moral
da mages was reduced to P3,000.00. 7

The petitioner a ssigns the following errors supposedly committed by the Court of Appeals:

It i s now respectfully submitted that the Court of Appeals committed the following errors i nvolvi ng questions of l aw, to wit:

Fi rs t error. — When i t did not conclude that the letters patent of the respondent although entitled on the cover page as a patent for
i mprovements, was in truth a nd i n fact, on the basis of the body of the same, a patent for the old a nd non-patentable process of making mosaic
pre-ca st tiles;

Second error. — When it did not conclude from the admitted fa cts of the case, particularly the contents of the l etters patent, Exh. L a nd the pieces
of phys ical evi dence i ntroduced consisting of samples of the tiles and catalouges, that the alleged improve ments i ntroduced by the respondent in
the ma nufacture of mosaic pre-cast tiles are not patentable, the same being not new, useful and inventive.

Thi rd error. — As a corollary, when it s entenced the herein petitioner to pay the damages enumerated i n the decision of the lower court (Record
on Appeal, pp. 74-75), as confirmed by i t (the Court of Appeals), but with the modification that the a mount of P50,000.00 mora l damages was
reduced to P3,000.00. 8

The fa cts, as found by the Court of Appeals, a re:

The ba sic fa cts borne out by the record are to the effect that on December 1, 1959 pl aintiff-appellee filed a patent application with the Philippine
Pa tent Office, a nd on May 5, 1960, s a id office issued i n his favor Letters Pa tent No. 658 for a "new and useful i mprovement in the process of
ma ki ng mosaic pre -cast tiles" (Exh, "L"); that defendant F.H. Aquino & Sons engraved the moulds embodying plaintiff's patented i mprovement for
the ma nufacture of pre-cast tiles, plaintiff furnishing said defendant the actual mo del of the tiles in escayola and explained to said engraver the
pl a ns, specifications and the details of the engravings as he wanted them to be made, including an explanation of the l ip width, artistic s lope of
ea sement a nd cri tical depth of the engravi ng that plaintiff wanted for his moulds; that engraver Enrique Aquino knew that the moulds he was
engra ving for plaintiff were the latter's very own, which possession the new features and characteristics covered by plaintiff's parent; that
defendant Aguas personally, a s a building contractor, purchased from plaintiff, tiles s haped out of these moulds at the back of which was imprinted
pl a intiff's patent number (Exhs., "A" to "E"); that s ubsequently, through a representative, Mr. Leonardo, defendant Aguas req uested Aquino to
ma ke engravi ngs of the same type a nd bearing the characteristics of plaintiff's moulds; that Mr. Aqui no knew that the moulds he was asked to
engra ve for defendant Aguas would be used to produce cement ti les s imilar to plaintiff's; that the m oulds which F.H. Aquino & Sons eventually
engra ved for Aguas and for which i t charged Aguas double the ra te i t charged plaintiff De Leon, contain the very s ame charact eristic features of
pl a intiff's mould a nd that Aguas used these moulds in the ma nufacture of his ti les which he actually put out for sale to the public (Exhs. "1" to "3"
a nd Exhs. "A" to "E"); that both plaintiff's a nd defendant Aguas' tiles a re sculptured pre -cast wall ti les i ntended as a new feature of construction
a nd wag ornamentation s ubstantially Identical to each other in size, easement, l ip width and critical depth of the deepest depression; a nd that the
onl y s ignificant difference between plaintiff's mould and that engraved by Aquino for Aguas is that, whereas plaintiff's moul d turns out tiles 4 x 4
i nches i n size, defendant Aguas' mould is made to fi t a 4-1/4 x 4-1/4 i nch tile. 9

The pa tent ri ght of the private respondent expired on May 5, 1977. 10 The errors will be discuss only to determine the ri ght of said priva te
res pondent to damages.
The petitioner questioned the va lidity of the patent of the private respondent, Conrado G. de Leon, on the ground that the process, subject of said
pa tent, i s not an invention or discovery, or a n improvement of the old system of making tiles. It s hould be noted that the priva te respondent does
not cl a im to be the discoverer or i nventor of the old process of tile-making. He only cl aims to have introduced an improvement of s aid process. In
fa ct, Letters Pa tent No. 658 wa s issued by the Philippine Patent Office to the private respondent, Conrado G. de Leon, to protect his ri ghts as the
i nventor of "an alleged new a nd useful improvement in the process of making mosaic pre -cast tiles." 11 Indeed, Section 7, Republic Act No. 165, a s
a mended provides: "Any i nvention of a new and useful ma chine, manufactured product or s ubstance, process, or a n i mprovement of the
foregoing, shall be patentable.

The Court of Appeals found that the private respondent has i ntroduced an improvement in the process of tile -making because:

... we fi nd that plaintiff-appellee has introduced an improvement in the process of ti le-making, which proceeds not merely from mechanical skill,
s a id improvement consisting among other things, i n the new critical depth, l ip width, easement and f ield of designs of the new tiles. The improved
l i p width of a ppellee's tiles ensures the durability of the finished product preventing the flaking off of the edges. The eas ement caused by the
i ncl ination of the protrusions of the patented moulds i s for the purpose of facilitating the removal of the newly processed tile from the female die.
Evi dently, a ppellee's improvement consists i n the solution to the old cri tical problem by making the protrusions on his moulds attain an optimum
hei ght, so that the engraving thereon would be deep enough to produce ti les for sculptured and decorative purposes, strong optimum thickness of
a ppellee's new tiles of only 1/8 of a n inch a t the deepest easement (Exhs. "D" and "D -1") is a most cri tical feature, suggestive of discovery a nd
i nventiveness, especially considering that, despite s aid thinness, the freshly formed tile remains s trong enough for i ts inte nded purpose.

Whi le i t is true that the matter of easement, lip width, depth, protrusions and depressions are known to s ome sculptors, still, to be a ble to produce
a new a nd useful wall ti le, by using them all together, a mounts to an invention. More s o, if the totality of a ll these features are vi ewed in
combi nation with the Ideal composition of cement, sodium silicate a nd s creened fine sand.

By us ing his improved process, plaintiff has succeeded in producing a new product - a concrete sculptured tile which could be utilized for walling
a nd decorative purposes. No proof was adduced to s how that any tile of the same kind had been produced by others before appellee. Moreover, i t
a ppears that appellee has been deriving considerable profit from his manufacture and sale of such tiles. This commercial succ ess is evidence of
pa tentability (Walker on Patents, Dellers Edition, Vol. I, p. 237). 12

The va l idily of the patent issued by the Philippines Pa tent Office i n favor of the private respondent and the question over t he i nventiveness, novelty
a nd usefulness of the i mproved process therein specified a nd described are matters which are better determined by the Philippines Pa tent Office.
The technical staff of the Philippines Pa tent Office, composed of experts in their fi eld, have, by the i ssuance of the patent i n question, accepted the
thi nness of the private respondent's new tiles as a discovery. There i s a presumption that the Philippines Pa tent Office has correctly determined
the pa tentability of the improvement by the private respondent of the process in question.

Anent this matter, the Court of Appeals s aid:

Appellant has not adduced evi dence s ufficient to overcome the above established legal presumption of va lidity or to wa rrant reversal of the
fi ndings of the l ower court relative to the va lidity of the patent in question. In fact, as we have already pointed out, the clear preponderance of
evi dence bolsters s aid presumption of va lidity of a ppellee's patent. There is no i ndication i n the records of this case and t his Court i s unaware of
a ny fa ct, which would tend to show that concrete wall tiles s imilar to those produced by a ppellee had ever been made by others before he started
ma nufacturing the same. In fa ct, during the trial, a ppellant was challenged by a ppellee to present a tile of the same kind as those produced by the
l a tter, from a ny earlier source but, despite the fact that a ppellant had every chance to do s o, he could not present any. There is, therefore, no
concrete proof that the i mproved process of tile-making described i n a ppellee's patent was used by, or known to, others previous to his discovery
thereof. 13

The contention of the petitioner Aguas that the l etters patent of de Leon was actually a patent for the old and non-patentable process of making
mos aic pre-cast tiles is devoid of merit. De Leon never cl aimed to have invented the process of tile-making. The Cl aims a nd Specifications of Patent
No. 658 s how that although some of the steps or parts of the old process of tile making were described therein, there were novel a nd i nventive
fea tures mentioned in the process. Some of the novel features of the private respondent's improvements are the following: cri tical depth, with
corres ponding easement a nd l ip width to such degree as leaves the tile a s thin as 1/8 of an inch at i ts thinnest portion, Ide al composition of cement
a nd fine river sand, among other i ngredients that makes possible the production of tough and durable wall tiles, though thin a nd light; the
engra ving of deep designs i n such a way a s to make the tiles decorative, a rtistic a nd s uitable for wall ornamentation, a nd th e fact that the ti les can
be ma ss produced i n commercial quantities a nd can be conveniently s tock-piled, handled a nd packed without any i ntolerable incidence of
brea kages. 14

The petitioner a lso contends that the i mprovement of respondent is not patentable because it is not new, useful and inventive. This contention i s
wi thout merit.

The records disclose that de Leon's process i s an i mprovement of the old process of tile making. The ti les produced from de L eon's process are
s ui table for construction and ornamentation, which previously had not been a chieved by tiles made out of the old process of ti le ma king. De Leon's
i nvention has therefore brought about a new a nd useful kind of tile. The old type of ti les were usually i ntended for floors a lthough there is nothing
to prevent one from using them for walling purposes. These ti les a re neither a rtistic nor ornamental. They a re heavy a nd massive.

The res pondent's improvement is indeed i nventive and goes beyond the exercise of mechanical s kill. He has introduced a new ki nd of ti le for a new
purpose. He has improved the old method of ma king tiles and pre-cast a rticles which were not satisfactory because of a n intolerable number of
brea kages, especially if deep engravings are made on the tile. He has overcome the problem of producing decorative tiles with deep engraving, but
wi th s ufficient durability. 15 Dura bility i nspite of the thinness a nd l ightness of the tile, is assured, provi ded that a certain cri tical depth is
ma i ntained in relation to the dimensions of the ti le. 16

The petitioner a lso claims that changing the design from embossed to e ngraved ti les is neither new nor inventive because the Ma chuca Tile Factory
a nd the Pomona Tile Manufacturing Company have been manufacturing decorative wall ti les that a re embossed a s well a s engraved; 17 tha t these
ti l es have a lso depth, lip width, easement a nd field of designs; 18 a nd that the priva te respondent had copied s ome designs of Pomona. 19

The Ma chuca ti les a re different from that of the priva te respondent. The designs are embossed and not engraved as claimed by the petitioner.
There may be depressions but these depressions are too shallow to be considered engraved. Besides, the Ma chuca tiles a re heavy a nd massive.

There is no similarity between the Pomona Tiles a nd de Leon's tiles. The Pomona tiles are made of ceramics. 20 The process i nvolved in making
cement tiles is different from ceramic tiles. Cement tiles a re made with the use of water, while i n ceramics fire is used. As regards the allegation of
the petitioner that the priva te respondent copied s ome designs of Pomona, suffice i t to say that what is in issue here is the process i nvolved in tile
ma ki ng and not the design.

In vi ew of the foregoing, this Court fi nds that Patent No. 658 was l egally issued, the process and/or improvement being paten table.

Both the tri al court and the Court of Appeals found as a fact that the petitioner Domiciano A. Aguas did infringe de Leon's patent. There is no
s howing that this case falls under one of the exceptions when this Court may overrule the fi ndings of fact of the Court of Ap peals. The only i ssue
then to be resolved is the a mount of damages that s hould be paid by Aguas.

In i ts decision the Court of Appeals affirmed the a mount of damages a warded by the l ower court wi th the modification that the respondent is only
enti tled to P3,000.00 mora l damages. 21

The l ower court a warded the following damages: 22

a ) P10,020.99 by wa y of a ctual damages;

b) P50,000.00 by wa y of moral damages;

c) P5,000.00 by wa y of exemplary damages;

d) P5,000.00 by wa y of a ttomey's fees a nd

e) Cos ts of s uit

beca use:

An exa mination of the books of defendant Aguas made before a Commissioner reveals that during the period that Aguas was manufacturing a nd
s elling tiles similar to plaintiff's, he made a gross i ncome of P3,340.33, which can be safely be considered the a mount by which he enriched himself
when he i nfringed plaintiff's patent. Under Sec. 42 of the Pa tent La w a ny patentee whose ri ghts have been infringed i s entitl ed to damages which,
a ccording to the circumstances of the ca se may be i n a s um above the a mount found as a ctual damages sustained provided the award does not
exceed three times the a mount of s uch a ctual damages. Considering the wantonness of the infringement committed by the defenda nts who knew
a l l the ti me a bout the existence of plaintiff's patent, the Court feels there is reason to gra nt plaintiff maximum damages in the s um of P10,020.99.
And i n order to discourage patent infringements and to give more teeth to the provisions of the patent law thus promoting a s tronger public policy
commi tted to afford greater incentives and protection to inventors, the Court hereby a wards plaintiff exemplary damages in the s um of P5,000.00
to be pa id jointly a nd s everally by defendants. Considering the status of plaintiff as a reputable businessman, and owner of the likewise reputed
Hous e of Pre-Cast, he is entitled to a n award of moral damages in the sum of P50,000.00. 23

In reducing the amount of moral damages the Court of Appeals said:

As rega rds the question of moral damages it has been s hown that as a result of the unlawful a cts of i nfringment committed by defendants, plaintiff
wa s unstandably very s a d; he worried a nd became nervous and lost concentration on his work i n connection with his tile busine ss (pp. 28, 30,
t.s .n., Feb. 28, 1964). In a ddition, plaintiff's character a nd reputation have been unnecessarily put i n question because defendants, by their a cts of
i nfri ngement have created a doubt or s uspicion i n the public mind concerning the truth a nd honesty of plaintiff's advertiseme nts a nd public
a nnouncements of his va lid patent. Necessarily, s aid acts of defendants have ca used plaintiff considerable mental suffering, considering es pecially,
the fa ct that he s taked everything on his pre-cast tile business (p. 36, t.s .n., Id.) The wantonness and evi dent bad faith characterizing defendants'
prejudicial a cts a gainst plaintiff justify the assessment of moral damages in plaintiff's favor, though we do not believe the a mount of P50,000.00
a wa rded by the l ower court i s warranted by the circumstances. We feel that s aid amount should be reduced to P3,000.00 by wa y of compensating
a ppellee for his moral s uffering. "Willful injury to property ma y be a legal ground for awarding moral damages if the court s hould find that, under
the ci rcumstances such damages a re justly due" (Art. 2219 NCC).

There is no reason to reduce the a mount of damages and attorneys fees a warded by the tri al court as modified by the Court of Appeals.

WHEREFORE, the decision of the Court of Appeals i n CA G.R. No. 37824-R a ppealed from is hereby a ffirmed, without pronouncement as to costs.

SO ORDERED.

Ma ka siar, Guerrero, Melencio-Herrera and Plana, JJ., concur.

Teehankee, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-22773 March 29, 1974
PITTSBURG PLATE GLASS COMPANY, petitioner,
vs.
THE DIRECTOR OF PATENTS and CHUA TUA HIAN AND COMPANY, doing business as "SIN TECK HENG & CO.", respondents.

CASTRO, J.:p

Before us i s a petition for review of two resolutions of the Director of Pa tents in Inter Pa rtes Ca se 283, dismissing the opposition of the Pi ttsburg
Pl a te Glass Company (hereinafter referred to a s the petitioner) to the registration of a tra demark a pplied for by Chua Tua Hi an Company
(hereinafter referre d to as the respondent).

On November 5, 1962, the l a w firm of Lichauco, Pi cazo and Agcaoili filed with the Philippine Pa tent Office a petition for ext ension of 30 days from
November 8, 1962 wi thi n which to file in behalf of the petitioner a notice of opposition to the respondent's application for registration of "Solex
Bl uepane" as tra demark for its glass products. The plea was made pursuant to a cablegram from Langner, Pa rry, Ca rd and Langne r International
Pa tent a nd Tra demark Agents, USA, asking that the respondent's application be opposed. A copy of the ca blegram was attached to the request.1
The extension was granted.

On December 7, 1962 a n unverified notice of opposition to the tra demark a pplication was filed by Li chauco, Picazo a nd Agca oili, pursuant to Rule
187(c) of the Rul es of Pra ctice before the Pa tent Office which a uthorizes the filing of such a notice provided it is verified by the opposer within 60
da ys thereafter.2 On the same day, the same counsel filed a duly a uthenticated power of a ttorney executed by the petitioner on November 12,
1962 i n fa vor of the former for the prosecution of i ts opposition. On February 5, 1963 the petitioner's verified opposition t o the respondent's
a pplication was filed.

On October 14, 1963 the Di rector of Pa tents, acting upon a motion of the respondent, i ssued a resolution dismissing the petitioner's opposition on
the ground that on November 5, 1962 when the petitioner's counsel asked for an extension of time to file a notice of oppositi on, the said counsel
wa s not yet a uthorized by the petitioner to file the said pleading a s the aforementioned power of attorney was executed only on November 12,
1962.3

On November 14, 1963 the petitioner's counsel filed a motion for reconsideration of the Director's resolution, attaching thereto an a ffidavit of the
peti tioner which s tates that the ca blegram from La ngner, et al. was duly a uthorized, as the latter has been entrusted the tas k of handling foreign
tra demark matters i nvolvi ng the petitioner. The motion was, however, denied i n a resolution dated April 29, 1964.

The ma in issue before this Court is whether the law firm of Lichauco, Pi cazo and Agcaoili was a uthorized to represent the pet itioner before the
Phi l ippine Pa tent Office on November 5, 1962 when the former pleaded fo r a n extension of time to register the petitioner's opposition to the
res pondent's application.

It i s our considered vi ew that the said law firm was s o properly a uthorized by the petitioner. It s hould be noted that the pe titioner does not deny,
a s i n fact i t asserted i n writing, that the said law firm was authorized to represent i t by vi rtue of the powers i t had vested upon Langner, et al., a
corres pondent of Lichauco, Pi cazo and Agcaoili, to handle all foreign tra demark matters a ffecting the petitioner. I t bears emphasis that the
rel a tionship between counsel a nd cl ient is strictly a personal one. It is a relationship the creation of which courts and administrative tribunals
ca nnot but recognize on the faith of the client's word, especially when no substantial prejudice is thereby ca used to a ny third party.

In the ca se at bar, the petitioner, which claims to be adversely a ffected by the respondent's trademark application, seasonably i nformed the
Di rector of Patents that i ts counsel had the authority to represent it before the l atter's office. We see no valid reason to i nterpose chevaux-de frise
upon that claim and deny the petitioner its basic ri ght to be heard.

ACCORDINGLY, the questioned resolutions of the Director of Patents of October 14, 1963 a nd April 29, 1964 a re s et aside, a nd the Director of
Pa tents is hereby directed to proceed with the determination of the a pplication a nd the opposition thereto with costs against Chua Tua Hian &
Compa ny.

Ma ka lintal, C.J., Teehankee, Ma kasiar, Esguerra a nd Muñoz Pa lma, JJ., concur.

SECOND DIVISION
G.R. No. 118708. February 2, 1998
CRESER PRECISION SYSTEMS, INC., Petitioner, v. COURT OF APPEALS AND FLORO INTERNATIONAL CORP., Respondents.

DE CI SI ON

MARTINEZ, J.:

Thi s petition for review on certiorari assails the decision1. The decision of the Court of Appeals was penned by Justice Glor ia C. Pa ras a nd concurred
i n by Jus tice Salome A. Montoya a nd Justice Hector L. Hofilea.

1 of the Court of Appeals dated November 9, 1994 i n C.A.-G.R. SP. No. 34425 enti tled Floro International Corp. vs . Hon. Tirso D.C Cruz a nd Creser
Preci s ion Sys tem, Inc., the dispositive portion of which reads:

WHEREFORE, THE PETITION IS HEREBY GRANTED. THE COMPLAINT FOR INJUNCTION AND DAMAGES, CIVIL CASE NO. 93-1856 BEFORE THE
RESPONDENT JUDGE IS HEREBY ORDERED DISMISSED AND HIS ORDERS THEREIN OF DECEMBER 29, 1993 AND MAY 11, 1994 ARE ORDERED SET
ASIDE.

Pri va te respondent i s a domestic corporation engaged i n the manufacture, production, distribution and sale of military a rmaments, munitions,
a i rmunitions and other s imilar ma terials.2cräläwvirtualibräry

On Ja nuary 23, 1990, pri va te respondent was gra nted by the Bureau of Pa tents, Tra demarks a nd Technology Tra nsfer (BPTTT), a L etters Pa tent No.
UM-69383 coveri ng a n a erial fuze which was published i n the September-October 1990, Vol . III, No. 5 i ssue of the Bureau of Patents Official
Ga zette.4cräläwvirtualibräry

Sometime in November 1993, pri vate respondent, through its president, Mr. Gregory Fl oro, Jr., di scovered that petitioner submitted samples of its
pa tented aerial fuze to the Armed Forces of the Philippines (AFP) for testing. He learned that petitioner was claiming the af oresaid a erial fuze as i ts
own a nd planning to bid a nd manufacture the same commercially wi thout license or a uthority from private respondent. To protect i ts right, private
res pondent on December 3, 1993, s ent a letter5 to petitioner a dvising i t fro its existing patent a nd i ts ri ghts thereunder, w arning petitioner of a
pos sible court a ction a nd/or a pplication for i njunction, s hould it proceed with the s cheduled testing by the military on December 7, 1 993.

In res ponse to private respondents demand, petitioner filed on December 8, 1993 a complaint6 for i njunction a nd damages aris ing from the alleged
i nfri ngement before the Regional Tri al Court of Quezon City, Bra nch 88. The complaint alleged, among others: that petitioner is the first, true and
a ctua l inventor of a n a erial fuze denominated as Fuze, PDR 77 CB4 whi ch i s developed as early a s December 1981 under the Self-Reliance Defense
Pos ture Program (SRDP) of the AFP; that sometime in 1986, petitioner began supplying the AFP with the said aerial fuze; that private respondents
a erial fuze is identical i n every respect to the petitioners fuze; a nd that the only di fference between the two fuzes are miniscule and merely
cos metic i n nature. Petitioner prayed that a temporary restraining order a nd/or wri t of preliminary i njunction be issued enjoining priva te
res pondent i ncluding a ny a nd all persons acting on i ts behalf from manufacturing, marketing a nd/or profiting therefrom, a nd/or from performing
a ny other act i n connection therewith or tending to prejudice a nd deprive it of a ny ri ghts, privileges and benefits to which i t is duly entitled as the
fi rs t, true and actual inventor of the aerial fuze.

On December 10, 1993, the tri a l court issued a temporary restraining order. Thereafter, hearings were held on the a pplication of petitioner for the
i s suance of a writ of preliminary i njunction, with both parties presenting their evidence. After the hearings, the trial court directed the parties to
s ubmit their respective memoranda i n support of their positions.

On December 27, 1993, pri va te respondent submitted i ts memorandum7 alleging that petitioner has no cause of action to file a complaint of
i nfri ngement a gainst i t since i t has no patent for the a erial fuze which it claims to have invented; that petitioners a vailable remedy i s to file a
peti tion for ca ncellation of patent before the Bureau of Pa tents; that private respondent a s the patent holder ca nnot be stripped of its property
ri ght over the patented aerial fuze consisting of the exclusive ri ght to manufacture, use a nd s ell the same and that it s tands to suffer i rreparable
da mage and i njury i f it is enjoined from the exercise of its property ri ght over its patent.

On December 29, 1993, the tri a l court issued an Order8 granting the issuance of a writ of preliminary i njunction a gainst private respondent the
di s positive portion of which reads:

WHEREFORE, plaintiffs application for the i ssuance of a writ of preliminary i njunction is gra nted a nd, upon posting of the co rresponding bond by
pl a intiff in the amount of PHP 200,000.00, l et the writ of preliminary i njunction be i ssued by the branch Cl erk of this Court enjoining the defendant
a nd a ny a nd all persons acting on i ts behalf or by a nd under its authority, from manufacturing, marketing and/or s elling aeri al fuzes identical, to
thos e of plaintiff, and from profiting therefrom, and/or from performing a ny other a ct in connection therewith until further orders from this Court.

Pri va te respondent moved for reconsideration but this was denied by the trial courts i n i ts Order9 of Ma y 11, 1994, perti nent portions of which
rea d:

For res olution before this Court is the Motion for Reconsideration filed by the defendant and the plaintiffs Opposition thereto. The Court finds no
s ufficient ca use to reconsider i ts order dated December 29, 1993. Duri ng the hearing for the issuance of the preliminary i njunction, the plaintiff has
a mply proven i ts entitlement to the relief prayed for. It is undisputed that the plaintiff has developed i ts aerial fuze way back in 1981 whi le the
defendant began manufacturing the same only in 1987. Thus, it is only l ogical to conclude that i t was the plaintiffs a erial fuze that was copied or
i mi tated which gives the plaintiff the ri ght to have the defendant enjoined from manufacturing, ma rketing and/or s elling aeri al fuzes identical to
thos e of the plaintiff, and from profiting therefrom and/or performing any other a ct i n connection therewith until further orders from this Court.
Wi th regards to the defendants assertion that an a ction for i nfringement may only be brought by a nyone possessing ri ght, titl e or i nterest to the
pa tented invention, (Section 42, RA 165) qualified by Section 10, RA 165 to i ncl ude only the first true a nd a ctual inventor, his heirs, le gal
representatives to assignees, this court fi nds the foregoing to be untenable. Sec. 10 merely enumerates the persons who may h ave a n i nvention
pa tented which does not necessarily limit to these persons the right to i nstitute an action for i nfringement. Defendant further contends that the
order i n issue is disruptive of the s tatus quo. On the contrary, the order issued by the Court in effect maintained the status quo. The last actual ,
pea ceable uncontested status existing prior to this controversy wa s the plaintiff manufacturing and selling i ts own aerial fu zes PDR 77 CB4 whi ch
wa s ordered stopped through the defendants letter. With issuance of the order, the operations of the plaintiff continue. Lastly, this court believes
tha t the defendant will not s uffer i rreparable i njury by vi rtue of said order. The defendants cl aim is primarily hinged on it s patent (Letters Patent
No. UM-6983) the va l idity of which is being questioned i n this case.
WHEREFORE, premises considered, the Motion for Reconsideration i s hereby denied for lack of merit.

SO ORDERED.

Aggri eved, private respondent on June 27, 1994, fi led a petition for certiorari, mandamus a nd prohibition10before respondent Court of Appeals
ra i sing as grounds the following:

a . Peti tioner has no cause of a ction for infringement a gainst private respondent, the latter not having any patent for the ae rial fuze which it claims
to ha ve i nvented a nd developed a nd allegedly i nfringed by pri vate respondent;

b. The ca se being a n action for cancellation or i nvalidation of private respondents Letters Patent over i ts own aerial fuze, the proper venue is the
Offi ce of the Director of Pa tents;

c. The tri al court acted in gra ve a buse of discretion and or in excess of jurisdiction in finding that petitioner has fully establ ished its clear ti tle or
ri ght to preliminary i njunction;

d. The tri al court acted in grave a buse of discretion and/or i n excess o f jurisdiction i n granting the preliminary i njunction, it being disruptive of the
s ta tus quo; a nd

e. The tri al court a cted in gra ve abuse of discretion and/or in excess of jurisdiction in gra nting the preliminary i njunction thereby deprivi ng private
res pondent of i ts property ri ghts over the patented a erial fuze a nd ca use it i rreparable damages.

On November 9, 1994, the res pondent court rendered the now assailed decision reversing the tri al courts Order of December 29, 1993 a nd
di s missing the complaint filed by petitioner.

The moti on for reconsideration was a lso denied on Ja nuary 17, 1995.11 Hence, this present petition.

It i s petitioners contention that i t can file, under Section 42 of the Patent La w (R.A. 165), a n action for infringement not as a patentee but as a n
enti ty i n possession of a ri ght, title or i nterest in a nd to the patented i nvention. It advances the theory tha t while the absence of a patent may
prevent one from lawfully s uing a nother for i nfringement of said patent, such absence does not bar the first true a nd a ctual inventor of the
pa tented invention from suing a nother who was granted a patent i n a s uit for declaratory or i njunctive relief recognized unde r American patent
l a ws. This remedy, petitioner points out, may be likened to a ci vil action for infringement under Section 42 of the Philippine Pa tent La w.

We fi nd the a bove arguments untenable.

Secti on 42 of R.A. 165, otherwise known as the Pa tent La w, explicitly provides:

SECTION. 42. Ci vi l a ction for infringement. Any patentee, or anyone possessing any ri ght, ti tle or interest i n a nd to the pat ented invention, whose
ri ghts have been i nfringed, may bring a civil a ction before the proper Court of First Instance (now Regional Trial court), to recover from the infringer
da mages sustained by reason of the i nfringement and to secure an i njunction for the protection of his ri ght. x x x

Under the a forequoted l aw, only the patentee or his s uccessors-in-interest may fi le an a ction for i nfringement. The phrase a nyone possessing any
ri ght, ti tle or i nterest i n and to the patented i nvention upon which petitioner maintains its present s uit, refers only to th e patentees successors-in-
i nterest, assignees or gra ntees since a ctions for infringement of patent may be brought i n the name of the person or persons interested, whether
a s patentee, a ssignees or grantees, of the exclusive right.12 Moreover, there ca n be no i nfringement of a patent until a pate nt has been issued,
s i nce whatever right one has to the i nvention covered by the patent arises a lone from the grant of patent.13 In short, a person or entity who has
not been granted letters patent over an invention and has not a cquired any ri ght or title thereto either a s assignee or a s li censee, has no cause of
a cti on for i nfringement because the ri ght to maintain an infringement suit depends on the existence of the patent.14cräläwvirtualibräry

Peti ti oner a dmits i t has no patent over i ts aerial fuze. Therefore, i t has no l egal basis or ca use of a ction to i nstitute the petition for i njunction a nd
da mages arising from the alleged infringement by pri vate respondent. While petitioner cl aims to be the first inventor of the aerial fuze, still it has
no ri ght of property over the same upon which it ca n maintain a s uit unless i t obtains a patent therefor. Under American jurisprudence, and
i nventor has no common-law right to a monopoly of his i nvention. He has the ri ght to ma ke, use and vend his own invention, but i f he vol untarily
di s closes i t, such as by offering it for sale, the world is free to copy a nd use i t with i mpunity. A pa tent, however, gi ves the inventor the ri ght to
excl ude all others. As a patentee, he has the exclusive ri ght of making, using or s elling the invention.15cräläwvirtualibräry

Further, the remedy of declaratory judgment or injunctive s uit on patent i nvalidity relied upon by petitioner cannot be likened to the civil a ction for
i nfri ngement under Section 42 of the Patent Law. The reason for this is that the said remedy is a vailable only to the patent holder or his s uccessors-
i n-interest. Thus, anyone who has no patent over an invention but claims to have a ri ght or interest thereto ca n not file a n act ion for declaratory
judgment or i njunctive suit which is not recognized in this jurisdiction. Said person, however, is not left without any remedy. He ca n, under Section
28 of the a forementioned law, file a petition for ca ncellation of the patent within three (3) years from the publication of s aid patent with the
Di rector of Patents a nd ra ise a s ground therefor that the person to whom the patent was issued is not the true and actual i nventor. Hence,
peti tioners remedy i s not to file an action for i njunction or i nfringement but to file a petition for ca ncellation of private respondent patent.
Peti ti oner however failed to do s o. As s uch, it ca n not now assail or i mpugn the va lidity of the private respondents letters patent by cl aiming that it
i s the true and actual i nventor of the aerial fuze.

Thus , as correctly ruled by the respondent Court of Appeals i n its assailed decision: s ince the petitioner (private respondent herein) is the patentee
of the disputed i nvention embraced by l etters of patent UM No. 6938 i ssued to it on January 23, 1990 by the Bureau of Pa tents , it has in i ts favor
not onl y the presumption of va lidity of i ts patent, but that of a legal a nd factual fi rst a nd true inventor of the i nvention.

In the ca se of Aguas vs . De Leon,16 we stated that:

The va l idity of the patent issued by the Philippine Pa tent Office in favor of the private respondent and the question over the investments, novelty
a nd usefulness of the i mproved process therein specified a nd described are matters which are better determined by the Philippines patent Office,
composed of experts i n their field, have, by the issuance of the patent i n question, a ccepted the thinness of the private respondents new ti les as a
di s covery. There is a presumption that the Philippine Pa tent Office has correctly determined the patentability of the i mprove ment by the priva te
res pondent of the process i n question.
In fi ne, in the absence of error or a buse of power or l ack or jurisdiction or grave abuse of discretion, we s ustain the assai led decision of the
res pondent Court of Appeal.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. No pronouncement a s to costs.

SO ORDERED.

Rega lado, (Chairman), Melo, Puno, and Mendoza, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 149907 April 16, 2009
ROMA DRUG and ROMEO RODRIGUEZ, as Proprietor of ROMA DRUG, Petitioners,
vs.
THE REGIONAL TRIAL COURT OF GUAGUA, PAMPANGA, THE PROVINCIAL PROSECUTOR OF PAMPANGA, BUREAU OF FOOD & DRUGS (BFAD) and
GLAXO SMITHKLINE, Respondents.

DE CI SI ON

TINGA, J.:

On 14 Augus t 2000, a team composed of the Na tional Bureau of Investigation (NBI) operatives a nd i nspectors of the Bureau of F ood and Drugs
(BFAD) conducted a raid on petitioner Roma Drug, a

dul y registered s ole proprietorship of petitioner Romeo Rodriguez (Rodriguez) operating a drug s tore l ocated a t San Ma tias, Guagua, Pa mpanga.
The ra i d was conducted pursuant to a s earch warrant1 i ssued by the Regional Trial Court (RTC), Branch 57, Angeles City. The raiding team s eized
s everal imported medicines, i ncluding Augmentin (375mg.) ta blets, Orbenin (500mg.) ca psules, Amoxil (250mg.) ca psules and Ampiclox (500mg.).2
It a ppears that Roma Drug is one of six drug s tores which were ra ided on or around the same ti me upon the request of SmithKli ne Beecham
Res earch Li mited (SmithKline), a duly registered corporation which is the local distributor of pharmaceutical products ma nufac tured by i ts parent
London-based corporation. The local SmithKline has since merged with Glaxo Wellcome Phil. Inc to form Glaxo Smi thKline, priva te respondent i n
thi s case. The seized medicines, which were manufactured by SmithKline, were i mported directly from abroad a nd not purchased through the local
Smi thKline, the a uthorized Philippine distributor of these products.

The NBI s ubsequently filed a complaint a gainst Rodriguez for vi olation of Section 4 (i n relation to Sections 3 a nd 5) of Republic Act No. 8203, a lso
known as the Special La w on Counterfeit Drugs (SLCD), with the Office of the Provi ncial Prosecutor i n San Fernando, Pa mpanga. The section
prohi bits the sale of counterfeit drugs, which under Section 3(b)(3), i ncludes "a n unregistered imported drug product." The t erm "unregistered"
s i gnifies the lack of registration with the Bureau of Pa tent, Trademark and Technology Tra nsf er of a tra demark, tra dename or other i dentification
ma rk of a drug i n the name of a natural or juridical person, the process of which is governed under Pa rt III of the Intellect ual Property Code.

In thi s case, there is no doubt that the subject s eized drugs are i dentical in content with their Philippine-registered counterparts. There is no claim
tha t they were adulterated i n any way or mi slabeled a t least. Their cl assification as "counterfeit" is based solely on the fa ct that they were
i mported from abroad a nd not purchased from the Philippine-registered owner of the patent or tra demark of the drugs.

Duri ng preliminary i nvestigation, Rodriguez challenged the constitutionality of the SLCD. However, Assistant Provi ncial Prose cutor Celerina C.
Pi neda s kirted the challenge and issued a Resolution dated 17 August 2001 recommending that Rodriguez be charged with vi olation of Section 4 (a)
of the SLCD. The recommendation was approved by Provi ncial Prosecutor Jesus Y. Ma narang a pproved the recommendation.3

Hence, the present Petition for Prohibition questing the RTC-Guagua Pa mpanga a nd the Provi ncial Prosecutor to desist from further prosecuting
Rodri guez, and that Sections 3(b)(3), 4 a nd 5 of the SLCD be declared unconstitutional. In gist, Rodriguez a sserts that t he challenged provisions
contra vene three provisions of the Constitution. The first is the equal protection clause of the Bill of Rights. The two othe r provisions a re Section
11, Arti cl e XIII, which mandates that the State make "essential goods, health a nd other social servi ces a vailable to a ll the people at a ffordable cost;"
a nd Section 15, Arti cle II, which states that it is the policy of the State "to protect and promote the ri ght to health of th e people and i nstill health
cons ciousness a mong them."

Through its Resolution dated 15 October 2001, the Court i ssued a temporary restraining order enjoining the RTC from proceeding w ith the trial
a ga inst Rodriguez, a nd the BFAD, the NBI and Glaxo Smithkline from prosecuting the petitioners.4

Gl a xo Smithkline and the Office of the Solicitor General (OSG) have opposed the petition, the l atter in behalf of public respondents RTC, Provi ncial
Pros ecutor a nd Bureau of Food a nd Drugs (BFAD). On the constitutional issue, Glaxo Smithkline asserts the rule that the SLCD is presumed
cons titutional, a rguing that both Section 15, Arti cle II and Section 11, Arti cle XIII "are not self -executing provisions, the disregard of which ca n give
ri s e to a ca use of a ction i n the courts." It a dds that Section 11, Arti cl e XIII in particular ca nnot be work "to the oppression and unlawful of the
property ri ghts of the legitimate manufacturers, i mporters or distributors, who take pains in having imported drug products registered before the
BFAD." Gl axo Smithkline further claims that the SLCD does not in fa ct conflict with the aforementioned constitutional provisions and in fact are in
a ccord wi th constitutional precepts in favor of the people’s ri ght to health.

The Offi ce of the Solicitor General ca sts the question as one of policy wisdom of the law that is, beyond the i nterference of the judiciary.5 Again,
the presumption of constitutionality of s tatutes is invoked, a nd the assertion is made that there is no clear a nd unequivocal breach of the
Cons ti tution presented by the SLCD.

II.

The constitutional aspect of this petition ra ises obvi ously i nteresting questions. However, s uch questions have in fact been mooted with the
pa ssage in 2008 of Republic Act No. 9502, a l so known as the "Universally Accessible Cheaper and Quality Medicines Act of 2 008".6

Secti on 7 of Rep. Act No. 9502 a mends Section 72 of the Intellectual Property Code in that the l ater law unequivocally gra nts third persons the right
to i mport drugs or medicines whose patent were registered i n the Philippines by the owner of the product:

Sec. 7. Secti on 72 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines, is hereby a mended to read as
fol l ows:

"Sec. 72. Li mi tations of Patent Rights. – The owner of a patent has no ri ght to prevent third parties from performing, without his a uthorization, the
a cts referred to in Section 71 hereof i n the following circumstances:
"72.1. Us i ng a patented product which has been put on the market in the Philippines by the owner of the product, or with his express consent,
i ns ofar as such use is performed a fter that product has been s o put on the said market: Provided, That, with regard to drugs and medicines, the
l i mitation on patent ri ghts shall apply a fter a drug or medicine has been i ntroduced in the Philippines o r a nywhere else in the world by the patent
owner, or by a ny party a uthorized to use the invention: Provi ded,

further, That the ri ght to import the drugs and medicines contemplated i n this s ection s hall be a vailable to a ny government a gency or a ny private
thi rd party;

"72.2. Where the act i s done privately a nd on a non-commercial scale or for a non-commercial purpose: Provi ded, That it does not significantly
prejudice the economic interests of the owner of the patent;

"72.3. Where the act consists of making or using exclusively for experimental use of the i nvention for s cientific purposes or educational purposes
a nd s uch other activities directly related to such scientific or educational experimental use;

"72.4. In the case of drugs and medicines, where the act i ncludes testing, using, making or s elling the i nvention including any data related thereto,
s ol ely for purposes reasonably related to the development and s ubmission of information and issuance of approvals by governme nt regulatory
a gencies required under any l aw of the Philippines or of a nother country that regulates the manufacture, construction, use or sale of a ny product:
Provi ded, That, i n order to protect the data submitted by the original patent holder from unfair commercial use provided in A rticle 39.3 of the
Agreement on Trade-Related Aspects of Intellectual Property Ri ghts (TRIPS Agreement), the Intellectual Property Office, i n consultation with the
a ppropriate government a gencies, s hall issue the a ppropriate rules and regulations necessary therein not later than one hundred twenty (120) days
a fter the enactment of this law;

"72.5. Where the act consists of the preparation for i ndividual cases, i n a pharmacy or by a medical professional, of a medicine in a ccordance with a
medi cal s hall a pply a fter a drug or medicine has been introduced i n the Philippines or anywhere else i n the world by the patent owner, or by a ny
pa rty a uthorized to use the invention: Provi ded, further, That the ri ght to import the drugs and medicines contemplated i n th is s ection s hall be
a va ilable to a ny government agency or a ny private third party; xxx7

The unqualified ri ght of priva te third parties s uch as petitioner to import or possess "unregistered imported drugs" in the Philippines i s further
confi rmed by the "Implementing Rules to Republic Act No. 9502" promulgated on 4 November 2008.8 The relevant provisions thereof read:

Rul e 9. Li mitations on Pa tent Rights. The owner of a patent has no ri ght to prevent third parties from performing, without hi s a uthorization, the
a cts referred to in Section 71 of the IP Code as enumerated hereunder:

(i ) Introduction in the Philippines or Anywhere Else in the World.

Us i ng a patented product which has been put on the market i n the Philippines by the owner of the product, or wi th hi s express consent, insofar a s
s uch use is performed a fter that product has been so put on the said market: Provi ded, That, with regard to drugs a nd medicin es, the l imitation on
pa tent ri ghts shall apply after a drug or medicine has been i ntroduced in the Philippines or a nywhere else in the world by the patent owner, or by
a ny pa rty a uthorized to use the i nvention: Provi ded, further, That the ri ght to i mport the drugs and medicines contemplated i n this section shall be
a va ilable to a ny government agency or a ny private third party. (72.1)1avvphi1

The drugs and medicines a re deemed introduced when they have been sold or offered for s ale a nywhere else in the world. (n)

It ma y be that Rep. Act No. 9502 di d not expressly repeal any provision of the SLCD. However, i t is clear that the SLCO’s cl assification of
"unregistered i mported drugs" as "counterfeit drugs," and of corresponding cri minal penalties therefore a re irreconcilably i n the i mposition conflict
wi th Rep. Act No. 9502 s i nce the l atter indubitably gra nts private third persons the unqualified ri ght to i mport or otherwise use s uch drugs. Where
a s ta tute of later date, s uch as Rep. Act No. 9502, cl early reveals an i ntention on the part of the legislature to abrogate a prior a ct on the s ubject
tha t i ntention must be given effect.9 When a s ubsequent enactment covering a field of operation coterminus with a prior s tatute ca nnot by a ny
rea s onable construction be given effect while the prior l aw remains i n operative existence because of irreconcilable conflict between the two acts,
the l a test l egislative expression prevails a nd the prior law yields to the extent of the conflict.10 Irreconcilable i nconsist ency between two laws
embra cing the same s ubject may exist when the later l aw nullifies the reason or purpose of the earlier act, s o that the latter l oses all meaning a nd
functi on.11 Legis posteriors priores contrarias abrogant.

For the reasons above-stated, the prosecution of petitioner is no l onger warranted and the quested wri t of prohibition s hould accordingly be
i s sued.

III.

Ha d the Court proceeded to directly confront the constitutionality of the assailed provisions of the SLCD, it is a pparent that i t would have a t least
pl a ced i n doubt the va lidity of the provisions. As wri tten, the law makes a criminal of a ny person who imports a n unregistere d drug regardless of
the purpose, even if the medicine ca n spell life or death fo r s omeone i n the Philippines. It does not accommodate the situation where the drug is
out of s tock in the Philippines, beyond the reach of a patient who urgently depends on it. It does not allow husbands, wives, children, s iblings,
pa rents to i mport the drug i n behalf of their l oved ones too physically ill to tra vel a nd a vail of the meager personal use exemption allotted by the
l a w. It discriminates, a t the expense of health, against poor Filipinos without means to tra vel abroad to purchase less expensive medicines i n favor
of thei r wealthier brethren able to do so. Less urgently perhaps, but still within the ra nge of constitutionally protected be havi or, i t deprives
Fi l ipinos to choose a l ess expensive regime for their health care by denying them a plausible and safe means of purchasing medicines at a cheaper
cos t.

The a bsurd results from this far-reaching ban extends to i mplications that deny the basic decencies of humanity. The l aw would make criminals of
doctors from a broad on medical missions of s uch humanitarian organizations s uch as the International Red Cross, the International Red Crescent,
Medi cin Sans Frontieres, a nd other

l i ke-minded groups who necessarily bring their own pharmaceutical drugs when they embark on their missions of mercy. After a ll, they are disabled
from i nvoking the bare "personal use" exemption afforded by the SLCD.

Even wors e is the fact that the l aw is not content with simply banning, a t civil costs, the importation of unregistered drugs . It equates the importers
of s uch drugs, many of whom motiva ted to do s o out of altruism or basic human l ove, with the malevolents who would alter or counterfeit
pha rmaceutical drugs for reasons of profit at the expense of public safety. Note that the SLCD is a special law, and the trad itional treatment of
penal provisions of s pecial l aws is that of malum prohibitum–or punishable regardless of motive or cri minal intent. For a l aw that is i ntended to
hel p s ave lives, the SLCD has revealed itself a s a heartless, s oulless legislative piece.

The cha llenged provisions of the SLCD apparently proscribe a range of constitutionally permissible behavior. It i s laudable that wit h the passage of
Rep. Act No. 9502, the Sta te has reversed course and allowed for a s ensible a nd compassionate approach with respect to the importation of
pha rmaceutical drugs urgently necessary for the people’s constitutionally-recognized ri ght to health.

WHEREFORE, the petition i s GRANTED i n part. A wri t of prohibition is hereby ISSUED commanding respondents from prosecuting pe titioner Romeo
Rodri guez for vi olation of Section 4 or Rep. Act No. 8203. The Temporary Restraining Order dated 15 October 2001 i s hereby ma de PERMANENT.
No pronouncements as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 115106 March 15, 1996
ROBERTO L. DEL ROSARIO, petitioner,
vs.
COURT OF APPEALS AND JANITO CORPORATION, respondents.

BELLOSILLO, J.:p

Roberto del Rosario petitions this Court to review the decision of the Court of Appeals 1 which set a side the order of the Regional Trial Court of
Ma ka ti granting a writ of preliminary i njunction i n his favor.

The a ntecedents: On 18 Ja nuary 1993 petitioner filed a complaint for patent i nfringement a gainst private respondent Ja nito Co rporation.2 Roberto
L. del Rosario alleged that he was a patentee of an audio equipment and i mproved audio equipment commonly known as the sing-along System or
ka ra oke under Letters Pa tent No. UM-5269 da ted 2 June 1983 a s well as Letters Patent No. UM-6237 da ted 14 November 1986 i ssued by the
Di rector of Patents. The effectivity of both Letters Patents was for five (5) years a nd was extended for another fi ve (5) yea rs starting 2 June 1988
a nd 14 November 1991, res pectively. He described his sing-along s ystem as a handy multi-purpose compact machine which incorporates an
a mplifier speaker, one or two tape mechanisms, optional tuner or ra dio a nd microphone mixer wi th features to enhance one's vo i ce, such as the
echo or reverb to stimulate a n opera hall or a s tudio s ound, with the whole s ystem enclosed i n one cabinet ca sing.

In the early part of 1990 petitioner l earned that private respondent was manufacturing a sing -along s ystem bearing the tra demark miyata or
mi ya ta karaoke substantially similar i f not identical to the s ing-along sys tem covered by the patents i ssued in his favor. Thus he sought from .the
tri a l court the issuance of a writ of preliminary i njunction to enjoin private respondent, its officers and everybody elsewhe re a cting on its behalf,
from us ing, s elling and advertising the mi yata or mi yata karaoke brand, the injunction to be made permanent a fter tri al, and praying f or damages,
a ttorney's fees a nd costs of suit.

On 5 February 1993 the tri al court temporarily restrained private respondent from m anufacturing, using and/or selling and advertising the miyata
s i ng-along system or a ny s ing-along sys tem s ubstantially i dentical to the sing-along system patented by petitioner until further orders.

On 24 February 1993 the tri al court i ssued a wri t of preliminary i njunction upon a bond on the basis of i ts finding that petitioner was a holder of a
uti l ity model patent for a sing-along system and that without his a pproval and consent private respondent was a dmittedly manufacturing a nd
s elling its own sing-along system under the brand name mi yata which was substantially similar to the patented utility mode 3 of petitioner.

Pri va te respondent a ssailed the order of 24 February 1993 di recting the i ssuance of the wri t by way of a petition for certiorari with prayer for the
i s suance of a writ of preliminary i njunction a nd a temporary restraining order before respondent Court of Appeals.

On 15 November 1993 res pondent appellate court gra nted the wri t and set aside the questioned order of the trial court. It expressed the vi ew that
there was no infringement of the patents of petitioner by the fact alone that private respondent had manufactu red the miyata karaoke or audio
s ys tem, a nd that the karaoke system was a universal product manufactured, a dvertised a nd marketed in most countries of the world long before
the pa tents were issued to petitioner. The motion to reconsider the grant of the wri t was denied;4 hence, the i nstant petition for review.

Thi s petition alleges that: (a) it was i mproper for the Court of Appeals to consider questions of fact in a certiorari procee ding; (b) the Court of
Appeals erred i n taking judicial notice of private respondent's s elf-servi ng presentation of facts; (c) the Court of Appeals erred in disregarding the
fi ndings of fact of the tri al court; a nd, (d) there was no basis for the Court of Appeals to grant a writ of preliminary i nju nction i n favor of private
res pondent.5

Peti ti oner a rgues that in a certiorari proceeding questions of fact a re not generally permitted the inquiry being l imited essentially to whether the
tri bunal has acted without or in excess of jurisdiction or with gra ve a buse of discretion; that respondent court s hould not have disturbed but
res pected instead the factual findings of the trial court; that the mova nt has a clear l egal ri ght to be protected and that t here is a vi olation of such
ri ght by pri va te respondent. Thus, petitioner herein claims, he has satisfied the l egal requisites to justify the order of the tri al court directing the
i s suance of the wri t of i njunction. On the other hand, in the absence of a patent to justify the manufacture and sale by priva te respondent of sing-
a l ong systems, it is not entitled to the injunctive relief granted by respondent appellate court.

The crux of the controversy before us hinges on whether respondent Court of Appeals erred i n finding the trial court to have committed grave
a buse of discretion in enjoining private respondent from manufacturing, selling a nd a dvertising the miyata karaoke brand sing-along system for
bei ng substantially similar i f not identical to the a udio equipment covered by l etters patent issued to petitioner.

Injunction is a preservative remedy for the protection of s ubstantive ri ghts or i nterests. It is not a cause of a ction in itself but merely a provisi onal
remedy, a n a djunct to a main s uit. The controlling reason for the existence of the judicial power to i ssue the writ is that t he court ma y thereby
prevent a threatened or continuous irremediable injury to s ome of the parties before their claims ca n be thoroughly i nvestiga ted and advisedly
a djudicated. It is to be resorted to only when there is a pressing necessity to a void i njurio us consequences which ca nnot be remedied under any
s ta ndard of compensation. The a pplication of the writ rests upon a n alleged existence of a n emergency or of a s pecial reason for s uch a n order
before the ca se can be regularly heard, a nd the essential conditions for granting such temporary i njunctive relief a re that the complaint alleges
fa cts which appear to be sufficient to constitute a cause of action for injunction and that on the entire showing from both s ides, i t appears, in vi ew
of a l l the ci rcumstances, that the i njunction is reasonably necessary to protect the legal ri ghts of plaintiff pending the l itigation.6

A prel iminary i njunction may be granted at a ny ti me after the commencement of the a ction a nd before judgment when it i s established that the
defendant is doing, threatens, or is a bout to do, or is procuring or s uffering to be done, s ome a ct probably i n vi olation of the plaintiff's rights. Thus,
there a re only two requisites to be satisfied i f a n injunction is to issue, namely, the existence of the ri ght to be protected, and that the facts a gainst
whi ch the i njunction is to be directed a re vi olative of said right.7

For the wri t to i ssue the interest of petitioner i n the controversy or the ri ght he seeks to be protected must be a present ri ght, a l egal right which
mus t be shown to be clear a nd positive.

In thi s regard Sec. 55 of R.A. 165 a s amended, known a s The Patent La w, provides —
Sec. 55. Des ign patents and patents for utility models. — (a) Any new, original, a nd ornamental design for a n a rticle of manufacture and (b) new
model or i mplements or tools or of any i ndustrial product or of part of the same, which does not possess the quality of i nven tion but which is of
pra cti cal utility by reason of its form, configuration, construction or comp osition, may be protected by the author thereof, the former by a patent
for a design a nd the latter by a patent for a utility model, i n the same manner and subject to the same provisions a nd requirements as relate to
pa tents for inventions insofar as they a re a pplicable, except as otherwise herein provi de . . . .

Admi ttedly, petitioner i s a holder of Letters Pa tent No. UM-5629 dated 2 June 1985 i ssued for a term of five (5) years from the gra nt of a Utility
Model herein described —

The construction of an audio equipment comprising a substantially cubical casing having a window at i ts rear a nd upper corner fitted with a slightly
i ncl ined control panel, said cubical (casing) having a vertical partition wall therein defining a rear compartment and a front compartment, a nd said
front compartment s erving as a speaker baffle; a tra nsistorized amplifier ci rcuit having an echo s ection and writhed in at l e ast the printed circuit
boa rds placed i nside said rear compartment of said casing and attached to said vertical partition wall, s aid transistorized a mplifier ci rcuit ca pable of
bei ng operated from outside, through va rious controls mounted on s aid control panel of such casing; a loud speaker fitted ins ide said front
compa rtment of said casing a nd connected to the output of the main a udio a mplifier section of s aid transistorized amplifier ci rcuit a nd a tape
pl a yer mounted on the top wall of said casing a nd said ta pe player being connected i n conventional manner to said tra nsistori zed amplifier circuit.8

Aga i n, on 14 November 1986 petitioner was granted Letters Patent No. UM-6237 for a term of five (5) years from the grant of a Utility Model
des cribed as —

In a n a udio equipment consisting of a first cubical casing having an opening at i ts rear a nd upper rear portion an d a partition therein forming a rear
compa rtment a nd a front compartment servi ng as a l oud speaker baffle, a control panel formed by verti cal a nd horizontal secti ons, a transistorized
a mplifier circuit wired i n at l east two printed circuit boards attached at the back of said control panel, a fi rst l oud speaker fitted i nside said first
compa rtment of such first casing and connected to the output of said tra nsistorized amplifier ci rcuit; the i mprovement wherei n said control panel
bei ng removably fi tted to said first cubical casing and further comprises a s et of ta pe recorder and ta pe player mounted on the vertical section of
s a id control panel a nd said recorder a nd player a re likewise connected to said tra nsistorized amplifier ci rcuit; a second cubical casing havi ng an
opening at i ts rear, said s econd cubical ca sing having (being?) provi ded with a vertical partition therein defining a rear co mpartment and a front
compa rtment, said rear compartment being provided with a door and enclosing therein a s et of ta pe ra cks and said front compartment s erving as
l oud speaker baffle, said second cubical casing being adapted to said first cubical casing so that said first and second casi ngs are s ecured together in
compa ct a nd portable form; a nd a second l oud speaker fitted i nside said front compartment of said casing and connected to the output of said
a mplifier circuit.9

The terms of both Letters Pa tents were extended for a nother five (5) years each, the first beginning 2 June 1988 a nd the seco nd, 14 November
1991.

The Pa tent La w expressly a cknowledges that any new model of implements or tools of a ny i ndustrial product even if not possessed of the quality of
i nvention but which is of practical utility is entitled to a patent for utility model. 10 Here, there is no dispute that the l etters patent issued to
peti tioner a re for utility models of audio equipment.

In i ssuing, reissuing or wi thholding patents a nd extensions thereof, the Director of Patents determines whether the patent is new and whether the
ma chine or device is the proper s ubject of patent. In passing on a n a pplication, the Director decides not only questions of l aw but a lso questions of
fa ct, i .e. whether there has been a prior public use or sale of the article sought to be patented. 11 Where petitioner i ntroduces the patent i n
evi dence, if it i s in due form, i t affords a prima facie presumption of its correctness a nd va lidity. The decision of the Director of Pa tents in granting
the pa tent i s always presumed to be correct, and the burden then s hifts to respondent to overcome this presumption by compete nt evidence. 12

Under Sec. 55 of The Pa tent La w a utility model s hall not be considered "new" i f before the application for a patent it has been publicly known or
publicly used in this country or has been described in a printed publication or publications ci rculated within the country, o r i f i t is substantially
s i milar to a ny other utility model so known, used or described within the country. Respondent corporation failed to present b efore the trial court
competent evidence that the utility models covered by the Letters Pa tents issued to petitioner were not new. This i s evident from the testimony of
Ja ni to Cua, President of respondent Janito Corporation, during the hearing on the issuance of the injunction, to wi t —

Q. Mr. Cua , you tes tified that there a re (sic) s o many other companies which already have (sic) the sing-along system even before the patent
a pplication of Mr. del Rosario a nd as a matter of fact you mentioned Sanyo, Sony a nd Sharp, is that ri ght?

A. Mus i cmate a nd Asahi.

Q. Now do you recall that your l awyer filed with this Honorable Court a n Urgent Moti on to Li ft Temporary Restraining Order of this Honorable
Court. I a m s ure you were the one who provided him with the information a bout the many other companies selling the sing-along system, is that
ri ght? These 18 which you enumerated here.

A. More tha n that because. . . .

Q. Now you wi ll agree with me that in your s tatement Sharp you put the date as 1985 a greed?

A. No.

Q. You mean your l awyer was wrong when he put the word Sharp 1985?

A. Ma ybe I i nformed him a lready.

xxx xxx xxx

Q. You mean your l awyer was wrong in a lleging to this Court that Sharp manufactured and sold (in) 1985 a s found i n the Urgent Motion?

A. Si nce i t is urgent i t is more or less.

Q. The s ame also with Sanyo 1985 whi ch you put, more or l ess?
A. Sa nyo is wrong.

Q. It i s not 1985?

A. Sa nyo is 1979 I thi nk.

Q. So thi s is a lso wrong. Pa nasonic 1986 i s a lso wrong?

A. Pa nasonic I think.

Q. So you don't think this is also correct.

A. The da te?

Q. So you don't think a lso that this allegation here that they manufactured i n 1986 i s correct?

A. Wrong. Ea rlier.

Q. Na ti onal by Precision Electronic 1986 this is a lso wrong?

A. I thi nk earlier.

Q. So tha t means all your a llegations here from 2 to 5 a re wrong? OK. By Phi lipps Philippines 1986, thi s is also correct or wrong?

A. More or l ess. We said more or l ess.

Q. Na ka butshi by Asahi Electronics that is a lso wrong?

A. No tha t i s 1979.

Q. El ectone by DICO 1989 i s this correct or wrong?

A. Correct. More or l ess.

Q. Skyl ers 1985 i s that correct or wrong?

A. It i s more or less because it is urgent. We don't have ti me to exact the date.

Q. Mus i cmate of G.A. Yupangco 1981 this is more or l ess? You are not also s ure?

A. 95% s ure.

Q. Now you a re sure 1981.

A. Thi s one because. . . .

Q. Mr. Wi tness s o you are now tryi ng to tell this Honorable Court that all your allegations here of the dates in this Urgent Motion except for
Mus i cmate which you are only 95% s ure they a re all wrong or they are also more or less or not s ure, is that ri ght?

A. More or l ess.

Q. Now do you have any proof, any a dvertisement, a nything in wri ting that would s how that all these i nstruments are in the ma rket, do you have it.

A. No I don't have it because. . . .

Q. No I a m s atisfied with your a nswer. Now Mr. Wi tness, you don't also have a proof that Akai instrument that you said was a lso in the market
before 1982? You don't have any written proof, a ny a dvertisement?

A. I ha ve the product.

Q. But you ha ve not brought the product i n (sic) this Honorable Court, ri ght?

A. No. 13

As ma y be gleaned herein, the rights of petitioner as a patentee have been s ufficiently established, contrary to the findings and conclusions of
res pondent Court of Appeals. Consequently, under Sec. 37 of The Patent law, petitioner as a patentee s hall have the exclusive ri ght to make, use
a nd s ell the patented machine, a rticle or product for the purpose of i ndustry or commerce, throughout the territory of the Ph ilippines for the term
of the pa tent, a nd s uch making, using or s elling by a ny person without authorization of the patentee constitutes infringement of his patent.

Peti ti oner established before the trial court that respondent Janito Corporation was manufacturing a similar sing-along s ystem bearing the
tra demark miyata which infringed his patented models. He also alleged that both his own patented a udio equipment and responde nt's s ing-along
s ys tem were constructed in a casing with a control panel, the ca sing havin g a vertical partition wall defining the rear compartment from the front
compa rtment, with the front compartment consisting of a l oud speaker baffle, both containing a transistorized amplifier ci rcuit ca pable of being
opera ted from outside through va rious controls mounted on the control panel, a nd that both had loud s peakers fitted inside the front
compa rtment of the casing and connected to the output of the main audio a mplifier s ection both having a tape recorder a nd a t ape player
mounted on the control panel with the ta pe recorder and tape player being both connected to the tra nsistorized amplifier ci rcuit. 14
Res pondent Janito Corporation denied that there was a ny vi olation of petitioner's patent ri ghts, a nd ci ted the differences be tween i ts miyata
equipment and petitioner's a udio equipment. But, i t must be emphasized, respondent only confined i ts comparison to the first model, Utility
Model No. 5269, a nd completely disregarded Utility Model No. 6237 which i mproved on the fi rst. As described by respondent corporation, 15
thes e differences a re —

Fi rs t. Under Utility Model 5269, the unit is a substantially cubical casing with a window a t its rear a nd upper corner fitted with slightly i nclined
control panel, while the miyata equipment is a substantially rectangular casing with panel vertically positioned.

Second. Under Utility Model 5269, the cubical casing has a vertical partition wall defining a rear compartment and a front co mpartment serving as
a s peaker baffle, while the miyata equipment has no rear compartment and front compartment in i ts rectangular ca sing; i t has only a front
compa rtment horizontally divi ded i nto 3 compartments like a 3-storey building, the 1st compartment being a kit, the 2nd also the speaker, and the
3rd a re ki ts.

Thi rd. Under Uti lity Model No. 5269, a tra nsistorized amplifier ci rcuit with an echo section wired i n at l east 2 pri nted circuit boards is pla ced inside
the rea r compartment of the casing and attached to the vertical partition wall, the printed circuit board having 1 a mpli fier a nd 1 echo, while in the
mi ya ta equipment the amplifier is mainly IC (Integrated Ci rcuit) — powered with 8 pri nted circuit boards almost all of which a re IC controlled, with
1 a mplifier wi th power supply, 1 ma in tuner, 1 equalizer (3-band), 1 IC controlled vol ume control, 1 echo IC, 1 ta pe pream, 1 i nstrument a nd 1
wi reless microphone.

Fourth. Under Utility Model 5269, 4 pri nted circuits a re placed inside the compartment of its casing a ttached to the vertical partition wall, while i n
the mi ya ta, the 7 pri nted circuit boards (PCB) are attached to the front panel and 1 a ttached to the horizontal divider.

Fi fth. Under Utility Model 5269, there a re va rious controls mounted on the control panel of the casing, while in miya ta, the va rious controls are a ll
s eparated from the printed ci rcuit boards a nd the va rious controls are all attached thereto.

Si xth. Under Utility Model 5269, a l oud s peaker fi tted inside the front compartment of the ca sing is connected to the output of the main a udio
a mplifier section of the tra nsistorized amplifier ci rcuit, while i n miyata, there is no other way but to use 2 l oud speakers connected to the ampl ifier.

Seventh. Under Utility Model 5269, a ta pe player i s mounted on the top wall of the ca sing, while i n miyata, 2 ta pe players are used mounted s ide
by s i de a t the front.

It i s elementary tha t a patent may be infringed where the essential or substantial features of the patented i nvention a re tak en or a ppropriated, or
the device, machine or other subject matter alleged to infringe is s ubstantially i dentical with the patented invention. In order to i nfringe a patent, a
ma chine or device must perform the same function, or accomplish the same result by i dentical or substantially i dentical means and the principle or
mode of operation must be substantially the same. 16

It ma y be noted that respondent corporation failed to present before the trial court a cl ear, competent and reliable comparison between its own
model and that of petitioner, and disregarded completely petitioner's utility Model No. 6237 whi ch i mproved on his first patented model.
Notwi thstanding the differences cited by respondent corporation, it did not refute a nd disprove the allegations of petitioner before the trial court
tha t: (a ) both are used by a singer to s ing and amplify his voi ce; (b) both are used to s ing with a minus-one or multiplex ta pes, or that both are used
to pl a y minus-one or s tandard cassette ta pes for s inging or for l istening to; (c) both a re used to sing with a minus -one tape and multiplex tape a nd
to record the singing and the a ccompaniment; (d) both are used to s ing with live accompaniment a nd to record the same; (e) bot h are used to
enhance the voice of the singer using echo effect, treble, bass and other controls; (g) both are equipped with casset te ta pe decks which a re
i ns talled with one being used for playback a nd the other, for recording the singer a nd the accompaniment, a nd both may a lso b e used to record a
s peaker's voice or i nstrumental playing, like the guitar a nd other instruments; (h) both are
enca sed i n a box-like ca binets; a nd, (i ) both can be used with one or more microphones. 17

Cl ea rly, therefore, both petitioner's and respondent's models involve substantially the same modes of operation and produce s ubstantially the
s a me if not i dentical results when used.

In vi ew thereof, we find that petitioner had established before the trial court prima facie proof of vi olation of his ri ghts as patentee to justify the
i s suance of a writ of preliminary i njunction i n his fa vor during the pendency of the main suit for damages resulting from the alleged infringement.

WHEREFORE, the Decision of the Court of Appeals dated 15 November 1993 i s REVERSED and SET ASIDE a nd the Order of the tri al court dated 24
February 1993 gra nting petitioner the wri t of i njunction is REINSTATED.

The tri al court is directed to continue with the proceedings on the main a ction pending before it i n order to resolve with dispatch the issues therein
pres ented.

SO ORDERED.

Pa di lla, Vi tug, Kapunan a nd Hermosisima, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 97343 September 13, 1993
PASCUAL GODINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, SPECIAL FOURTH DIVISION and SV-AGRO ENTERPRISES, INC., respondents.

ROMERO, J.:

Through this petition for revi ew i n certiorari of a decision of the Court of Appeals affirming the decision of the tri al cour t, petitioner Pa scual
Godi nes seeks to reverse the adverse decision of the Court a quo that he was liable for infringement of patent and unfair competition. The
di s positive portion of the assailed decision is hereby quoted to wit:

WHEREFORE, with the elimination of the a ward for a ttorney's fees, the judgment a ppealed from is hereby AFFIRMED, with costs a gainst
a ppellant.1

The pa tent i nvolved i n this ca se is Letters Patent No. UM-2236 i ssued by the Philippine Pa tent Office to one Ma gdalena S. Vi llaruz on July 15, 1976.
It covers a utility model for a hand tra ctor or power tiller, the main components of which a re the following: "(1) a va cuumatic house float; (2) a
ha rrow with adjustable operating handle; (3) a pair of paddy wheels; (4) a protective water covering for the engine main drive; (5) a tra nsmission
ca s e; (6) a n operating handle; (7) an engine foundation on the top midportion o f the va cuumatic housing float to which the main engine drive is
deta chedly i nstalled; (8) a frontal fra me extension above the quarter — ci rcularly s haped water covering hold (sic) in place the tra nsmission case;
(9) a V-belt connection to the engine main drive with tra nsmission gear through the pulley, a nd (10) a n i dler pulley i nstalled on the engine
foundation."2 The patented hand tractor works in the following manner: "the engine drives the tra nsmission gear thru the V -belt, a driven pulley
a nd a tra nsmission shaft. The engine drives the tra nsmission gear by tensioning of the V-belt which is controlled by the idler pulley. The V-belt
dri ves the pulley a ttached to the transmission gear which i n turn drives the shaft where the paddy wheels are a ttached. The operator handles the
ha nd tractor through a handle which is i nclined upwardly a nd supported by a pair of s ubstanding pipes and reinforced by a U -shaped G.I. pipe at
the V-s haped end."3

The a bove mentioned patent was acquired by SV-Agro Industries Enterprises, Inc., herein priva te respondent, from Ma gdalena Villaruz, i ts
cha i rman and president, by vi rtue of a Deed of Assignment executed by the latter i n its favor. On October 31, 1979, SV -Agro Industries caused the
publication of the patent i n Bulletin Today, a newspaper of general ci rculation.

In a ccordance with the patent, priva te respondent manufactured and sold the patented power tillers with the patent i mprinted on them. In 1979,
SV-Agro Industries s uffered a decline of more than 50% in sales i n i ts Mo lave, Zamboanga del Sur branch. Upon investigation, i t discovered that
power ti llers similar to those patented by priva te respondent were being manufactured and sold by petitioner herein. Conseque ntly, private
res pondent notified Pa scual Godines a bout the existing patent and demanded that the latter s top s elling and manufacturing s imilar power tillers.
Upon petitioner's failure to comply wi th the demand, SV-Agro Industries filed before the Regional Trial Court a complaint for infringement of
pa tent a nd unfair competition.

After tri a l, the court held Pascual Godines liable for i nfringement of patent a nd unfair competition. The dispositive portion of the decision reads as
fol l ows:

WHEREFORE, premises considered, JUDGMENT is hereby rendered in fa vor of the plaintiff SV-Agro Industries Enterprises, Inc., a nd against
defendant Pascual Godines:

1. Decl aring the writ of preliminary i njunction issued by this Court a gainst defendant a s permanent;

2. Orderi ng defendant Pa scual Godines to pay plaintiff the s um of Fifty Thousand Pesos (P50,000.00) a s damages to i ts business reputation a nd
goodwill, plus the further s um of Eighty Thousand Pesos (P80,000.00) for unrealized profits during the period defendant was m anufacturing and
s elling copied or i mitation floating power ti ller;

3. Orderi ng the defendant to pay the plaintiff, the further sum of Eight Thousand Pesos (P8,000.00) a s reimbursement of attorney's fees and other
expenses of litigation; and to pay the costs of the suit.

SO ORDERED.4

The decision was affirmed by the appellate court.

Thereafter, this petition was filed. Petitioner maintains the defenses which he ra ised before the trial a nd a ppellate courts, to wit: that he was not
enga ged in the manufacture a nd sale of the power tillers as he made them only up on the s pecial order of his customers who gave their own
s pecifications; hence, he could not be liable for i nfringement of patent a nd unfair competition; a nd that those made by him w ere different from
thos e being manufactured and sold by private respondent.

We fi nd no merit in his a rguments. The question of whether petitioner was manufacturing and selling power tillers is a questi on of fa ct better
a ddressed to the l ower courts. In dismissing the first a rgument of petitioner herein, the Court of Appeals quo ted the findings of the court, to wit:

It i s the contention of defendant that he did not manufacture or ma ke i mitations or copies of plaintiff's turtle power ti ller as what he merely did
wa s to fabricate his floating power tiller upon specifications and designs of those who ordered them. Howeve r, this contention appears untenable
i n the light of the following circumstances: 1) he admits in his Answer that he has been manufacturing power ti llers or hand tractors, selling and
di s tributing them long before plaintiff s tarted selling its turtle power tiller in Zamboanga del Sur and Mi samis Occi dental, meaning that defendant
i s principally a manufacturer of power ti llers, not upon specification a nd design of buyers, but upon his own specification a nd design; 2) i t would be
unbelieva ble that defendant would fabricate power tillers similar to the turtle power tillers of plaintiff upon s pecifications of buyers without
requi ring a job order where the specification and designs of those ordered are s pecified. No document was (sic) ever been pre sented s howing s uch
job orders, and it i s rather unusual for defendant to manufacture something without the s pecification a nd designs, considering that he is an
engi neer by profession and proprietor of the Ozamis Engineering s hop. On the other hand, it is also highly unusual for buyers to order the
fa bri cation of a power tiller or hand tra ctor a nd a llow defendant to manufacture them merely based on their verbal instructions. This is contrary to
the us ual business a nd manufacturing practice. This is not only ti me consuming , but costly because it i nvolves a tri al and error method, repeat jobs
a nd material wastage. Defendant judicially a dmitted two (2) units of the turtle power tiller sold by him to Policarpio Berondo.5

Of general acceptance is the rule i mbedded i n our jurisprudence that ". . . the juri sdiction of the Supreme Court in cases brought to i t from the
Court of Appeals i n a petition for certiorari under Rule 45 of the Rules of Court is limited to the review of errors of l aw, a nd that said a ppellate
court's findings of fact a re conclusive upon this Court."6

The fa ct that petitioner herein manufactured and sold power ti llers without patentee's authority has been established by the courts despite
peti tioner's claims to the contrary.

The question now a rises: Did petitioner's product i nfringe upon the patent of private respondent?

Tes ts have been established to determine infringement. These are (a) literal infringement; a nd (b) the doctrine of equivalent s.7 In using literal
i nfri ngement a s a test, ". . . res ort must be had, i n the first instance, to the words of the claim. If a ccused matter cl early falls within the claim,
i nfri ngement i s made out a nd that is the end of i t."8 To determine whether the particular i tem falls within the l iteral meani ng of the patent claims,
the court must juxtapose the cl aims of the patent and the accused product within the overall context of the claims and specifications, to determine
whether there is exact i dentity of a ll material elements.9

The tri al court made the following observa tion:

Sa mples of the defendant's floating power tiller have been produced a nd i nspected by the court a nd compared with that of the turtle power ti ller
of the pl aintiff (see Exhibits H to H-28). In a ppearance a nd form, both the floating power tillers of the defendant and the turtle power tiller of the
pl a intiff are virtually the same. Defendant admitted to the Court that two (2) of the power inspected on Ma rch 12, 1984, were manufactured and
s ol d by him (see TSN, March 12, 1984, p. 7). The three power ti llers were placed alongside with each other. At the center was the turtle power tiller
of pl aintiff, and on both sides thereof were the floating power ti llers of defendant (Exhibits H to H -2). Witness Rodrigo took photographs of the
s a me power tillers (front, side, top and back vi ews for purposes of comparison (see Exhibits H -4 to H-28). Viewed from a ny perspective or a ngle,
the power ti ller of the defendant is identical a nd similar to that of the turtle power tiller of plaintiff in form, configura tion, design and appearance.
The pa rts or components thereof are vi rtually the same. Both have the ci rcularly-shaped va cuumatic housing float, a paddy i n front, a protective
wa ter covering, a tra nsmission box housing the tra nsmission gears, a handle which is V-shaped and inclined upwardly, attached to the side of the
va cuumatic housing float a nd s upported by the upstanding G.I. pipes a nd a n engine base a t the top midportion of the vacuumati c housing float to
whi ch the engine drive may be attached. In operation, the floating power ti ller of the defendant operates a lso in similar manner a s the turtle power
ti l ler of plaintiff. This was admitted by the defendant himself in court that they a re operating on the same principles. (TSN, August 19, 1987, p. 13)
10

Moreover, i t is a lso observed that petitioner a lso called his power tiller as a floating power ti ller. The patent issued by the Patent Office re ferred to
a "fa rm i mplement but more particularly to a turtle hand tractor having a va cuumatic housing float on which the engine drive i s held in place, the
opera ting handle, the harrow housing with its operating handle a nd the paddy wheel protective covering." 11 It a ppears from t he foregoing
obs erva tion of the trial court that these claims of the patent a nd the features of the patented utility model were copied by petitioner. We a re
compelled to a rrive a t no other conclusion but that there was i nfringement.

Peti ti oner's argument that his power tillers were different from private respondent's is that of a drowning man cl utching a t straws.

Recognizing that the logical fallback position of one i n the place of defendant is to aver that his product i s different from the patented one, courts
ha ve a dopted the doctrine of equivalents which recognizes that minor modifications i n a patented i nvention are sufficient to put the item beyond
the s cope of literal infringement. 12 Thus, according to this doctrine, "(a)n i nfringement a lso occurs when a devi ce appropri ates a prior invention by
i ncorporating its i nnovative concept and, albeit with s ome modification a nd change, performs substantially the same function i n substantially the
s a me way to a chieve substantially the same result." 13 The reason for the doctrine of equivalents is that to permit the imita tion of a patented
i nvention which does not copy a ny l iteral detail would be to convert the protection of the patent grant i nto a hollow and useless thing. Such
i mi tation would l eave room for — i ndeed encourage — the unscrupulous copyist to make unimportant a nd insubstantial changes a nd s ubstitutions
i n the patent which, though adding nothing, would be enough to ta ke the copied matter outside the claim, and hence outside th e reach of the law.
14

In thi s case, the trial court observed:

Defendant's witness Eduardo Cañete, employed for 11 yea rs as welder of the Ozamis Engineering, and therefore a ctually i nvolved in the making of
the fl oating power ti llers of defendant tri ed to explain the difference between the floating power ti llers made by the defendant. But a careful
exa mination between the two power ti llers will show that they will operate on the same fundamental principles. And, a ccording to establish
juri s prudence, i n infringement of patent, similarities or differences are to be determined, not by the names of things, but i n the light of what
el ements do, and substantial, rather than technical, identity i n the test. More specifically, i t is necessary a nd sufficient to constitute equivalency
tha t the same function ca n be performed i n s ubstantially the s ame way or ma nner, or by the s ame or s ubstanti ally the same, principle or mode of
opera tion; but where these tests a re satisfied, mere differences of form or name are i mmaterial. . . . 15

It a l so s tated:

To es tablish a n infringement, i t is not essential to show that the defendant adopted the devi ce or process in every particular; Proof of a n a doption
of the s ubstance of the thing will be sufficient. "In one sense," said Justice Brown, "i t may be said that no device can be a djudged an infringement
tha t does not s ubstantially correspond with the patent. But a nother construction, which would limit these words to exact mechanism described i n
the pa tent, would be s o obvi ously unjust that no court could be expected to a dopt it. . . .

The l aw will protect a patentee against i mitation of his patent by other forms and proportions. If two devi ces do the same work in s ubstantially the
s a me way, a nd accomplish substantially the same result, they a re the same, even though they di ffer i n name, form, or shape. 1 6

We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No. 165, a s a mended, providing, i nter alia:

Sec. 37. Ri ght of Pa tentees. — A pa tentee s hall have the exclusive ri ght to make, use a nd s ell the patented machine, article or product, and to use
the pa tented process for the purpose of i ndustry or commerce, throughout the territory of the Philippines for the terms of th e patent; a nd such
ma ki ng, using, or s elling by a ny person without the authorization of the Pa tentee constitutes infringement of the patent. (Emphasis ours)
As fa r a s the issue regarding unfair competition is concerned, suffice it to s ay that Republic Act No. 166, a s a mended, provi des, inter alia:

Sec. 29. Unfa ir competition, rights a nd remedies. — . . .

xxx xxx xxx

In pa rticular, a nd without i n a ny way l imiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

(a ) Any person, who in selling his goods shall give them the general a ppearance of goods of another manufacturer or dealer, either as to the goods
thems elves or i n the wra pping of the packages i n which they a re contained, or the devi ces or words thereon, or i n a ny other f eature of their
a ppearance, which would be likely to i nfluence purchasers that the goods offered are those of a manufacturer or dealer other than the actual
ma nufacturer or dealer, or who otherwise clothes the goods with such a ppearance as s hall deceive the public and defraud a noth er of his legitimate
tra de. . . .

xxx xxx xxx

Cons idering the foregoing, we find no reversible error i n the decision of the Court of Appeals affirming with modification th e decision of the trial
court.

WHEREFORE, premises considered, the decision of the Court of Appeals is hereby AFF IRMED a nd this petition DENIED for lack of merit.

Bi din, Melo and Vitug, JJ., concur.

Fel iciano, J., i s on l eave.