ARELLANO UNIVERSITY SCHOOL OF LAW

CASES IN COPYRIGHT Compilation of Cases in IPL Copyright

Compiled by: Anne Meagen DC. Maningas

AUSL| SUMMER 2014 | COPY000 | Atty. Josephine Santiago

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Topic - Functions/Role of IPO/Bureaus

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. NO. 156041 February 21, 2007

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

President, MANUEL J. CHAVEZ, Petitioner, vs. FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT

OF AGRICULTURE, FPA OFFICER- IN-CHARGE CESAR M. DRILON, AND FPA DEPUTY

DIRECTOR DARIO C. SALUBARSE, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking to set aside the Decision1 of the Regional Trial Court of Quezon City, Branch 90 (RTC) dated November 5, 2002. The case commenced upon petitioners filing of a Petition For Declaratory Relief With Prayer For Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining Order with the RTC on January 4, 2002. Petitioner, a non-stock corporation duly organized and existing under the laws of the Philippines, is an association of pesticide handlers duly licensed by respondent Fertilizer and Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory Policies and Implementing Guidelines, which provides thus:

3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a pesticide

active ingredient in the Philippines will be granted proprietary protection for a

period of seven years from the date of such registration. During this period subsequent registrants may rely on these data only with third party authorization or

otherwise must submit their own data. After this period, all data may be freely cited in support of registration by any applicant, provided convincing proof is submitted that the product being registered is identical or substantially similar to any current registered pesticide, or differs only in ways that would not significantly increase the risk of unreasonable adverse effects.

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

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

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

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

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

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

II

WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR PROPRIETARY DATA PROTECTION;

III

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL RESTRAINT OF FREE TRADE;

IV

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

V

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

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

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

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

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

The petition is devoid of merit.

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

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

I. Common to Fertilizers, Pesticides and other Agricultural Chemicals

x x x

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

x x x

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

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

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

x x x [t]he interpretation of an administrative government agency, which is tasked to implement a statute is generally accorded great respect and ordinarily controls the

construction of the courts. The reason behind this rule was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise:

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to the accumulation of experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs. Commissioner of Customs, the Court stressed thatexecutive officials are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the

law, and to have formed an independent, conscientious and competent expert

opinion thereon. The courts give much weight to the government agency officials

charged with the implementation of the law, their competence, expertness,

experience and informed judgment, and the fact that they frequently are the drafters

of the law they interpret."

x x x.5 [Emphasis supplied]

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

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

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

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

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

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

SO ORDERED.

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Topic: Differences of forms of IP

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 172835 December 13, 2007

AIR PHILIPPINES CORPORATION, Petitioner, vs. PENNSWELL, INC. Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the Rules of Court, the nullification of the 16 February 2006 Decision1 and the 25 May 2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the Order3 dated 30 June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.

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

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by Sales Invoices No. 8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433, 6684, 6634 and 6633, respectively. Under the contracts, petitioners total outstanding obligation amounted to P449,864.98 with interest at 14% per annum until the amount would be fully paid. For failure of the petitioner to comply with its obligation under said contracts, respondent filed a Complaint8 for a Sum of Money on 28 April 2000 with the RTC.

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

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

1. a. Anti-Friction Fluid b. Excellent Rust Corrosion (fake)

MPL-800 MPL-008

153,941.40 155,496.00

5714 5888

05/20/99 06/20/99

2. a. Contact Grease b. Connector Grease (fake)

COG #2 CG

115,236.00 230,519.52

5540 6327

04/26/99 08/05/99

3. a. Trixohtropic Grease b. Di-Electric Strength Protective Coating (fake)

EPC EPC#2

81,876.96 81,876.96

4582 5446

01/29/99 04/21/99

4. a. Dry Lubricant b. Anti-Seize Compound (fake)

ASC-EP ASC-EP 2000

87,346.52 124,108.10

5712 4763 & 5890

05/20/99 02/16/99 & 06/24/99

According to petitioner, respondents products, namely Excellent Rust Corrosion, Connector Grease, Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated that had respondent been forthright about the identical character of the products, it would not have purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby the parties agreed that respondent would return to petitioner the amount it previously paid. However, petitioner was surprised when it received a letter from the respondent, demanding payment of the amount of P449,864.94, which later became the subject of respondents Complaint for Collection of a Sum of Money against petitioner. During the pendency of the trial, petitioner filed a Motion to Compel10 respondent to give a detailed list of the ingredients and chemical components of the following products, to wit: (a) Contact Grease and Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-Seize Compound.11It appears that petitioner had earlier requested the Philippine Institute of Pure and Applied Chemistry P)PAC for the latter to conduct a comparison of respondents goods. On March , the RTC rendered an Order granting the petitioners motion. It disposed, thus:

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

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a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and

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

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

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

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

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

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

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

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

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

It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose documents, papers, or any object which are considered trade secrets.

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

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

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

x x x x

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

All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent Judge in finding that the detailed list of ingredients or composition of the subject lubricant products which petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets of [respondent] Pennswell; hence, privileged against compulsory disclosure.14 Petitioners Motion for Reconsideration was denied.

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

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE C(EM)CAL COMPONENTS OR )NGRED)ENTS OF RESPONDENTS PRODUCTS ARE TRADE SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY DISCLOSURE.15

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

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it.16 The definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value.17 A trade secret may consist of any formula, pattern, device, or compilation of information that: (1) is used in one's business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information.18 Generally, a trade secret is a process or device intended for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or catalogue or specialized customer list.19 It is indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of the trade secret by one who obtained the information "in confidence" or through a "confidential relationship."20 American jurisprudence has utilized the following factors21 to determine if an information is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer's business;

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

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

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

(5) the amount of effort or money expended by the company in developing the information; and

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

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In Cocoland Development Corporation v. National Labor Relations Commission,23 the issue was the legality of an employees termination on the ground of unauthorized disclosure of trade secrets. The Court laid down the rule that any determination by management as to the confidential nature of technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court rejected the employers naked contention that its own determination as to what constitutes a trade secret should be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of.24 Hence, in Cocoland, the parameters in the determination of trade secrets were set to be such substantial factual basis that can withstand judicial scrutiny. The chemical composition, formulation, and ingredients of respondents special lubricants are trade secrets within the contemplation of the law. Respondent was established to engage in the business of general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods, wares, merchandise, products, including but not limited to industrial chemicals, solvents, lubricants, acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations, among others. It is unmistakable to our minds that the manufacture and production of respondents products proceed from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent expended efforts, skills, research, and resources. What it had achieved by virtue of its investments may not be wrested from respondent on the mere pretext that it is necessary for petitioners defense against a collection for a sum of money. By and large, the value of the information to respondent is crystal clear. The ingredients constitute the very fabric of respondents production and business. No doubt, the information is also valuable to respondents competitors. To compel its disclosure is to cripple respondents business, and to place it at an undue disadvantage. )f the chemical composition of respondents lubricants are opened to public scrutiny, it will stand to lose the backbone on which its business is founded. This would result in nothing less than the probable demise of respondents business. Respondents proprietary interest over the ingredients which it had developed and expended money and effort on is incontrovertible. Our conclusion is that the detailed ingredients sought to be revealed have a commercial value to respondent. Not only do we acknowledge the fact that the information grants it a competitive advantage; we also find that there is clearly a glaring intent on the part of respondent to keep the information confidential and not available to the prying public.

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

SECTION 1. Motion for production or inspection order. Upon motion of any party showing good cause therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to

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any matter involved in the action and which are in his possession, custody or control; or (b) order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just.

A more than cursory glance at the above text would show that the production or inspection of documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good cause therefor before the court in which an action is pending. The court may order any party: a) to produce and permit the inspection and copying or photographing of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, which are not privileged;25 which constitute or contain evidence material to any matter involved in the action; and which are in his possession, custody or control; or b) to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that may be produced and inspected should not be privileged.26 The documents must not be privileged against disclosure.27 On the ground of public policy, the rules providing for production and inspection of books and papers do not authorize the production or inspection of privileged matter; that is, books and papers which, because of their confidential and privileged character, could not be received in evidence.28 Such a condition is in addition to the requisite that the items be specifically described, and must constitute or contain evidence material to any matter involved in the action and which are in the partys possession, custody or control. Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication, to wit: (a) communication between husband and wife; (b) communication between attorney and client; (c) communication between physician and patient; (d) communication between priest and penitent; and (e) public officers and public interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them are the following: (a) editors may not be compelled to disclose the source of published news; (b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank deposits. 30

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

That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A,31 as amended; and (2) cases for rehabilitation transferred

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from the Securities and Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, expressly provides that the court may issue an order to protect trade secrets or other confidential research, development, or commercial information belonging to the debtor.32 Moreover, the Securities Regulation Code is explicit that the Securities and Exchange Commission is not required or authorized to require the revelation of trade secrets or processes in any application, report or document filed with the Commission.33 This confidentiality is made paramount as a limitation to the right of any member of the general public, upon request, to have access to all information filed with the Commission.34

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

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

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

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

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

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, enacted to implement the policy of the state to regulate, restrict or prohibit the importation, manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable risk and/or injury to health or the environment, also contains a provision that limits the right of the public to have access to records, reports or information concerning chemical substances and mixtures

including safety data submitted and data on emission or discharge into the

environment, if the matter is confidential such that it would divulge trade secrets,

production or sales figures; or methods, production or processes unique to such

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manufacturer, processor or distributor; or would otherwise tend to affect adversely

the competitive position of such manufacturer, processor or distributor.35

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

Jurisprudence has consistently acknowledged the private character of trade secrets.1wphi1 There is a privilege not to disclose ones trade secrets.39 Foremost, this Court has declared that trade secrets and banking transactions are among the recognized restrictions to the right of the people to information as embodied in the Constitution.40 We said that the drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory disclosure.41

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

In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or the Consumer Act of the Philippines, in order to compel respondent to reveal the chemical components of its products. While it is true that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the law does not apply to respondent. Respondents specialized lubricants -- namely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and Anti-Seize Compound -- are not consumer products. "Consumer products," as it is defined in Article 4(q),44 refers to goods, services and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices. This is not the nature of respondents products. )ts products are not intended for personal, family, household or agricultural purposes. Rather, they are for industrial use, specifically for the use of aircraft propellers and engines. Petitioners argument that Republic Act No. , or the Special Law on Counterfeit Drugs, requires the disclosure of the active ingredients of a drug is also on faulty

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ground.45 Respondents products are outside the scope of the cited law. They do not come within the purview of a drug46 which, as defined therein, refers to any chemical compound or biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in man or animals. Again, such are not the characteristics of respondents products. What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical formulation of respondents products is not known to the general public and is unique only to it. Both courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below.47 We need not delve into the factual bases of such findings as questions of fact are beyond the pale of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court.48

We do not find merit or applicability in petitioners invocation of Section 49 of the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or information concerning chemical substances and mixtures, including safety data submitted, and data on emission or discharge into the environment. To reiterate, Section 1250 of said Act deems as confidential matters, which may not be made public, those that would divulge trade secrets, including production or sales figures or methods; production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. It is true that under the same Act, the Department of Environment and Natural Resources may release information; however, the clear import of the law is that said authority is limited by the right to confidentiality of the manufacturer, processor or distributor, which information may be released only to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. The right to confidentiality is recognized by said Act as primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in the case at bar.

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

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show a compelling reason for us to lift the veil of confidentiality which shields respondents trade secrets.

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

SO ORDERED.

Footnotes

1 Penned by Associate Justice Jose C. Reyes, Jr. with Associate Justice Eliezer R. de los Santos and Associate Justice Arturo G. Tayag, concurring. CA rollo, pp. 166-176. 2 Id. at 206. 3 Penned by Judge Delia H. Panganiban. Records, p. 313-314. 4 Corresponding to the sale of Penns-Lube Graphite Grease. Id. at 7. 5 Corresponding to the sale of Rectified Insulation and Carbon Remover. Id. at 9. 6 Corresponding to the sale of Anti-Contaminant. Id. at 11. 7 Corresponding to the sale of Non-Toxic Ease Off with Product Code Penns-Chem CIR. Id. at 13. 8 Id. at 1-6. 9 Id. at 33-48. 10 Id. at 291-294. 11 Id. at 291-292. 12 Id. at 300. 13 Id. at 313-314. 14 CA rollo, pp. 172-175. 15 Rollo, p. 26 16 BLACKS LAW D)CT)ONARY , th ed. 17 Id., citing Palin Mfg. Co., Inc. v. Water Technology, Inc., 103 Ill.App.3d 926, 59 Ill.Dec. 553, 431 18 AMJUR EMPLOYMENT 178, citing Saunders v. Florence Enameling Co., Inc., 540 So. 2d 651 (Ala. 1988); Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). The foregoing citation also expounded that trade secrets need not be technical in nature. Market-related information such as information on current and future projects, as well as potential future opportunities for a firm, may constitute a trade secret., citing Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). 19 Id., citing Saunders v. Florence Enameling Co., Inc., 540 So. 2d 651 (Ala. 1988); Air Products and Chemicals, Inc. v. Johnson, 296 Pa. Super. 405, 442 A.2d 1114 (1982). A former employee of an insurance company, who routinely received information regarding the company's customer list and policy termination dates while serving as vice-president, was barred from disclosing that information, even though the company had partially disclosed the customer list in attempts to secure new clients. Alexander & Alexander, Inc. v. Drayton, 378 F. Supp. 824 (E.D. Pa. 1974), aff'd, 505 F.2d 729 (3d Cir. 1974).

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20 9 A.L.R.3d 665, citing Am Jur, Injunctions (Rev ed 72). The Restatement of the Law of Torts 757, emphasizes that liability for the disclosure of a trade secret learned under conditions giving no privilege of disclosure or use is not based on the mere copying or use but on the improper means by which the information was procured. 21 Id., as adopted from the Uniform Trade Secrets Act which is intended to provide states with a legal framework for improved trade-secret protection. 22 Id. 23 328 Phil. 351 (1996). 24 Id. 25 "Privileged communications" are communications which occur in a context of legal or other recognized professional confidentiality. The fact that a certain communication is termed privileged allows the speakers to resist legal pressure to disclose its contents. (See Barrons Law Dictionary, rd ed., p. . The term "privileged" in Section , Rule , Rules of Court, on depositions and discovery, refers to privileged confidential communications under Sec. 21, Rule 130, Rules of Court. (See Philippine Law Dictionary, 1982 ed., p. 484.) 26 Feria and Noche, Civil Procedure Annotated (2001 ed.), p. 553. 27 Agpalo, Handbook on Civil Procedure (2001 ed.), p. 288. 28 Id. at 289. 29 Sec. 24. Disqualification by reason of privileged communication. The following persons cannot testify as to matters learned in confidence in the following cases: (a) The husband or the wife, during or after the marriage cannot be examined without the consent of the other as to any communication received in confidence by one from the other during the marriage except in a civil case by one against the other, or in a criminal case for a crime committed by one against the other or the latter's direct descendants or ascendants; (b) An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of, or with a view to, professional employment, nor can an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and his employer, concerning any fact the knowledge of which has been acquired in such capacity; (c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil case, without the consent of the patient, be examined as to any advice or treatment given by him or any information which he may have acquired in attending such patient in a professional capacity, which information was necessary to enable him to act in capacity, and which would blacken the reputation of the patient; (d) A minister or priest cannot, without the consent of the person making the confession, be examined as to any confession made to or any advice given by him in his professional character in the course of discipline enjoined by the church to which the minister or priest belongs; (e) A public officer cannot be examined during his term of office or afterwards, as to communications made to him in official confidence, when the court finds that the public interest would suffer by the disclosure. 30 Francisco, Evidence (3rd ed., 1996), pp. 171-173. 31 SEC Reorganization Act. 32 Section 4, Rule 3 of the Interim Rules of Procedure on Government Rehabilitation.

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33 Section 66.2 of the Securities Regulation Code of 2000 provides that, "66.2. Nothing in this Code shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission. 34 SEC. 66. Revelation of Information Filed with the Commission. 66.1. All information filed with the Commission in compliance with the requirements of this Code shall be made available to any member of the general public, upon request, in the premises and during regular office hours of the Commission, except as set forth in this Section. 35 Section 12. - Public Access to Records, Reports or Notification. The public shall have access to records, reports, or information concerning chemical substances and mixtures including safety data submitted, data on emission or discharge into the environment, and such documents shall be available for inspection or reproduction during normal business hours except that the Department of Environment and Natural Resources may consider a record, report or information or particular portions thereof confidential and may not be made public when such would divulge trade secrets, production or sales figures or methods, production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. The Department of Environment and Natural Resources, however, may release information subject to claim of confidentiality to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. 36 Mirpuri v. Court of Appeals, 376 Phil. 628 (1999). 37 Id. 38 )d. )n Mirpuri id. at , the Court acknowledges the Philippines respect for intellectual and industrial property, and held: The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." The Intellectual Property Code took effect on January 1, 1998 and by its express provision, repealed the Trademark Law, the Patent Law, Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, and the Decree on Compulsory Reprinting of Foreign Textbooks. The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 39 Id. 40 The pertinent Constitutional provisions on the right of the people to information are, to wit: Sec. 7 [Article III]. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. Sec. 28 [Article II]. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. 41 Chavez v. Presidential Commission on Good Government and Magtanggol Gunigundo, 360 Phil. 133, 161 (1998).

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42 Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No. 162994, 17 September 2004, 438 SCRA 343, 352; See also Star Paper Corporation v. Simbol, G.R. No. 164774, 12 April 2006, 487 SCRA 228, 242. 43 ARTICLE 77. Minimum Labeling Requirements for Consumer Products. All consumer products domestically sold whether manufactured locally or imported shall indicate the following in their respective labels of packaging: a) its correct and registered trade name or brand name; b) its duly registered trademark; c) its duly registered business name; d) the address of the manufacturer, importer, repacker of the consumer product in the Philippines; e) its general make or active ingredients; f) the net quantity of contents, in terms of weight, measure or numerical count rounded off to at least the nearest tenths in the metric system; g) country of manufacture, if imported; and h) if a consumer product is manufactured, refilled or repacked under license from a principal, the label shall so state the fact. The following may be required by the concerned department in accordance with the rules and regulations they will promulgate under authority of this Act: a) whether it is flammable or inflammable; b) directions for use, if necessary; c) warning of toxicity; d) wattage, voltage or amperage; or e) process of manufacture used, if necessary. Any word, statement or other information required by or under authority of the preceding paragraph shall appear on the label or labeling with such conspicuousness as compared with other words, statements, designs, or devices therein, and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase or use. The above requirements shall form an integral part of the label without danger of being erased or detached under ordinary handling of the product. 44 ARTICLE 4. Definition of Terms. For purposes of this Act, the term: x x x x q) "Consumer products and services" means goods, services and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include but not limited to, food, drugs, cosmetics, and devices. 45 Petitioner cites the definition of a counterfeit drug/medicine in Republic Act 8203 or the Special Law on Counterfeit Drugs to buttress its argument, specifically Section 3(b)(4) thereof, to wit: a drug which contains no amount of, or a different active ingredient, or less than eighty percent (80%) of the active ingredient it purports to possess, as distinguished from an adulterated drug including reduction or loss or efficacy due to expiration. 46 SECTION 3. Definition of Terms For purposes of this Act, the terms: (a) Drugs shall refer to any chemical compound or biological substance, other than food, intended for use in the treatment, prevention or diagnosis of disease in man or animals, including but not limited to:

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(1) any article recognized in the official United States Pharmacopoeia National Formulary (USP-NF), official Homeopathic Pharmacopoeia of the United States, Philippines National Drug Formulary, British Pharmacopoeia, any National Compendium or any supplement to any of them; (2) any article intended for use in the diagnosis, cure mitigation, treatment, or prevention of disease in man or animals; (3) any article other than food intended to affect the structure or any function of the body of man or animals; (4) any article intended for use as a component of any articles specified in clauses (1), (2), (3) not including devices or their components, parts, or accessories; and (5) herbal and/or traditional drugs which are articles of plant or animal origin used in folk medicine which are: (a) recognized in the Philippine National Drug Formulary; (b) intended for use in the treatment or cure or mitigation of disease symptoms, injury or body defect in man; (c) other than food, intended to affect the structure or any function of the body of man; (d) in finished or ready-to-use dosage form; and (e) intended for use as a component of any of the articles specified in clauses (a), (b), (c) and (d). 47 Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856, 28 May 2004, 430 SCRA 323, 331. 48 Filinvest Land, Inc. v. Court of Appeals, G.R. No. 138980, 20 September 2005, 470 SCRA 260, 267-268. 49 Section 12. - Public Access to Records, Reports or Notification. The public shall have access to records, reports or information concerning chemical substances and mixtures including safety data submitted, data on emission or discharge into the environment, and such documents shall be available for inspection or reproduction during normal business hours except that the Department of Environment and Natural Resources may consider a record, report or information or particular portions thereof confidential and may not be made public when such would divulge trade secrets, production or sales figures or methods, production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. The Department of Environment and Natural Resources, however, may release information subject to claim of confidentiality to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. (Republic Act No. 6969.) 50 Republic Act No. 6969. 51 Francisco, Evidence (3rd ed., 1996), pp. 171-173. 52 AMJUR DEPOSITION 42 , citing Ex parte Miltope Corp., 823 So. 2d 640 (Ala. 2001).

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Topic: Differences of forms of IP; Statutory right; No unfair competition in copyright

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148222 August 15, 2003

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

INCORPORATED, Respondents.

D E C I S I O N

CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision1 of the Court of Appeals reversing the October 31, 1996 decision2 of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals3 contained a summary of this dispute:

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

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On September , , Pearl and Deans General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SM)s Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding

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him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply. )nstead, in a letter dated January , , SM)s house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao.

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

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

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

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

In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to Pearl and Deans copyright. SM) noted that the registration of the mark "Poster Ads" was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word "Poster Ads" is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was

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purely intended to malign SM)s good name. On this basis, SM), aside from praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988.

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

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

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

(1) to pay plaintiff the following damages:

(a) actual damages - P16,600,000.00, representing profits derived by defendants as a result of infringe- ment of plaintiffs copyright from 1991 to 1992

(b) moral damages - P1,000.000.00

(c) exemplary damages - P1,000,000.00 d attorneys fees - P1,000,000.00 plus

(e) costs of suit;

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

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark "Poster Ads", for destruction; and to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark "Poster Ads". Defendants counterclaims are hereby ordered dismissed for lack of merit. SO ORDERED.4

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

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

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellants will not extend to the actual object. )t has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled "Seldens Condensed Ledger or Bookkeeping Simplified" which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Seldens copyrighted books. The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that "to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright." And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled "Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic congestion". The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiffs drawings. )n this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves. )n fine, we cannot find SM) liable for infringing Pearl and Deans copyright over the technical drawings of the latters advertising display units. xxx xxx xxx

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The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:

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

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

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

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. While we do not discount the striking similarity between Pearl and Deans registered trademark and defendants-appellants "Poster Ads" design, as well as the parallel use by which said words were used in the parties respective advertising copies, we cannot find defendants-appellants liable for infringement of trademark. "Poster Ads" was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had caused.

xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words "Poster Ads" are a simple contraction of the generic term poster advertising. In the absence of any convincing proof that "Poster Ads" has acquired a secondary meaning in this jurisdiction,

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we find that Pearl and Deans exclusive right to the use of "Poster Ads" is limited to what is written in its certificate of registration, namely, stationeries.

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

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

xxx xxx xxx

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

Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Courts consideration: A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEANS TRADEMARK "POSTER ADS" WAS COMM)TTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TR)AL COURT, DESP)TE T(E LATTERS F)ND)NG, NOT D)SPUTED BY T(E (ONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.

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