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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-27897 December 2, 1927

WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC COMPANY, INC., W. Z. SMITH and FELIX C. REYES, plaintiffs-appellees, vs.FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY HERMAN, PETER O'BRIEN, MANUEL B. DIAZ, FELIPE MAPOY and ARTEMIO ZAMORA, defendants-appellants.

J. W. Ferrier for appellants.DeWitt, Perkins and Bradly for appellees.

STATEMENT

October 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following complaint against the defendants:

Now come the plaintiffs in the above entitled case, by the undersigned their attorneys, and to this Honorable Court respectfully show:

I. That the Western Equipment and Supply Company is a foreign corporation organized under the laws of the State of Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized under the laws of the State of New York, United States of America; and that the plaintiffs W. Z. Smith and Felix C. Reyes are both of lawful age and residents of the City of Manila, Philippine Islands.

II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and Industry and as such Director is charged with the duty of issuing and denying the issuance of certificates of incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.

III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of lawful age and are residents of the City of Manila, Philippines Islands.

IV. That on or about May 4, 1925, the plaintiff the Western Equipment and Supply Company applied to the defendant Director of the Bureau of Commerce and Industry for the issuance of a license to engage in business in the Philippine Islands and, accordingly, on May 20, 1926, a provisional license was by said defendant issued in its favor, which license was made permanent on August 23, 1926.

V. That from and since the issuance of said provisional license of May 20,. 1926, said plaintiff Western Equipment and Supply Company has been and still is engaged in importing and selling in the Philippine Islands the electrical and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc., its offices in the City of Manila being at No. 600 Rizal Avenue, in the charge and management of the plaintiff Felix C. Reyes, its resident agent in the Philippine Islands.

VI. That the electric and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc., have been sold in foreign and interstate commerce and have become well and thoroughly known to the trade in all countries of the world for the past fifty years; that at present time the greater part of all telephone equipment used in Manila and elsewhere in the Philippine Islands was manufactured by the said Western Electric Company, Inc., and sold by it in commerce between the United States and the Philippine Islands; that about three fourths of such equipment in use throughout the world are of the manufacture of said "Western Electric Company, Inc.," and bear its corporate name; and that these facts are well known to the defendant Henry Herman who for many years up to May 20, 1926, has himself been buying said products from the plaintiff Western Electric Company, Inc., and selling them in the Philippine Islands.

VII. That the name `Western Electric Company, Inc., has been registered as a trade-mark under the provisions of the Act of Congress of February 20, 1905, in the office of the Commissioner of Patents, at Washington, District of Columbia, and said trade-mark remains in force to this date.

VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora filed articles of incorporation with the defendant Director of the Bureau of Commerce and Industry with the intention of organizing a domestic corporation to be known as the "Western Electric Company, Inc.," for the purpose principally of manufacturing, buying, selling and generally dealing in electrical and telephone apparatus and supplies.

IX. That the purpose of said defendant in attempting to incorporate under the corporate name of plaintiff Western Electric Company, Inc., is to profit and trade upon the plaintiff's business and reputation, by misleading and deceiving the public into purchasing the goods manufactured or sold by them as those of plaintiff Western Electric Company, Inc., in violation of the provisions of Act No. 666 of the Philippine Commission, particularly section 4 thereof.

X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board of Directors of the Western Electric Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in business in the Philippine Islands and to accept service of summons and process in all legal proceedings against said company, and on October 21, 1926, said plaintiff W. Z. Smith filed a written application for the issuance of such license with the defendant Director of Bureau of Commerce and Industry, which application, however, has not yet been acted upon by said defendant.

XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the defendant Director of the Bureau of Commerce and Industry his protest, and opposed said attempted incorporation, by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, of the `Western Electric Company, Inc.,' as a domestic corporation, upon the ground among others, that the corporate name by which said defendants desire to be known, being identical with that of the plaintiff Western Equipment and Supply Company, will deceive and mislead the public purchasing electrical and telephone apparatus and supplies. A copy of said protest is hereunto annexed, and hereby made a part hereof, marked Exhibit A.

XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and Industry has announced to these plaintiffs his intention to overrule the protest of plaintiffs, and to issue to the other defendants a certificate of incorporation constituting said defendants a body politic and corporate under the name "Western Electric Company, Inc.," unless restrained by this Honorable Court.

XIII. That the issuance of a certificate of incorporation in favor of said defendants under said name of "Western Electric Company, Inc.," would, under the circumstances hereinbefore stated, constitute a gross abuse of the discretionary powers conferred by law upon the defendant Director of the Bureau of Commerce and Industry.

XIV. That the issuance of said certificate of incorporation would, if carried out, be in violation of plaintiff's rights and would cause them irreparable injury which could not be compensated in damages, and from which petitioner would have no appeal or any plain, speedy and adequate remedy at law, other than that herein prayed for.

They prayed for a temporary injunction, pending the final decision of the court when it should be made permanent, restraining the issuance of the certificate of incorporation in favor of the defendants under the name of Western Electric Company, Inc., or the use of that name for any purpose in the exploitation and sale of electric apparatus and supplies. The preliminary writ was issued.

For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, admits the allegations of paragraphs 1, 2, 3 and 4 of the complaint, and as to paragraphs 5, 6 and 7, he alleges that he has no information upon which to form a belief, and therefore denies them. He admits the allegations of paragraph 8, and denies paragraph 9. He denies the first part of paragraph 10, but admits that an application for a license to do business was filed by the Western Electric Company, Inc., as alleged. He admits paragraphs 11 and 12, and denies paragraphs 13 and 14, and further alleges that the present action is prematurely brought, in that it is an attempt to coerce his discretion, and that the mere registration of the articles of incorporation of the locally

organized Western Electric Company, Inc., cannot in any way injure the plaintiffs, and prays that the complaint be dismissed.

For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the allegations of paragraphs 1, 2, 3, 4 and 5 of the complaint, and deny paragraph 7, but allege that on October 15, 1926, the articles of incorporation in question were presented to the Director of the Bureau of Commerce and Industry for registration. They deny paragraphs 9 and 10, except as to the filing of the application. They admit the allegations made in paragraph 11, but alleged that W. Z. Smith was without any right or authority. Admit the allegations of paragraph 12, but deny the allegations of paragraphs 13 and 14, and allege that the Western Electric Company, Inc., has never transacted business in the Philippine Islands; that its foreign business has been turned over to the International Standard Electric Corporation; that the action is prematurely brought; and that the registration of the articles of incorporation in question cannot in any way injure plaintiffs.

Wherefore, such defendants pray that the preliminary injunction be dissolved, and plaintiffs' cause of action be dismissed, with costs.

The case was tried and submitted upon the following stipulated facts:

Now come the parties plaintiff and defendants in the above entitled cause, by their respective undersigned attorneys, and for the purpose of this action, agree that the following facts are true:

I. That the Western Equipment and Supply Company is a foreign corporation, organized under the laws of the State of Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized under the laws of the State of New York, United States of America; and that the plaintiff W. Z. Smith and Felix C. Reyes, are both of lawful age and residents of the City of Manila, Philippine Islands.

II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and Industry and as such Director is charge with the duty of issuing and/or denying the issuance of certificates of incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.

III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of lawful age and all residents of the City of Manila, Philippine Islands.

IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and Supply Company, through its duly authorized agent, the plaintiff, Felix C. Reyes, applied to the defendant Director of the Bureau of Commerce and Industry for the issuance of a license to engage in business in the Philippine Islands and on May 20, 1926, said defendant issued in favor of said plaintiff a provisional license for that purpose which was permanent on August 23, 1926.

V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to engage in business in the Philippine Islands, and has never engaged in business therein.

VI. That from and since the issuance of said provisional license of May 20, 1926, to the plaintiff, Western Equipment and Supply Company, said plaintiff has been and still is engaged in importing and selling in the Philippine Islands electrical and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc. (as well as those manufactured by other factories), said Western Equipment and Supply Company's offices in the City of Manila being at No. 600 Rizal Avenue, and at the time of the filing of the complaint herein was under the charge and management of the plaintiff, Felix C. Reyes, its then resident agent in the Philippine Islands.

VII. That the electrical and telephone apparatus and supplies manufactured by the plaintiff, Western Electric Company, Inc., have been sold in foreign and interstate commerce for the past fifty years, and have acquired high trade reputation throughout the world; that at the present time the greater part of all telephone equipment used in Manila, and elsewhere in the Philippine Islands, was manufactured by the said plaintiff, Western Electric Company, Inc., and sold by it for exportation to the Philippine Islands; that such equipment, manufactured by the said Western Electric Company, Inc., and bearing its trade-mark "Western Electric" or its corporate name is generally sold and used throughout the world; that a Philippine Corporation known as the `Electric Supply Company, Inc.,' has been importing the manufactures of the

plaintiff, Western Electric Company, Inc., into the Philippine Islands for the purpose of selling the same therein, and that the defendant Henry Herman, is the President and General Manager of said corporation.

VIII. That the words `Western Electric' have been registered by the plaintiff, Electric Company, Inc., as a trade-mark under the provisions of the Act of Congress of February 20, 1905, in the office of the Commissioner of the Patents at Washington, District of Columbia, and said trade-mark remains in force as the property of said plaintiff to this date.

IX. That the plaintiff, Western Electric Company, Inc., is advertising its manufacturers in its own name by means of advertising its manufactures in its own name by means of advertisements inserted in periodicals which circulate generally throughout the English and Spanish speaking portions of the world, and has never abandoned its corporate name or trade-mark, but, on the contrary, all of its output bears said corporate name and trade-mark, either directly upon the manufactured article or upon its container, including that sold and used in the Philippine Islands.

X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora signed and filed articles of incorporation with the defendant, Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, with the intention of organizing a domestic corporation under the Philippine Corporation Law to be known as the "Western Electric Company, Inc.," for the purpose, among other things or manufacturing, buying, selling and dealing generally in electrical and telephone apparatus and supplies; that said defendants Peter O'Brien, Felipe Mapoy and Artemio Zamora are employees of the said Electrical Supply Company, of which said defendant, Henry Herman, is and has been, during the period covered by this stipulation, the president and principal stockholder; and that they, together with the said defendant Herman, signed said articles of incorporation for the incorporation of a domestic company to be known and the "Western Electric Company, Inc.," with full knowledge of the existence of the plaintiff Western Electric Company, Inc., of its corporate name, of its trade-mark, "Western Electric," and of the fact that the manufactures of said plaintiff bearing its trade-mark or corporate name are in general use in the Philippine Islands and in the United States.

XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the Board of Directors of the plaintiff, Western Electric Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in business in the Philippine Islands, and to accept service of summons and process in all legal proceedings against said company, and on October 21, 1926, said plaintiff, W. Z. Smith, filed a written application for the issuance of such license with the defendant Director of the Bureau of Commerce and Industry, which application, however, has not yet been acted upon by said defendant.

XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its general manager, the plaintiff W. Z. Smith. lodged with the defendant Director of the registration of the proposed corporation by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, to be known as the Western Electric Company, Inc., as a domestic corporation under the Philippine Corporation Law. A copy of said protest, marked Exhibit A, hereunto attached and is hereby made a part of this stipulation.

XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and Industry, announced his intention of overrule said protest and will, unless judicially restrained therefrom, issue to the other defendants herein a certificate of incorporation, constituting said defendants a Philippine body politic and corporate under the name of "Western Electric Company, Inc."

XIV. That the defendant, Henry Herman, acting in behalf of said corporation, Electrical Supply Company, Inc., has written letters to Messrs. Fisher, DeWitt, Perkins & Brady, acting as attorneys for plaintiff, Western Electric Company, Inc., copies of which are hereunto annexed and hereby made a part hereof, marked Exhibits B, C and D.

XV. That the defendants, while admitting the facts set out in paragraph VII and IX regarding the business done, merchandise sold and advertisements made throughout the world by the plaintiff Western Electric Company, Inc., insist and maintain that said allegations of fact are immaterial and irrelevant to the issues in the present case, contending that such issued should be determined upon the facts as they exist in the Philippine Islands alone.

To which were attached Exhibits A, B, C and D.

The lower court rendered judgment for the plaintiffs as prayed for in their complaint, and made the temporary injunction permanent, from which the defendants appeal and assign the following errors:

The lower court erred:

(1) When it granted the writ of preliminary injunction (pages 9 and 10, record; 12 to 14, B. of E.).

(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a right to bring the present suit in courts of the Philippine Islands, wherein it is unregistered and unlicensed, as was done in the decision upon the petition for a preliminary injunction (pages 97 to 115 record), and in repeating such holding in the final decision herein (pages 51 and 52, B. of E.), as well as in basing such holding upon the decision of this Honorable Supreme Court in Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70.)

(3) When it found that the plaintiff, the Western Electric Co., Inc., has any such standing in the Philippine Islands or before the courts thereof as to authorize it to maintain an action therein under the present case.

(4) When it found that the other plaintiffs herein have any rights in the present controversy or any legal standing therein.lawphi1.net

(5) In ordering the issuance of a permanent injunction restraining the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, from issuing a certificate of incorporation in favor of the other defendants under the name of "Western Electric Co., Inc.," or any similar name, and restraining the other defendants from using the name "Western Electric Co., Inc.," or any like name, in the manufacture of sale of electrical and telephone apparatus and supplies or as a business name or style in the Philippine Islands.

(6) In finding that the purpose of the defendants, other than the defendant Fidel A. Reyes, in seeking to secure the registration of a local corporation under the name of "Western Electric Co., Inc.," was "certainly not an innocent one," thereby imputing to said defendants a fraudulent and wrongful intent.

(7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.

(8) In overruling and denying defendants' motion for a new trial.

JOHNS, J.:

The appellants say that the two questions presented are:

Has a foreign corporation, which has never done business in the Philippine Islands, and which is unlicensed and unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from organizing a corporation therein bearing the same name as such foreign corporation?

Has such foreign corporation a legal right to restrain an officer of the Government of the Philippine Islands, i. e., the Director of the Bureau of Commerce and Industry from exercising his discretion, and from registering a corporation so organized by residents and inhabitants of the Philippine Islands?

As to the first question, the appellees say that it should be revised, so as to read as follows:

Has a foreign corporation which has never done business in the Philippine Islands, and which is unlicensed and unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from organizing a corporation therein bearing the same name as such foreign corporation, when said residents and inhabitants have knowledge of the existence of such foreign corporation, having dealt with it, and sold its manufactures, and when said foreign corporation is widely and favorably known in the Philippine Islands through the use therein of its products bearing its corporate and trade name, and when the purpose of the proposed domestic corporation is to deal in precisely the same goods as those of the foreign corporation?

As to the second, the appellees say that the question as propounded by the appellants is not fully and fairly stated, in that it overlooks and disregards paragraphs 12 and 13 of the stipulation of facts, and that the second question should be revised to read as follows:

Has an unregistered corporation which has not transacted business in the Philippine Islands, but which has acquired a valuable goodwill and high reputation therein, through the sale, by importers, and the extensive use within the Islands of products bearing either its corporate name, or trade-mark consisting of its corporate name, a legal right to restrain an officer of the Commerce and Industry, with knowledge of those facts, from issuing a certificate of incorporation to residents of the Philippine Islands who attempt to organize a corporation for the purpose of pirating the corporate name of such foreign corporation, of engaging in the same business as such foreign corporation, and of defrauding the public into thinking that its goods are those of such foreign corporation, and of defrauding such foreign corporation and its local dealers of their legitimate trade?

We agree with the revisions of both questions as made by the appellees, for the reason that they are more in accord with the stipulated facts. First, it is stipulated that the Western Electric Company, Inc., "has never engaged in business in the Philippine Islands."

In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this court held:

The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines, and third, that it has not obtained the proper license as provided by the statute.

If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been doing business in the Philippine Islands without first obtaining a license, another and a very different question would be presented. That company is not here seeking to enforce any legal or contract rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:

"Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves." And it contends that its rights to the use of its corporate and trade name:

Is a property right, a right in rem, which may assert and protect against all the world, in any of the courts of the world — even in jurisdictions where it does not transact business — just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and Trade-Marks and cases cited; secs. 21-22, Hopkins on Trade-Marks, Trade Names and Unfair Competition and cases cited." That point is sustained by the authorities, and is well stated in Hanover Star Milling Co. vs. Allen and Wheeler Co. (208 Fed., 513), in which they syllabus says:

Since it is the trade and not the mark that is to be protect, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by the use of the mark.

In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:

In order that competition in business should be unfair in the sense necessary to justify the granting of an injunction to restrain such competition it must appear that there has been, or is likely to be, a diversion of trade from the business of the complainant to that of the wrongdoer, or methods generally recognized as unfair; . . . In most, if not all, of the cases in which relief has hitherto been granted against unfair competition the means and methods adopted by the wrongdoer in order to divert the coveted trade from his rival have been such as were calculated to deceive and mislead the public into thinking that the goods or business of the wrongdoer are the goods or business of the rival. Diversion of trade is really the fundamental thing here, and if diversion of trade be accomplished by any means which according to accepted legal canons are unfair, the aggrieved party is entitled to relief.

In Shaver vs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,. 881), it is said:

The contention of counsel for the appellants here is a confusion of the bases of two classes of suits, — those for infringements of trade-marks, and those for unfair competition in trade. . . . In the former, title to the trade-marks is indispensable to a good cause of action; in the latter, no proprietary interest in the words, names, or means by which the fraud is perpetrated is requisite to maintain a suit to enjoin it. It is sufficient that the complainant is entitled to the custom — the goodwill — of a business, and that this goodwill is injured, or is about to be injured, by the palming off of the goods of another as his.

The remaining question as to the jurisdiction of the courts over the defendant Reyes, as Director of the Bureau of Commerce and Industry, has been adversely decided to his contention in the case of Asuncion vs. De Yriarte (28 Phil., 67), in which, among other things, it is said:

If, therefore, the defendant erred in determining the question presented when the articles were offered for registration, then that error will be corrected by this court in this action and he will be compelled to register the articles as offered. If, however, he did not commit an error, but decided that question correctly, then, of course, his action will be affirmed to the extent that we will deny the relief prayed for.

It is very apparent that the purpose and intent of Herman and his associates in seeking to incorporate under the name of Western Electric Company, Inc., was to unfairly and unjustly compete in the Philippine Islands with the Western Electric Company, Inc., in articles which are manufactured by, and bear the name of, that company, all of which is prohibited by Act No. 666, and was made known to the defendant Reyes by the letter known in the record to the defendant Reyes by the letter known in the record as Exhibit A.

As appellees say:

These defendant, Herman and his associates, are actually asking the Government of the Philippine Island to permit them to pirate the name of the Western Electric Company, Inc., by incorporating thereunder, so that they may deceive the people of the Philippine Islands into thinking that the goods they propose to sell are goods of the manufacture of the real Western Electric Company. It would be a gross prostitution of the powers of government to utilize those powers in such a way as to authorize such a fraud upon the people governed. It would be the grossest abuse of discretion to permit these defendants to usurp the corporate mane of the plaintiff, and to trade thereupon in these Islands, in fraud of the Philippine public and of the true owners of the name and the goodwill incidental thereto.

The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for over fifty years, during which time it has established a reputation all over the world including the Philippine Islands, for the kind and quality of its manufactured articles, and it is very apparent that the whole purpose and intent of Herman and his associates in seeking to incorporate another corporation under the identical name of Western Electric Company, Inc., and for the same identical purpose as that of the plaintiff, is to trespass upon and profit by its good name and business reputation. The very fact that Herman and his associates have sought the use of that particular name for that identical purpose is conclusive evidence of the fraudulent intent with which it is done.

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

Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand and Villa-Real, JJ., concur.


Manila

EN BANC

G.R. No. L-19906 April 30, 1969

STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant, vs.FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING AND TRADING CO., INC., defendant-appellants.

SANCHEZ, J.:

In this, a case for trademark infringement and unfair competition, each of the principal suitors, namely, plaintiff Sterling Products International, Inc.,1 and defendant Farbenfabriken Bayer Aktiengesellschaft,2 seeks to exclude the other from use in the Philippines of the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI asks this Court to strike down FBA's registration of BAYER CROSS IN CIRCLE covering industrial and agricultural products — insecticides and other chemicals, not medicines — from the supplemental register. FBA, for its part, prays for the cancellation from the principal register of SPI's certificates of registration of the trademarks aforesaid for medicines.

Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin, Aspirin for Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are being used by SPI in the Philippines only for said products — Bayer Aspirin, Cafiaspirina and Bayer Aspirin for Children. On the containers (bottles or printed celophane strips, which, in turn, are placed in cardboard boxes) of Bayer Aspirin, Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and BAYER CROSS IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc.3 distributes "Folidol" and other industrial and agricultural chemicals. FBA's "Folidol" (in steel or fiber drums or aluminum containers) displays a replica of SPI's trademark BAYER CROSS IN CIRCLE; on the tin cap and label of the container.

The conflict apparent, suit followed.

The trial court declared itself "in favor of the solution that favors division of the market rather than monopoly." But to avoid confusion, it directed defendants "to add a distinctive word, or words in their mark to indicate that their products come from Germany." The judgment below reads:

IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the Court sustains plaintiff's right to use the Bayer trademark for its medicines, and defendants' right to use it for chemicals, insecticides, and other products not medicines, but the Court orders defendants to add a distinctive word or words in their mark to indicate that their products come from Germany.4

Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint and sustains defendants' right to use the BAYER trademark for their chemicals, insecticides, and other products not medicines";5 and defendants, from the portions of the aforementioned decision particularly those which dismiss the counterclaim of the defendants for the cancellation of the registrations by the plaintiff of the trademarks Bayer and Bayer Cross and which allow the plaintiff "to continue using the Bayer trademarks for medicines."6

And now to the facts.

The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1868, organized a drug company bearing his name — Friedr Bayer et comp. — at Barmen, Germany. The company was at first engaged in the manufacture and sale of chemicals. At about the year 1888 it started to manufacture pharmaceutical preparations also. A change of name from Friedr Bayer to Farbenfabriken vorm. Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was followed in 1912 by a change of principal place of business from Elberfeld to Luverkusen, Germany.7 Its products came to be known outside Germany. With the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige. The time was ripe to register the trademarks. The record, however, does not clearly show when the word BAYER was registered as a trademark in Germany. The BAYER CROSS IN CIRCLE trademark was registered in Germany on January 6, 1904 — No. 65777.8 It was intended to be used on "medicines for human beings and animals, disinfectants preservatives, tar dyestuffs and

chemical preparations for dyes and for photographic purposes."9 This registered trademark consists of the BAYER CROSS encircled by the company's name Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld.

When the company was merged with other German companies in 1925 to form the I.G. Farbenindustrie, the name of the former company was deleted from the trademark and what remained was the present BAYER CROSS IN CIRCLE. A new registration was effected on June 17, 1929 in Germany and for which it was issued a certificate with serial no. 404341. The trademark BAYER CROSS IN CIRCLE was registered by FFB and its subsidiaries in other parts of the world, viz, in Norway, England, Denmark, and Argentina in 1904; in Japan and the United States in 1908; in Spain in 1911; in Peru in 1913.

Sometime in 1895, FFB established a subsidiary in New York, United States. It was named Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the United States and Canada. It was this subsidiary that registered the trademarks BAYER and BAYER CROSS IN CIRCLE in the United States between the years 1907-1908.

Sometime in 1913, FFB organized another subsidiary — The Bayer Co., Inc. of New York. This new subsidiary was authorized by FFB to negotiate for and acquire the trademarks, goodwill, assets and property of Farbenfabriken of Elberfeld Co. By an agreement dated June 12, 1913 (Exh. 106) Bayer of New York purchased for the sum of US $750,000.00 Farbenfabriken of Elberfeld Co.'s "right for the sale in the United States and Canada of the drugs, chemicals, pharmaceuticals and any and all other products and articles manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, good will and other assets and property."

On April 6, 1917,10 the United States declared war on Germany. Pursuant to the provisions of the Trading with the Enemy Act, the Alien Property Custodian classified The Bayer Co., Inc. of New York as an enemy-controlled corporation. Hence, the Alien Property Custodian seized its assets about the early part of 1918. Between December 1918 and January 1919, all the assets of The Bayer Co., Inc. of New York were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US $5,310,000.00. The Bayer Co., Inc. of New York then became a subsidiary of Sterling Drug, Inc. Winthrop Chemical Co., Inc. was later organized as a new subsidiary of Sterling Drug, Inc. to manufacture and sell the physicians' drugs which had been acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was evidently hampered because 'the Germans had kept manufacturing processes secret, so that the manufacture of physicians' drugs on a commercial scale became an almost insoluble problem.11

Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of the world.12

It would appear that the trademark BAYER for medicines was known in the Philippines about the close of the 19th century. This appears on page 88 of the Revista Farmaceutica de Filipinos Año I, Numero 7, 3 de Julio de 1893. Before World War I, BAYER products entering the Philippines came from Germany.

In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm. Friedrich Bayer & Co. and The Bayer Co., Inc. of New York, in reference to the trademarks BAYER and BAYER CROSS IN CIRCLE as they were applied to various products.

Two agreements resolved this conflict, both executed on April 9, 1923 in London, England: one, between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB and Bayer New York (Exh. WWW). Under the terms of the agreement with Winthrop Chemical Co., Inc., FFB stipulated, amongst others: (1) not to contest anymore Winthrop's right over the trademarks BAYER and BAYER CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United States which was understood to include the Philippines under par. 16 of said agreement; and (3) to disclose all secrets of other processes relating to the manufacture of pharmaceuticals.

Paragraph 26 of the FFB — Bayer New York agreement reads —

26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer for sale any goods other than hereunder or those they may market for Winthrop as hereinbefore provided and other than Aspirin and compounds of Aspirin which New York shall continue to market for their own account in the United States of America, Puerto Rico, the Philippines and Hawaiian Islands and the Panama Zone.13

In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This necessitated a new agreement incorporating Exh. 66 with modifications. Said new agreement was signed on November 15, 1926 between I.G. Farbenindustrie and Winthrop.

On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop Chemicals Co. and The Bayer Co., of New York, two consent decrees [Exh. 68 (No. 15-363) and Exh. 69: (No. 15-364)] were promulgated by the U.S. District Court for Southern New York. Said consent decrees declared the April 9 1923, cartel agreements violative of the U.S. anti-trust laws. One reason given is that the German company, FFB (later I.G. Farbenindustrie) — FBA's predecessors — was excluded from the U.S. pharmaceutical market. The sentence, however, contains a saving clause, thus —

The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or supplements thereto are declared and adjudged to be unlawful under the Anti-Trust Laws of the United States, and the defendants Bayer and Sterling, and their respective successors an subsidiaries, or any of them, be and they are hereby enjoined and restrained from carrying out or enforcing any of the aforesaid contracts, or any supplements, amendments or modifications thereof, or from paying to I.G. Farben, its subsidiaries, successors, or assigns, any royalties or share of profits pursuant to said contracts with respect to sales following the effective date of this decree.

Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.nêt

x x x x x x x x x

Affect in any way the rights or title of the defendant Bayer, its successors, subsidiaries or assigns, in or to the name "Bayer" and the "Bayer Cross" mark or registrations thereof, or

Affect or diminish any right, title or interest of said defendants, their successor subsidiaries or assigns, in or to or under any heretofore acquired and presently existing patents, patent applications, patent licenses, trade-marks, trade-names (such as the name "Bayer" and the "Bayer Cross" mark and registrations thereof), processes or formulae relating to the manufacturing, processing, use or sale of aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or impair any rights or remedies of said defendants, their successors, subsidiaries or assigns, provided by statute or convention, and by suits for damages, injunction or other remedy with respect to any such patents, patent applications, patent licenses or trademarks....14

Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware corporation, a subsidiary of Sterling Drug, Inc. of New York, was issued a license to do business in the Philippines.15 The trademarks BAYER and BAYER CROSS IN CIRCLE were then registered in the Philippines under the old Trademark Law (Act 666) by The Bayer Co., Inc.; the BAYER CROSS IN CIRCLE trademark on April 18, 1939 for which it was issued Certificate of Registration No. 13081; the BAYER trademark on April 22, 1939 for which it was issued Registration Certificate No. 13089. These trademark rights were assigned to SPI on December 30, 1942 and the assignment was recorded in the Philippines Patent Office on March 5, 1947. With the passage of Republic Act 166 repealing the old Trademark Law (Act 666), SPI was issued by the Philippines Patent Office on June 18, 1948 two new certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The registration of these trademarks was only for "Medicines".

Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In 1945, after World War II, I.G. Farbenindustrie AG. was decartelized by the Allied High Commission. The unit known as Farbenfabriken Bayer was transferred in 1953 to Farbenfabriken Bayer Aktiengesellschaft (FBA), one of the defendants in this case, which was organized in 1951.

Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started selling FBA's products especially "Folidol" a chemical insecticide which bears the BAYER CROSS IN CIRCLE trademark.16

On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE trademark with the Philippines Patent Office for animal and plant destroying agents. The examiner's report dated December 17, 1959 stated that the subject mark appears to be similar to SPI's registered BAYER trademarks as covered by Certificates of Registration Nos. 1260-S and 1262-S. He concluded that "[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because it would cause confusion or mistake or [to] deceive purchasers."17 This action of the Philippines Patent Office drew a reply from FBA. In its letter dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no question or objection to the assertion of the Examiner that the registrant's mark and that of the applicant are similar to each other. It emphasized the fact that it was seeking registration in the Supplemental Register. Its concluding statement runs thus:.

Being aware of the duties and obligations of a trademark user in the Philippines and the penalties provided for in the pertinent law on tradermarks and being aware also that Supplemental Registration is not a prima facie evidence of ownership of mark but merely a recordation of the use as in fact the mark is actually being used by the applicant in the Philippines, it is respectfully urged that this [application] be given due course.18

On February 25, 1960, FBA was issued a certificate of registration in the Supplemental Register, SR-304.

We now grapple with the problems raised in the separate appeals.

1. A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. This rule is spelled out in our. Trademark Law thus:

SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his, exclusive use a trademark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business, or service from the merchandise, business or service of others. The ownership or possession of a trademark, trade-name, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As inserted by Section 1 of Republic Act 638)

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use."19 Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that Purchasers have come to understand the mark as indicating the origin of the wares.20 Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right.

The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as correctly stated in the decision below, are those which cover medicines only. For, it was on said goods that the BAYER trademarks were actually used by it in the Philippines. Therefore, the certificates of registration for medicines issued by the Director of Patents upon which the protection is enjoyed are only for medicines. Nothing in those certificates recited would include chemical or insecticides.

But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its registrations of the BAYER marks states that "the merchandise for which the trademark is appropriated is d. — Chemicals, Medicines and Pharmaceutical Preparations." Plaintiff's position is that such statement determines the goods for which said marks had been registered. Validity does not attach to this proposition. First, the statement itself admits that "the particular description of the articles comprised in said class (d) on which the trademark is used is Medicines."21 It is not used for chemicals.

Then, Section 11 of the Trademark Law requires that the certificate of registration state "the particular goods . . . for which it is registered." This is controlling. Under Section 11 aforesaid, likewise to be entered in the certificate of registration is "the date of the first use in commerce or business. SPI may not claim "first use" of the trademarks prior to the registrations thereof on any product other than medicines.

Besides, Section 7 of the same Trademark Act directs that upon the filing of the application and the payment of the required fee, the "Director [of Patents] shall cause an examination of the application" — for registration of the trademark — "to be made, and, if on such examination it shall appear that the applicant is entitled to registration, the Director . . . shall cause the mark . . . to be published in the Official Gazette." This examination, it would seem to us, is necessary in order that the Director of Patents may be satisfied that the application conforms to the requirement of actual use in commerce of the trademark in Section 2 and 2-A of the Trademark Law; and that the statement in said application — as to the "first use" thereof and "the goods . . . in connection with which the mark . . . is used" (Section 5) — is true.

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his

mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law.

Because of this and of the fact that the Bayer trademarks were never used in the Philippines by plaintiff except for medicines — Aspirin, Aspirin for Children and Cafiaspirina — we find ourselves unwilling to draw a hard and fast rule which would absolutely and under all circumstances give unqualified protection to plaintiff against the use of said trademarks by all others on goods other than medicines.

2. Neither will the 1927 registration in the United States of the BAYER trademark for insecticides serve plaintiff any. The United States is not the Philippines. Registration in the United States is not registration in the Philippines. At the time of the United States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks owned by persons domiciled in the United States.

What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement.

There is nothing new in what we now say. Plaintiff itself concedes22 that the principle of territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or territoriality."23

Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the same or different products.

3. A question basic in the field of trademarks and unfair competition is the extent to which a registrant of a trademark covering one product may invoke the right to protection against the use by other(s) of the same trademark to identify merchandise different from those for which the trademark has been appropriated.

Plaintiff's trenchant claim is that it should not be turned away because its case comes within the protection of the confusion of origin rule. Callmann notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other." In which case, "defendant's goods are then bought as the plaintiff's, and the poorer quality of the former reflects adversely on the plaintiff's reputation." The other is the confusion of business: "Here though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist."24

A judicial test giving the scope of the rule of confusion of origin is Ang vs. Teodoro (December 14, 1942), 74 Phil. 50. Briefly, the facts of the just cited case are as follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, had continuously used "Ang Tibay" both as trademark and as tradename in the manufacture and sale of slippers, shoes and indoor baseballs since 1910. He formally registered it as a trademark on September 29, 1915 and as a tradename on January 3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April 11, 1932 and established a factory for the manufacture of said articles in 1937. Suit was lodged by Teodoro against Ang to cancel the latter's registration of the trademark "Ang Tibay" and to perpetually enjoin her from using the said trademark on goods manufactured and sold by her. The judgment of the trial court absolved defendant (Ana L. Ang) from the complaint with costs against the plaintiff. The Court of Appeals reversed. On appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there said:

"In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trademarks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods.

Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trademark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the vauable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trademark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trademark or trade-name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud.25

The thoughts expressed in Ang Tibay command respect Conduct of business should conform to ethical business standards. Unfairness is proscribed. The invocation of equity is bottomed upon the injunction that no one should "reap where he has not sown."26

Nonetheless, "[i]t has been emphasized that each case presents a unique problem which must be answered by weighing the conflicting interests of the litigants."27 With this in mind, we are convinced that the case before us is not to be analogized with Ang Tibay. The factual setting is different. His Honor, Judge Magno S. Gatmaitan (now Associate Justice of the Court of Appeals), the trial judge, so found. He reached a conclusion likewise different. And the reasons, so well stated by His Honor, are these:

1st). — It was not plaintiff's predecessor but defendant's namely Farbenfabriken or Bayer Germany that first introduced the medical products into the Philippine market and household with the Bayer mark half a century ago; this is what the Court gathers from the testimony of Frederick Umbreit and this is the implication even of Exhs. 48, 49, 66 and as already shown a few pages back;28

2nd). — There is thus reason plausible enough for defendant' plea that as Sterling was not the "originator" of the Bayer mark, the rule in Ang vs. Teodoro, supra, is not applicable; and this is correct notwithstanding Exhs. 106 and 63 and even giving unto these documents full force and virtue, because purchase of the assets of Elberfeld, defendants' previous affiliate in New York, by Bayer of New York, even if that were to be held to include purchase of the Bayer mark, did not make the purchaser Bayer of New York the originator of the mark; especially since Bayer of New York was only another subsidiary of Bayer Germany or Farbenfabriken which was the real originator;

3rd). — The Court is also impelled to believe that the evidence establishes that among the common people of the Philippines the "Bayer" medicines come from Germany; this the Court deduces from the testimony of witness Florisa Pestano who only reproduced the belief of her grandmother; the Court might as well say that plaintiff itself has not discouraged that belief because the drug and its literature that came from the plaintiff and its affiliate would show that it represented its medicines to have come from defendant29 and were manufactured in Germany with that Bayer mark; thus Exh. 7030 which is the price list of 1928 of Botica de Sta. Cruz on page 6 indicates that Winthrop Chemical Company of New York, — plaintiff's subsidiary — was a distributor of I.G. Farbenindustrie, A.G. Leverkusen Germany; Exh. 8031 which is a medical diary published by Winthrop for 1934 on page 148 manifested that the journal, "Practical Therapeutics" was published by I.G. Farbenindustrie Aktiengesellachaft for Winthrop Chemical Company, Inc.; "with particular reference to the pharmacological products, sera and vaccines originated and prepared in the laboratories of the I.G. Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are prospectuses for the medicines, Mitigal, Afridol, Aspirins, Novalgina and My-Salvarsan32 showed that these products were manufactured for Winthrop by I.G. Farbenindustrie; and then Exh. 81 the Revista Boie of 1928 would show that Winthrop represented itself as the distributor of the products of Bayer of Germany otherwise known as I.G. Farbenindustrie, "segun la alta calidad de la marca original";33 the Court being also impelled to add in this connection that it has to take judicial notice of a belief of long standing common among the people in the Philippines that German products are of very high quality and it is only natural for a distributor or a retailer to take advantage of that, and as it is not debated that "Bayer" is a German surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply

memorandum wherein it is said that this surname is a "pretty common one among members of the Germany race") it is all so very easy to associate the Bayer trademark with products that come from Germany and to believe that they are of high quality;

4th). — The rationale of the doctrine in Ang vs. Teodoro, supra being that:

The Courts have come to realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such unfair trading can cause injury or damage to the first user of a given trade mark, first, by prevention of the natural expansion of his business, and second, by having his business reputation confused with and put at the mercy of the second user. 74 Phil. 55-56;

and the Court having found out that the 'first user' was Bayer Germany and it was this that had built up the Bayer mark and plaintiff apparently having itself encouraged that belief even after it had acquired the Bayer mark in America, thru forced sale, of defendant's subsidiary there in 1918, Exhs. 79, 80, 81, to apply the Ang Tibay rule in the manner advocated by Sterling would, the Court fears, produce the reverse result and the consequence would be not equity but injustice.34

It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer trademark has diluted the rationally of its exclusionary claim. Not that the free ride in the name of defendant's German predecessor was sporadic. It is continuing. Proof of this is the label on the box used by plaintiff (Exhibit U) in the distribution of Bayer Aspirin. This box bears prominently on the front part the legend "Genuine" in red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE, and the second, to BAYER Aspirin. At the back thereof in big letters are the words "BAYER ASPIRIN", followed in small letters "Used since 1900" and down below the small words "Mfd. in the Phil. by Winthrop Stearns, Inc. for STERLING PRODUCTS INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1) found in the box of Bayer Aspirin tablets, children's size, there is the significant statement: "GENUINE BAYER — Each Children's Size Bayer Aspirin tablet is stamped with the Bayer Cross, the trademark of the genuine Bayer product. This means that your child is getting the same gentle-to-the-system Bayer Aspirin that has been used for over 50 years by millions of normal people without ill effect."

With the background of prior use in the Philippines of the word BAYER by FBA's German predecessor and the prior representations that plaintiff's medicines sold in the Philippines were manufactured in Germany, the facts just recited hammer on the mind of the public that the Aspirin. Cafiaspirina and Aspirin for Children being marketed for plaintiff in the Philippines come from the same source — the German source — and in use since 1900. That this view is far from far-fetched, is illustrated by the testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz:

Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a company in Germany named Bayer?

A. Yes, sir.

Q. Since when have you heard of this pharmaceutical company in Germany with the name Bayer, since when have you heard of that?

A. I have always taken the name Bayer as associated with Winthrop & Stearns.

Q. But, you said a while ago....

Witness.

.... Yes .....

x x x x x x x x x

Q. ... that you have heard of a pharmaceutical company with the name of Bayer in Germany?

A. Yes, sir.

Q. Do you know if this Winthrop & Stearns you mentioned has ever been connected with Bayer Company of Germany?

A. I have always understood that they were distributing drugs of Bayer & Company.35

4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored teaching that he who comes into equity must do so with clean hands.36 Plaintiff cannot now say that the present worth of its BAYER trademarks it owes solely to its own efforts; it is not insulated from the charge that as it marketed its medicines it did so with an eye to the goodwill as to quality that defendants' predecessor had established.

There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first user thereof in the Philippines. The trademarks do not necessarily link plaintiff with the public. Plaintiff must show injury; it has not. On the contrary, representations as to the place of manufacture of plaintiff's medicines were untrue, misleading. Plaintiff could still be tagged with the same deception "which (it) complains of in the defendant(s)."37 Appropriate it is to recall here our observation in the Ang Tibay opinion, viz: "On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own."38

Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus forfeited its right to protection from the use of the same trademarks by defendants for products different therefrom — insecticides and other chemicals.

5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from the Principal Register, claiming right thereto for said use. Said trademarks had been registered since 1939 by plaintiff's predecessor. The Bayer Co., Inc.

Defendants' claim is stale; it suffers from the defect of non-use.39 While it is conceded that FBA's predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, no definite evidence there is that defendants or their professors traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its objection. Lack of protest thereto connoted acquiescence. And this; notwithstanding the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the marks; but it was much later, i.e., in 1958 — and on chemicals and insecticides — not on medicines. FBA only bestirred itself and challenged plaintiff's right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit.40

The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for medicines. And defendants may continue using the same trademarks for insecticides and other chemicals, not medicines.

6. Defendants balk at the ruling below which directs them "to add a distinctive word or words in their mark to indicate that their products come from Germany."41

We are left under no doubt as to the reasonableness of the formula thus fashioned. It avoids the mischief of confusion of origin — defendant FBA's product would not be mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to defendants. The order does not visit defendant FBA with reprobation or condemnation. Rather, said defendant would be enhancing the value of and would be sponsoring its own products. Anyway, a statement that its products come from Germany is but a statement of fact.

FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.Castro, J., is on leave.

Footnotes

1Hereinafter referred to as SPI.2Hereinafter referred to as FBA.3Hereinafter referred to as AMATCO.4Record on Appeal, p. 93.5Record on Appeal p. 94.6Record on Appeal, pp. 95-96.

7The former places of Elberfeld and Barmen and other places together now form the town of Wuppertal.8No longer valid in the Federal Republic of Germany as its protection expired on January 5, 1933.9Exhs. 26 and 26-A.10Encyclopedia of American History, ed. by Richard B. Morris (1953), p. 309.11Exhibit 63-A, p. 99.12See: Exhibits DDDD to YYYYYY-3.13Emphasis supplied.14Exhibit 69.15Exhibit A-2.16FBA's predecessors have been using elsewhere this mark for chemicals since 1910 (Exhibits 99 to 99-C) and plant destroying agents since 1924 (Exhibits 100 and 100-A).17Exhibit II-1.18Exhibit JJ-1.19Esso, Inc. vs. Standard Oil Co., 98 P. 2d 1, 6, citing, Han over Star Milling Co. vs. Metcalf, 240 U.S. 403, 36 S Ct. 367, 60 L. ed. 713; United Drug Co. vs. Theodore Rectanus Co., 248 U.S. 90, 39 S. Ct. 48, 63 L. ed. 141. See also: Oakford Company vs. Kroger Company, 157 P. Supp. 453, 458-460; Mason Au 8 Magenheimer Confectionery Co. vs. Loose-Wiles Biscuit Co., 1 F. Supp. 755, 756; Try vs. Leyne-Western Company, 282 F. 2d 97, 104; J. A. Doughtery's Sons, Inc., vs. Kasko Distillers Products Co., 35 P. Supp. 561, 564; Compania Gral, de Tabacos vs. Alhambra Cigar & Cigarrette Mfg. Co., 33 Phil. 485, where we held that in order that a name may be considered a tradename with exclusive rights which attach to the use thereof, it is necessary that it be used with the intent of appropriating it as a trade name.20I Tolentino, Commentaries and Jurisprudence on the Commercial Law of the Philippines, 8th ed., p. 531, citing United Drug Co. vs. Theodore Rectanus Co., 248 U.S. 90, 63 L. ed. 141.21Medicines (class d) in the 1939 registrations; medicines (class 6) in the 1949 registrations.22Brief for Plaintiff-Appellant, p. 88.232 Callmann, Unfair Competition and Trademarks, 1946 ed., p. 1006.242 Callmann, op. cit., pp. 1323-1324.25Ang vs. Teodoro, supra, at pp. 54-55; emphasis supplied. See also: Sta. Ana vs. Maliwat (August 31, 1968), 24 SCRA 1018, 1025-1026. Cf.: The George W. Luft Co., Inc. vs. Ngo Guan (December 17, 1966), 18 SCRA 944, 946.2652 Am. Jur., P. 581.27Id., p. 577; emphasis supplied.28The lower court, in its decision (Rec. on Appeal, p. 65), said that there are indications that Bayer Germany's manufactures came to be known outside Germany even before the turn of the century, viz, according to Exh. 12, Catalogue of Exhibits at the Glasgow Exhibition, 1888; according to Exh. 47, thru drug literature in the Philippines in 1893. Dr. Agerico Sison, plaintiff's witness, testified: .

"Q. When you were still in college, still a student, you studied inventions -famous medicines such as acetyl salicylic acid, is that right?x x x x x x x x x

A. Yes, sir.Q. And you remember that acetyl salicylic acid was invented by chemist in the employ of the Bayer Company of Germany?A. Yes, sir.Q. And that this discovery was made about the end of the nineteenth century?A. Yes, sir.Q. And that you came to know afterwards when you are already practising medicine that one of the renowned manufacturers of pharmaceutical products is that Bayer Company of Germany?

x x x x x x x x xA. Yes, sir.Q. And before World War II, in your practice of medicine had come across pharmaceutical products manufactured by that Bayer Company of Germany being used here in the Philippines?

x x x x x x x x xA. Yes, sir. (t.s.n., pp. 15-18, March 3, 1961)." (See: Brief of Defendants-Appellants', pp. 32-34)

29"Defendant" should read defendant's predecessor.30On pages 2 and 3 of price list of Botica de Sta. Cruz del Dr. Carlos Jaehrling (Exh. 70) printed by Binipayo Press & Photo Engraving, Manila, there are some photographs with the heading "Works of I.G. Farbenindustrie A.G., Germany, Parmaceutical Department, 'Bayer-Meister Lucius', Leverkusen and Hoechst A.M." At bottom of page 3, particularly, are the words: "The I.G. Farbenindustrie A.G., Germany, is the largest chemical manufacturing concern in the world combining the most reputable German manufacturing of chemicals, dyes and pharmaceutical products. The principal works in different parts of Germany are shown here." Page 5 thereof bears the heading "The BAYER COMPANY, INC. New York" followed by a specification of its "Aspirin Preparations," namely: ASPIRIN, BAYASPIRIN, CAFIASPIRIN and FENASPIRIN and the corresponding prices thereof. On page 6 is the heading "Winthrop Chemical Co., Inc., New York, H.A. Metz Laboratories, Inc., New York, Distributors of the I.G. Farbenindustrie A.G., Leverkusen Germany, in the Philippine Islands.31On pages 7 and 8 of this diary, reference is made to the late Dr. Eliodoro Mercado, formerly of the San Lazaro Hospital. Particularly on page 8 thereof, we find the following statement: "In collaboration with the Bayer Company of Leverkusen, Germany — now part of the I.G. Farbenindustrie A.G. — he improved his original formula and experiments ... in the successful treatment of a number of lepers...." On the opposite side a photographic picture of "The Works at Leverkusen is shown (Exhs. 80-a, 80-b, and 80-c).32Exh. 79-a, a MITIGAL prospectus showing the photograph of a bottle and a package with the Bayer Cross. The words "Fabricado por: I.G. Farbenindustrie Aktiengesellschaft Leverkusen b. Koln para: Winthrop Chemical Company Inc., New York, N.Y.," appear on the lower left part of the prospectus. Exh. 79-b, an AFRIDOL prospectus showing the photograph of a package with the Bayer Cross and the same words Fabricado por I.G. Farbenindustrie Aktiengesellschaft Leverkusen b. Koln para: Winthrop Chemical Company, Inc., New York, N.Y." appearing also on the lower left part of the prospectus. Exh. 79-c, an ASPIRINA prospectus in which reference is made to the discovery of aspirin in 1899 by "la gigantesca fabrica de Elberfeld de la razon social Farbenfabriken vorm. Friedrich Bayer & Co." Exh. 79-d, a prospectus on NOVALGINA, which displays clearly the Bayer Cross beneath the word NOVALGINA; aa manufacturer is indicated "I.G. FARBENINDUSTRIE AKTIENGESELLSCHAFT, Seccion Farmaceutica, Bayer-Meister Lucius". On top of this particular prostectus is a rubber stamp, "Dr. G. SCHWAB P.O.B. 1162, MANILA." Exh. 79-e, a prospectus on MYO-SALVARSAN, which mentions as manufacture manufacturer of this product "I.G. FARBENINDUSTRIE ARTIENGESELLSCHAFT, Pharmaceutical Dept. Bayer-Meister Lucius."33At the foot of page 38 of the Revista Boie, May 1928, Exh. 81-c, the following appears: 'Winthrop Chemical Co., Inc., New York, Distributor of the 'BAYER' products in the Philippines. Manila Office: Dr. G, Schwab, P.O. Box 1162, Escolta 619."34Record on Appeal, pp. 87-91; emphasis supplied.35Tr., February 28, 1961, pp. 61-62; emphasis ours.3687 C.J.S., p. 310, citing cases at footnote 53; 52 Am. Jur., p. 626, citing cases at footnote 18.3752 Am. Jur., p. 631, citing cases at footnote 20.38At p. 56.39See: Section 9-A, Trademark Law (R.A. 166, as amended by R.A. 638).40Buenaventura vs. David, 37 Phil. 435, 441.41Record on Appeal, p. 93.


Manila

FIRST DIVISION

G.R. No. L-63796-97 May 2, 1984

LA CHEMISE LACOSTE, S. A., petitioner, vs.HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.

G.R. No. L-65659 May 2l, 1984

GOBINDRAM HEMANDAS SUJANANI, petitioner, vs.HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.

Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.

GUTIERREZ, JR., J.:

It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames which have established themselves in international or foreign trade.

Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the seized items.

The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:

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... Considering that the mark was already registered in the Supplemental Register in favor of herein applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark until after the registration is declared cancelled.

Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".

On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the

petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).

On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operated by Hemandas.

The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search found and seized various goods and articles described in the warrants.

Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same subject matter and between the same parties would be premature.

The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People should prosecution follow in court.

The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)

The petitioner anchors the present petition on the following issues:

Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,

(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits; and

(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of the Philippine Patent Office?

Respondent, on the other hand, centers his arguments on the following issues:

I THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.

II THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.

Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention The Leviton case, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:

Sec. 21 — A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false

designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines.

We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded.

In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code. The Leviton case is not applicable.

Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans.

The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair competition."

In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner.

The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one" which includes, inter alia:

(1) ... A foreign firm which does business through middlemen acting on their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.

(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its account, and not in the name or for the account of a principal Thus, where a foreign firm is represented by a person or local company which does not act in its name but in the name of the foreign firm the latter is doing business in the Philippines.

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Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the name or for the account of the petitioner.

But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.

We further held:

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... That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:

Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.' And it contends that its rights to the use of its corporate and trade name:

Is a property right, a right in rem, which it may assert and protect against all the world, in any of the courts of the world-even in jurisdictions where it does not transact business-just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and cases cited.' That point is sustained by the authorities, and is well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513). in which the syllabus says:

Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and Identified by the use of the mark.

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office.

More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue.

In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so.

The Paris Convention provides in part that:

ARTICLE 1

(1) The countries to which the present Convention applies constitute themselves into a Union for the protection of industrial property.

(2) The protection of industrial property is concerned with patents, utility models, industrial designs, trademarks service marks, trade names, and indications of source or appellations of origin, and the repression of unfair competition.

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ARTICLE 2

(2) Nationals of each of the countries of the Union shall as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided they observe the conditions and formalities imposed upon nationals.

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ARTICLE 6

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for Identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

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ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark.

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ARTICLE 10bis

(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective protection against unfair competition.

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ARTICLE 10ter

(1) The countries of the Union undertake to assure to nationals of the other countries of the Union appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis.

(2) They undertake, further, to provide measures to permit syndicates and associations which represent the industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their countries, to take action in the Courts or before the administrative authorities, with a view to the

repression of the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in which protection is claimed allows such action by the syndicates and associations of that country.

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ARTICLE 17

Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this Convention.

It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country; such country will be in a position under its domestic law to give effect to the provisions of this Convention. (61 O.G. 8010)

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In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to comment on the extraterritorial application of the Paris Convention It said that:

[11] The International Convention is essentially a compact between the various member countries to accord in their own countries to citizens of the other contracting parties trademark and other rights comparable to those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each member nation 'to assure to nationals of countries of the Union an effective protection against unfair competition.'

[12] The Convention is not premised upon the Idea that the trade-mark and related laws of each member nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law shall have only territorial application. Thus a foreign national of a member nation using his trademark in commerce in the United States is accorded extensive protection here against infringement and other types of unfair competition by virtue of United States membership in the Convention. But that protection has its source in, and is subject to the limitations of, American law, not the law of the foreign national's own country. ...

By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the Director of the Patents Office directing the latter:

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... to reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users.

The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the

parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed.

Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the questioned order of April 22, 1983.

A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare allegation that the respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the absence of probable cause, we, nonetheless, hold the arguments to be untenable.

As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).

This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has performed particular acts, or committed specific omissions, violating a given provision of our criminal laws."

The question of whether or not probable cause exists is one which must be decided in the light of the conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule for the determination of the existence of probable cause since, as we have recognized in Luna v. Plaza (26 SCRA 310), the existence depends to a large degree upon the finding or opinion of the judge conducting the examination. However, the findings of the judge should not disregard the facts before him nor run counter to the clear dictates of reason. More so it is plain that our country's ability to abide by international commitments is at stake.

The records show that the NBI agents at the hearing of the application for the warrants before respondent court presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the testimonies and examining the documentary evidence, the respondent court was convinced that there were good and sufficient reasons for the issuance of the warrant. And it then issued the warrant.

The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of the warrants.

True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more carefully because the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to be fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the return of the seized items.

Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the Supplemental Register.

A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).

Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in addition to the principal register but specifically directs that:

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The certificates of registration for marks and trade names registered on the supplemental register shall be conspicuously different from certificates issued for marks and trade names on the principal register.

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The reason is explained by a leading commentator on Philippine Commercial Laws:

The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration on the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration of marks which are not registrable on the principal register because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963);

Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user must Still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register.

The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that "registrant is presumed to be the owner of the mark until after the registration is declared cancelled" is, therefore, misplaced and grounded on shaky foundation, The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. And even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v. Chua Seco & Co., 14 Phil. 534).

By the same token, the argument that the application was premature in view of the pending case before the Patent Office is likewise without legal basis.

The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a prejudicial question which must first be definitely resolved.

Section 5 of Rule 111 of the Rules of Court provides that:

A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a civil case, may only be presented by any party before or during the trial of the criminal action.

The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally determinative of the private respondent's innocence of the charges against him.

In Flordelis v. Castillo (58 SCRA 301), we held that:

As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question was held inapplicable because no criminal case but merely an administrative case and a civil suit were involved. The Court, however, held that, in view of the peculiar circumstances of that case, the respondents' suit for damages in the lower court was premature as it was filed during the pendency of an administrative case against the respondents before the POLCOM. 'The possibility cannot be overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial question comes into play generally in a situation where a civil action and a criminal action both penned and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case.

In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case before the Patent Office.

Even assuming that there could be an administrative proceeding with exceptional or special circumstances which render a criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar circumstances are present in this case.

Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).

The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the protection of Industrial Property instructed the Director of Patents to reject applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of such trademarks to surrender their certificates of registration. Compliance by the Director of Patents was challenged.

The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:

In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason, applications for its registration must be rejected or refused, pursuant to the treaty obligation of the Philippines.

Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and the like. La Chemise Lacoste S.A, obtained registration of these mark and device and was in fact issued renewal certificates by the French National Industry Property Office.

xxx xxx xxx

Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to protect in favor of its owners. it would be to exalt form over substance to say that under the circumstances, due process requires that a hearing should be held before the application is acted upon.

The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an opposition to the registration of a trademark is made. This provision does not apply, however, to situations covered by the Paris Convention, where the appropriate authorities have determined that a well-known trademark is already that of another person. In such cases, the countries signatories to the Convention are obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in Republic Act No. 166, would be superfluous.

The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due process was not violated.

In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.

We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic.

The issue of whether or not the trademark used by the private respondent is different from the petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as a preliminary matter in an administrative proceeding.

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495).

The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who have not shown prior registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41 SCRA 50).

The law on trademarks and tradenames is based on the principle of business integrity and common justice' This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster, and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing another's business by fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).

The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.

We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. Roberto V Ongpin, et al. (G.R. No. 65659).

Actually, three other petitions involving the same trademark and device have been filed with this Court.

In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following relief:

IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent Court of June 30, 1983 be declared to be the law on the matter; (b) that the Director of Patents be directed to issue the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such other legal and equitable remedies as are justified by the premises.

On December 5, 1983, we issued the following resolution:

Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the petition for lack of merit.

The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark 'Chemise Lacoste'.

The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the following:

I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:

l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner;

2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication in newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending proceedings hereof; and

3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and threatening them with confiscation and seizure thereof.

II. On the main petition, judgment be rendered:

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining respondents from further committing the acts complained of;

2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents National Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to immediately comply with the Order of the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which directs the immediate return of the seized items under Search Warrants Nos. 83-128 and 83-129;

3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in the petition at bar: and

4. Awarding such other and further relief as may be just and equitable in the premises.

As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to be final.

Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.

In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the enforcement of the following memorandum of respondent Minister Roberto Ongpin:

MEMORANDUM:

FOR: THE DIRECTOR OF PATENTS

Philippine Patent Office

xxx xxx xxx

Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can ...apply more swift and effective solutions and remedies to old and new problems ... such as the infringement of internationally-known tradenames and trademarks ...'and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said convention in general, and, more specifically, to honor our commitment under Section 6 bis thereof, as follows:

1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof:

(a) a declaration by the Minister of Trade and Industry that' the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement;

(b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source;

(e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for Identification and recognition by consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division.

5. All pending applications for Philippine registration of signature and other world famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings.

6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay the following cases pending before your Office:

1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and Company;

2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;

3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the registration of trademark Crocodile Device and Skiva sought by one Wilson Chua.

Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without merit and accordingly deny it due course.

In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as expounded by this Court to those facts.

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair trade practices of business firms has reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neck, ties, etc. — the list is quite length — and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and genuine nature on helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties.

WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.


Manila

EN BANC

G.R. No. L-46720 June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant, vs.THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.

De Witt, Perkins and Ponce Enrile for appellant.Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici curiæ.

MORAN, J.:

An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.

Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles, California, the place of her alleged last residence and domicile. Among the properties she left her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining Company, an anonymous partnership (sociedad anonima), organized and existing under the laws of the Philippines, with is principal office in the City of Manila. She left a will which was duly admitted to probate in California where her estate was administered and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee of the created by the said will. The Federal and State of California's inheritance taxes due on said shares have been duly paid. Respondent Collector of Internal Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax, to which petitioner-appellant objected. Wherefore, a petition for a declaratory judgment was filed in the lower court, with the statement that, "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares of stock is legally subject to the Philippine inheritance tax, the petitioner will pay such tax, interest and penalties (saving error in computation) without protest and will not file to recover the same; and the petitioner believes and t herefore alleges that it should be held that such transfer is not subject to said tax, the respondent will not proceed to assess and collect the same." The Court of First Instance of Manila rendered judgment, holding that the transmission by will of the said 35,000 shares of stock is subject to Philippine inheritance tax. Hence, this appeal by the petitioner.

Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible personal property of a non-resident decedent, located in the Philippines, the Philippine inheritance tax may be imposed upon their transmission by death, for the self-evident reason that, being a property situated in this country, its transfer is, in some way, defendant, for its effectiveness, upon Philippine laws. It is contended, however, that, as to intangibles, like the shares of stock in question, their situs is in the domicile of the owner thereof, and, therefore, their transmission by death necessarily takes place under his domiciliary laws.

Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of inheritance of any share issued by any corporation of sociedad anonima organized or constituted in the Philippines, is subject to the tax therein provided. This provision has already been applied to shares of stock in a domestic corporation which were owned by a British subject residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See also Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the effect that an inheritance tax can be imposed with respect to intangibles only by the State where the decedent was domiciled at the time of his death, and that, under the due-process clause, the State in which a corporation has been incorporated has no power to impose such tax if the shares of stock in such corporation are owned by a non-resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks, 288 U. S., 378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of the Federal Government to impose an inheritance tax on the transmission, by death of a non-resident, of stock in a domestic (America) corporation, irrespective of the situs of the corresponding certificates of stock. But it is contended that the doctrine in the foregoing case is not applicable, because the due-process clause is directed at the State and not at the Federal Government, and that the federal or national power of the United

States is to be determined in relation to other countries and their subjects by applying the principles of jurisdiction recognized in international relations. Be that as it may, the truth is that the due-process clause is "directed at the protection of the individual and he is entitled to its immunity as much against the state as against the national government." (Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid down in the four cases relied upon by the appellant was predicated on a proper regard for the relation of the states of the American Union, which requires that property should be taxed in only one state and that jurisdiction to tax is restricted accordingly. In other words, the application to the states of the due-process rule springs from a proper distribution of their powers and spheres of activity as ordained by the United States Constitution, and such distribution is enforced and protected by not allowing one state to reach out and tax property in another. And these considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and no analogy, however remote, cam be suggested in the relation of one state of the Union with another or with the United States. The status of the Philippines has been aptly defined as one which, though a part of the United States in the international sense, is, nevertheless, foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)

At any rate, we see nothing of consequence in drawing any distinct between the operation and effect of the due-process clause as it applies to the individual states and to the national government of the United States. The question here involved is essentially not one of due-process, but of the power of the Philippine Government to tax. If that power be conceded, the guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is challenged, which is not, on considerations repugnant to such guaranty of due process of that of the equal protection of the laws, as, when the law is alleged to be arbitrary, oppressive or discriminatory.

Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time of his death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur personam, upon which the rule rests, has been described as a mere "fiction of law having its origin in consideration of general convenience and public policy, and cannot be applied to limit or control the right of the state to tax property within its jurisdiction" (State Board of Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to established fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do so result in inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from artificial postulates of law, formulated for reasons of convenience, to the actualities of each case.

An examination of the adjudged cases will disclose that the relaxation of the original rule rests on either of two fundamental considerations: (1) upon the recognition of the inherent power of each government to tax persons, properties and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle that as o intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which may be entered into with respect thereto. It is on the basis of the first consideration that the case of Burnet vs. Brooks, supra, was decided by the Federal Supreme Court, sustaining the power of the Government to impose an inheritance tax upon transmission, by death of a non-resident, of shares of stock in a domestic (America) corporation, regardless of the situs of their corresponding certificates; and on the basis of the second consideration, the case of Cury vs. McCanless, supra.

In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal estate tax is precluded by the due-process clause of the Fifth Amendment, held:

The point, being solely one of jurisdiction to tax, involves none of the other consideration raised by confiscatory or arbitrary legislation inconsistent with the fundamental conceptions of justice which are embodied in the due-process clause for the protection of life, liberty, and property of all persons — citizens and friendly aliens alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326; 76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government had jurisdiction to impose the tax, there is manifestly no ground for assailing it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747; MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R. Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39 S. Ct., 214. (Emphasis ours.)

And, in sustaining the power of the Federal Government to tax properties within its borders, wherever its owner may have been domiciled at the time of his death, the court ruled:

. . . There does not appear, a priori, to be anything contrary to the principles of international law, or hurtful to the polity of nations, in a State's taxing property physically situated within its borders, wherever its owner may have been domiciled at the time of his death. . . .

As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct grounds — the citizenship of the owner, his domicile, the source of income, the situs of the property — efforts have been made to preclude multiple taxation through the negotiation of appropriate international conventions. These endeavors, however, have proceeded upon express or implied recognition, and not in denial, of the sovereign taxing power as exerted by governments in the exercise of jurisdiction upon any one of these grounds. . . . (See pages 396-397; 399.)

In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the tax. In arriving at this conclusion, the court made the following observations:

In cases where the owner of intangibles confines his activity to the place of his domicile it has been found convenient to substitute a rule for a reason, cf. New York ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466; 108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are taxed at their situs and not elsewhere, or perhaps less artificially, by invoking the maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed., 749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the identify owner at his domicile which gives jurisdiction to tax. But when the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of another state, in such a way as to bring his person or properly within the reach of the tax gatherer there, the reason for a single place of taxation no longer obtains, and the rule even workable substitute for the reasons may exist in any particular case to support the constitutional power of each state concerned to tax. Whether we regard the right of a state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall in McCulloch vs. Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons whose relationships are source of intangibles rights, or on the benefit and protection conferred by the taxing sovereignty, or both, it is undeniable that the state of domicile is not deprived, by the taxpayer's activities elsewhere, of its constitutional jurisdiction to tax, and consequently that there are many circumstances in which more than one state may have jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles. Shares or corporate stock be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's domicile. protection, benefit, and power over the subject matter are not confined to either state. . . .(p. 1347-1349.)

. . . We find it impossible to say that taxation of intangibles can be reduced in every case to the mere mechanical operation of locating at a single place, and there taxing, every legal interest growing out of all the complex legal relationships which may be entered into between persons. This is the case because in point of actuality those interests may be too diverse in their relationships to various taxing jurisdictions to admit of unitary treatment without discarding modes of taxation long accepted and applied before the Fourteen Amendment was adopted, and still recognized by this Court as valid. (P. 1351.)

We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the issue here involved is controlled by those doctrines. In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein. And besides, the certificates of stock have remained in this country up to the time when the deceased died in California, and they were in possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom they have been delivered and indorsed in blank. This indorsement gave Syrena McKee the right to vote the certificates at the general meetings of the stockholders, to collect dividends, and dispose of the shares in the manner she may deem fit, without prejudice to her liability to the owner for violation of instructions. For all practical purposes, then, Syrena McKee had the legal title to the certificates of stock held in trust for the true owner thereof. In other words, the owner residing in California has extended here her activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.

Judgment is affirmed, with costs against petitioner-appellant.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.


Manila

THIRD DIVISION

G.R. No. 91332 July 16, 1993

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A., petitioners vs.THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco Law Office for petitioners.Teresita Gandionco-Oledan for private respondent.

MELO, J.:

In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco Corporation, herein private respondent, from manufacturing and selling "MARK" cigarettes in the local market.

Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also for cigarettes, must be protected against unauthorized appropriation, petitioners twice solicited the ancillary writ in the course the main suit for infringement but the court of origin was unpersuaded.

Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of the issue on the propriety of lifting the writ of preliminary injunction should not be construed as a prejudgment of the suit below. Aware of the fact that the discussion we are about to enter into involves a mere interlocutory order, a discourse on the aspect infringement must thus be avoided. With these caveat, we shall now shift our attention to the events which spawned the controversy.

As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under the laws of the State of Virginia, United States of America, and does business at 100 Park Avenue, New York, New York, United States of America. The two other plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the Philippines but are suing on an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per certificates of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no right to manufacture and sell cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be precluded during the pendency of the case from performing the acts complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132).

For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration with the Philippine Patent Office subject to the affirmative and special defense on misjoinder of party plaintiffs. Private respondent alleged further that it has been authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that "MARK" is a common word which cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132). On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the Presiding Judge of Branch 166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the following propositions:

Plaintiffs admit in paragraph 2 of the complaint that ". . . they are not doing business in the Philippines and are suing on an isolated transaction . . .". This simply means that they are not engaged in the sale, manufacture, importation, expor[t]ation and advertisement of their cigarette products in the Philippines. With this admission, defendant asks: ". . . how could defendant's "MARK" cigarettes cause the former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs maintain that since their trademarks are entitled to protection by treaty obligation under Article 2 of the Paris Convention of which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the Philippines and as such, have the force and effect of law under Section 12, Article XVII of our Constitution and since this is an action for a violation or infringement of a trademark or trade name by

defendant, such mere allegation is sufficient even in the absence of proof to support it. To the mind of the Court, precisely, this is the issue in the main case to determine whether or not there has been an invasion of plaintiffs' right of property to such trademark or trade name. This claim of plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis for the issuance of a writ of preliminary injunction.

There is no dispute that the First Plaintiff is the registered owner of trademar[k] "MARK VII" with Certificate of Registration No. 18723, dated April 26,1973 while the Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration No. 10953 dated March 23, 1964, in addition to a pending application for registration of trademark "MARK VII" filed on November 21, 1980 under Application Serial No. 43243, all in the Philippine Patent Office. In same the manner, defendant has a pending application for registration of the trademark "LARK" cigarettes with the Philippine Patent Office under Application Serial No. 44008. Defendant contends that since plaintiffs are "not doing business in the Philippines" coupled the fact that the Director of Patents has not denied their pending application for registration of its trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge to give semblance of good faith intended to deceive the public and patronizers into buying the products and create the impression that defendant's goods are identical with or come from the same source as plaintiffs' products or that the defendant is a licensee of plaintiffs when in truth and in fact the former is not. But the fact remains that with its pending application, defendant has embarked in the manufacturing, selling, distributing and advertising of "MARK" cigarettes. The question of good faith or bad faith on the part of defendant are matters which are evidentiary in character which have to be proven during the hearing on the merits; hence, until and unless the Director of Patents has denied defendant's application, the Court is of the opinion and so holds that issuance a writ of preliminary injunction would not lie.

There is no question that defendant has been authorized by the Bureau of Internal Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated September 24, 1982). However, this authority is qualified . . . that the said brands have been accepted and registered by the Patent Office not later than six (6) months after you have been manufacturing the cigarettes and placed the same in the market." However, this grant ". . . does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your indicated trademarks/brands". As aforestated, the registration of defendant's application is still pending in the Philippine Patent Office.

It has been repeatedly held in this jurisdiction as well as in the United States that the right or title of the applicant for injunction remedy must be clear and free from doubt. Because of the disastrous and painful effects of an injunction, Courts should be extremely careful, cautious and conscionable in the exercise of its discretion consistent with justice, equity and fair play.

There is no power the exercise of which is more delicate which requires greater caution, deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than the issuing of an injunction; it is the strong arm of equity that never ought to be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear, the injury impending or threatened, so as to be averted only by the protecting preventive process of injunction. (Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)

Courts of equity constantly decline to lay down any rule which injunction shall be granted or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of society which may require their aid to protect rights and restrain wrongs. (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)

It is the strong arm of the court; and to render its operation begin and useful, it must be exercised with great discretion, and when necessary requires it. (Attorney-General v. Utica Inc. Co., P. John Ch. (N.Y.) 371.)

Having taken a panoramic view of the position[s] of both parties as viewed from their pleadings, the picture reduced to its minimum size would be this: At the crossroads are the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law, treaty and jurisprudence to restrain defendant in

its activities of manufacturing, selling, distributing and advertising its "MARK" cigarettes and now comes defendant who countered and refused to be restrained claiming that it has been authorized temporarily by the Bureau of Internal Revenue under certain conditions to do so as aforestated coupled by its pending application for registration of trademark "MARK" in the Philippine Patent Office. This circumstance in itself has created a dispute between the parties which to the mind of the Court does not warrant the issuance of a writ of preliminary injunction.

It is well-settled principle that courts of equity will refuse an application for the injunctive remedy where the principle of law on which the right to preliminary injunction rests is disputed and will admit of doubt, without a decision of the court of law establishing such principle although satisfied as to what is a correct conclusion of law upon the facts. The fact, however, that there is no such dispute or conflict does not in itself constitute a justifiable ground for the court to refuse an application for the injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)

Hence, the status quo existing between the parties prior to the filing of this case should be maintained. For after all, an injunction, without reference to the parties, should be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)

In the process of denying petitioners' subsequent motion for reconsideration of the order denying issuance of the requested writ, the court of origin took cognizance of the certification executed on January 30, 1984 by the Philippine Patent Office attesting to the fact that private respondent's application for registration is still pending appropriate action. Apart from this communication, what prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners' application for a writ of preliminary injunction was the letter from the Bureau of Internal Revenue date February 2, 1984 which reads:

MRS. TERESITA GANDIONGCO OLEDANLegal CounselFortune Tobacco Corporation

Madam:

In connection with your letter dated January 25, 1984, reiterating your query as to whether your label approval automatically expires or becomes null and void after six (6) months if the brand is not accepted and by the patent office, please be informed that no provision in the Tax Code or revenue regulation that requires an applicant to comply with the aforementioned condition order that his label approved will remain valid and existing.

Based on the document you presented, it shows that registration of this particular label still pending resolution by the Patent Office. These being so , you may therefore continue with the production said brand of cigarette until this Office is officially notified that the question of ownership of "MARK" brand is finally resolved.

Very truly yours,

TEODORO D. PAREÑOChief, Manufactured TobaccoTax DivisionTAN-P6531-D2830-A-6

(p. 348, Rollo.)

It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division of the then Philippine Patent Office that Fortune's application for its trademark is still pending before said office (p. 311, Rollo).

Petitioners thereafter cited supervening events which supposedly transpired since March 28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that could alter the results of the case in that Fortune's application had been rejected, nay, barred by the Philippine Patent Office, and that the application had been forfeited by abandonment, but the trial court nonetheless denied the second motion for issuance of the injunctive writ on April 22, 1987, thus:

For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants have fallen far short of the legal requisites that would justify the grant of the writ of preliminary injunction prayed for. For one, they did not even bother to establish by competent evidence that the products supposedly affected adversely by defendant's trademark now subject of an application for registration with the Philippine Patents Office, are in actual use in the Philippines. For another, they concentrated their fire on the alleged abandonment and forfeiture by defendant of said application for registration.

The Court cannot help but take note of the fact that in their complaint plaintiffs included a prayer for issuance preliminary injunction. The petition was duly heard, and thereafter matter was assiduously discussed lengthily and resolved against plaintiffs in a 15-page Order issued by the undersigned's predecessor on March 28, 1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8 page Order issued on April 5, 1984,, and the matter was made to rest.

However, on the strength of supposed changes in the material facts of this case, plaintiffs came up with the present motion citing therein the said changes which are: that defendant's application had been rejected and barred by the Philippine Patents Office, and that said application has been deemed abandoned and forfeited. But defendant has refiled the same.

Plaintiffs' arguments in support of the present motion appear to be a mere rehash of their stand in the first above-mentioned petition which has already been ruled upon adversely against them. Granting that the alleged changes in the material facts are sufficient grounds for a motion seeking a favorable grant of what has already been denied, this motion just the same cannot prosper.

In the first place there is no proof whatsoever that any of plaintiffs' products which they seek to protect from any adverse effect of the trademark applied for by defendant, is in actual use and available for commercial purposes anywhere in the Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique Madarang, the abandonment of an application is of no moment, for the same can always be refiled. He said there is no specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to Madarang, the refiled application of defendant is now pending before the Patents Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G. R. No. 91332.)

Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals.

The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction enjoining Fortune, its agents, employees, and representatives, from manufacturing, selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked:

There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence registration was barred under Sec. 4 (d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by respondents.

Pitted against the petitioners' documentary evidence, respondents pointed to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting Commissioner of Internal Revenue, temporarily granting the request of private respondent for a permit to manufacture two (2) new brands of cigarettes one of which is brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of private respondents' counsel dated September 17, 1986 attesting that the records of his office would show that the "trademark MARK" for cigarettes is now the subject of a pending application under Serial No. 59872 filed on September 16, 1986.

Private respondent's documentary evidence provides the reasons neutralizing or weakening their probative values. The penultimate paragraph of Commissioner Diaz' letter of authority reads:

Please be informed further that the authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above-named brands/trademark.

while Director Sandico's certification contained similar conditions as follows:

This Certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register if contrary to the provisions of the Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases.

The temporary permit to manufacture under the trademark "MARK" for cigarettes and the acceptance of the second application filed by private respondent in the height of their dispute in the main case were evidently made subject to the outcome of the said main case or Civil Case No. 47374 of the respondent Court. Thus, the Court has not missed to note the absence of a mention in the Sandico letter of September 26, 1986 of any reference to the pendency of the instant action filed on August 18, 1982. We believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan, 125 SCRA 276)

The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)

After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the disputed writ of preliminary injunction with offer to post a counterbond was submitted which was favorably acted upon by the Court of Appeals, premised on the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a result thereof, to wit:

The private respondent seeks to dissolve the preliminary injunction previously granted by this Court with an offer to file a counterbond. It was pointed out in its supplemental motion that lots of workers employed will be laid off as a consequence of the injunction and that the government will stand to lose the amount of specific taxes being paid by the private respondent. The specific taxes being paid is the sum total of P120,120, 295.98 from January to July 1989.

The petitioners argued in their comment that the damages caused by the infringement of their trademark as well as the goodwill it generates are incapable of pecuniary estimation and monetary evaluation and not even the counterbond could adequately compensate for the damages it will incur as a result of the dissolution of the bond. In addition, the petitioner further argued that doing business in the Philippines is not relevant as the injunction pertains to an infringement of a trademark right.

After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for US to grant the dissolution of the writ of preliminary injunction by the offer of the private

respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction.

The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages.

While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No. 91332.)

Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332).

Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion tantamount to excess of jurisdiction when:

I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines;

II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court; and

III. . . . after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain private respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized the private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the Trademark Law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)

To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local commerce, rely on section 21-A of the Trademark Law reading as follows:

Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it brings complaint: Provided, That the country of which the said foreign corporation or juristic person is a citizen or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines. (As inserted by Sec. 7 of Republic Act No. 638.)

to drive home the point that they are not precluded from initiating a cause of action in the Philippines on account of the principal perception that another entity is pirating their symbol without any lawful authority to do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for the proposition in support thereof is embedded in the Philippine legal jurisprudence.

Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that:

Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in Philippine courts for infringement of a mark or tradename, for unfair competition, or false designation of origin and false description, "whether or not it has been licensed to do business in the

Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it brings complaint."

Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation, since it requires, before a foreign corporation may bring an action, that its trademark or tradename has been registered under the Trademark Law. The argument misses the essential point in the said provision, which is that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business in the Philippines" pursuant to the Corporation Law (precisely to counteract the effects of the decision in the Mentholatum case). (at p. 57.)

However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally allege its personality to sue. Relative to this condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).

Another point which petitioners considered to be of significant interest, and which they desire to impress upon us is the protection they enjoy under the Paris Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned, there is no necessity to treat the matter with an extensive response because adherence of the Philippines to the 1965 international covenant due to pact sunt servanda had been acknowledged in La Chemise (supra at page 390).

Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have done in the case at hand.

In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2 of the Paris Convention in that:

(2) . . . . no condition as to the possession of a domicile or establishment in the country where protection is claimed may be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property of any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)

Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak loudly, about necessity of actual commercial use of the trademark in the local forum:

Sec. 2. What are registrable. — Trademarks, tradenames and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed; And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865).

Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service

mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis supplied.)

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16).

The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this manner:

A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename.

xxx xxx xxx

These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:

A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark.

xxx xxx xxx

. . . Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. . . .

In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce.

We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]):

3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value". The evidence for respondent must be clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by the law. Respondent did not expect income from such "samples". There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)

The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It is unknown to Filipino except the very few who

may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. (at pp. 589-591.)

In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

Going back to the first assigned error, we can not help but notice the manner the ascription was framed which carries with it the implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary injunction is due to judicial deference to the lower courts, involved as there is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary to the main action for infringement still pending factual determination before the court of origin. It is virtually needless to stress the obvious reality that critical facts in an infringement case are not before us more so when even Justice Feliciano's opinion observes that "the evidence is scanty" and that petitioners "have yet to submit copies or photographs of their registered marks as used in cigarettes" while private respondent has not, for its part, "submitted the actual labels or packaging materials used in selling its "Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state of facts on their so called right to the trademarks which could be subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy would practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable barrier to petitioners' portrayal of whimsical exercise of discretion by the Court of Appeals is the well-taken remark of said court that:

The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.)

More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not doing business in the Philippines, for these frank representations are inconsistent and incongruent with any pretense of a right which can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot be made to rest solely on these documents since dominion over trademarks is not acquired by the mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]).

Even if we disregard the candid statements of petitioners anent the absence of business activity here and rely on the remaining statements of the complaint below, still, when these averments are juxtaposed with the denials and propositions of the answer submitted by private respondent, the supposed right of petitioners to the symbol have thereby been controverted. This is not to say, however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of justice in favor of private respondent. Far from it. What we are simply conveying is another basic tenet in remedial law that before injunctive relief may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as the possibility of irreparable damage, without prior proof of transgression of an actual existing right, is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82).

On the economic repercussion of this case, we are extremely bothered by the thought of having to participate in throwing into the streets Filipino workers engaged in the manufacture and sale of private respondent's "MARK"

cigarettes who might be retrenched and forced to join the ranks of the many unemployed and unproductive as a result of the issuance of a simple writ of preliminary injunction and this, during the pendency of the case before the trial court, not to mention the diminution of tax revenues represented to be close to a quarter million pesos annually. On the other hand, if the status quo is maintained, there will be no damage that would be suffered by petitioners inasmuch as they are not doing business in the Philippines.

With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary injunction, it cannot be gainsaid that respondent court acted well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:

Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. — The injunction may be refused or, if granted ex parte, may be dissolved, upon the insufficiency of the complaint as shown by the complaint itself, with or without notice to the adverse party. It may also be refused or dissolved on other grounds upon affidavits on the part of the defendants which may be opposed by the plaintiff also by affidavits. It may further be refused or, if granted, may be dissolved, if it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case may be, would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. If it appears that the extent of the preliminary injunction granted is too great, it must be modified.

Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following instances:

(1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be granted in this case with or without notice to the adverse party.

(2) If it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he may suffer. The defendant, in this case, must file a bond in an amount fixed by the judge conditioned that he will pay all damages which plaintiff may suffer by the refusal or the dissolution of the injunction.

(3) On the other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff also affidavits.

Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p. 268.)

In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore discussed on the absence of their "right" to be protected. At any rate, and assuming in gratia argumenti that respondent court erroneously lifted the writ it previously issued, the same may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of the court before final judgment, petitioners' criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made without previous notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed., p. 81).

WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.

SO ORDERED.

Bidin, J., concurs.Davide, Jr., concurs in the result.Romero, J. took no part.

Separate Opinions

FELICIANO, J., dissenting:

I find myself unable to join in the opinion prepared by my distinguished brother, Melo, J.

It seems to me that the issues involved in this case are rather more complex than what has been assumed to be the case by the majority opinion. For this and related reasons, there is set out below a statement of the relevant facts (as I see them) that is more extensive than what is ordinarily found in dissenting opinions.

Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and existing under the law of Canada and Switzerland, respectively.

Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of Registration No. 18723, dated 26 April 1973. The statement attached to the Certificate of Registration states that the trademark "MARK VII" had been registered in the United States Patent Office, on the Principal Register, under Certificate of Registration No. 888,931 issued on 7 April 1970. The statement also requested that the trademark be registered in the Philippine Patent Office on the Principal Register in accordance with Section 37 of R.A. No. 166, as amended.

Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register. This Trademark Certificate of Registration was originally issued in the name of Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc. Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to Benson & Hedges (Canada) Ltd. This trademark Certificate of Registration was renewed on 28 May 1984. The statement attached thereto stated that the "date of first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15, 1963," and that trademark had "been in actual use in commerce over the Philippines continuously for two months."

Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 10953, dated 25 March 1964. This Trademark Certificate of Registration was originally issued in the name of Ligget and Myres Tobacco Company was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged that the name of Liggett and Myres Tobacco Company was changed later to Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of Registration states that the trademark "LARK" was first used by Ligget and Myres Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the Philippines on February 6, 1963" and has been continuously used by it "in trade in or with the Philippines since February 6, 1963."

Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation ("Fortune") commenced manufacturing and selling in the Philippines cigarettes under the brandname "MARK." Fortune also filed on 13 February 1981 with the Philippine Patent Office an application for registration of "MARK" as a trademark for cigarettes.

By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune stating that the manufacturing, selling and advertising of "MARK" cigarettes by Fortune constituted an "infringement or an act of unfair competition with" petitioners' "well-known international trademarks used on cigarettes and tobacco products which were registered worldwide and with the Philippine Patent Office." Petitioners listed their Philippine Certificates of Registration for the trademarks "MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and desist from further manufacturing; selling or advertising 'MARK' cigarettes," otherwise appropriate court actions would be filed without further notice.

On 18 August 1982, petitioners commenced action before the Court of First Instance of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged that they were not doing business in the Philippines but had nonetheless the right and the capacity to bring the instant suit; that they were owners of Philippine Patent Office Trademark Certificates of Registration which were in full force and effect, covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last which also covered chewing and smoking tobacco); that they had registered those trademarks in their respective countries of origin and in other countries the world and that by virtue of their "long and extensive use [had] gained international fame and acceptance;" that they had their respective real and effective industrial or commercial establishments in the United States, Canada and

Switzerland, which countries were, like the Philippines, members of the Convention of Paris for the Protection of Industrial Property; that under that Convention each member-country undertakes to prohibit the use of a trademark which constitutes a reproduction, imitation or translation of a mark already belonging to a person entitled to the benefits of the Convention and use for identical or similar goods; that petitioner Fabriques de Tabac Reunies, S.A. had long been using trademark "LARK" throughout the world, including the Philippines where its products bearing the trademark "LARK" had been sold in the duty-free market, and advertised and marketted in the Philippines at least since 1964 and have continued to be so to present; that Fortune had without previous consent, authority or license from petitioners, with knowledge of the popularity of petitioners' marks and their Philippine registrations, manufactured, advertised and sold cigarettes bearing the identical or confusingly similar trademark "MARK" which unauthorized use constituted an act of infringement under Section 22 of R.A. No. 166, as amended; that thereby the public and the patronizers of petitioners' products were being deceived into buying Fortune's cigarettes under the impression and mistaken belief that Fortune's cigarettes were identical with, or came from the same source as, petitioners' products or that Fortune was licensee of petitioners, which it was not; that the infringement by Fortune of petitioners' trademarks have inflicted damages upon petitioners; that the continued unauthorized and unlicensed manufacture and sale by Fortune of its infringing products during the litigation would work injustice and cause irreparable injury to petitioners in violation of their property rights and moreover tend to render the judgment which the court might render ineffectual. Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune from manufacturing or selling "MARK" cigarettes, and after trial, to make such preliminary injunction permanent and to order Fortune's infringing materials to be destroyed, and for damages.

Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28 March 1983, the trial court 1 issued an Order denying petitioners' motion for preliminary injunction. In rendering that order, the trial court, while noting that petitioners were holders of Philippine Certificates of Trademark Registration, relied heavily on three (3) factors:

Firstly, that petitioners were foreign corporations not doing business in the Philippines;

Secondly, that Fortune's application for a registration as trademark of the word "MARK" for cigarettes was then pending before the Philippine Patent Office; and

Thirdly, that Fortune was the "only party authorized" by the Bureau of Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK" in the Philippines.

In respect of the first point, the trial court was obviously heavily influenced by Fortune's argument that because petitioners were not doing business in the Philippines, which meant that "they [were] not engaged in the sale, manufacture, importation, exportation and advertisement of their cigarette products in the Philippines," Fortune's manufacture and sale of its "MARK" cigarettes could not be said to be causing petitioners "irreparable damage" within the Philippines. In respect to the second point, the trial judge felt that because the Director of Patents had not, at that point, denied Fortune's pending application for registration of its trademark "MARK," the grant of a preliminary injunction was premature. With regard to the third point, the judge noted a letter dated 30 January 1979 2 of the then Acting Commissioner of Internal Revenue Mr. Conrado P. Diaz, temporarily granting the request of Fortune for a permit to manufacture two (2) new brands of cigarettes, one of which was "MARK." The trial judge also noted that the BIR letter contained the following paragraph:

Please be informed further that this authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above named brands/trademarks. 3

The trial judge, however, apparently gave no weight at all to this caveat.

Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder, and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5 April 1984 another Order denying the Motion for Reconsideration. In his second order, the trial judge laid great stress on the fact that Fortune's application for registration of its trademark "MARK" for cigarettes remained subsisting. On the basis, Judge Reyes denied petitioners' motion for reconsideration.

More than two (2) years later, petitioners filed a "Second Motion for Issuance of Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and Wilfredo T. Jaramillo, Trademark Examiner, stating that:

This application [for registration of "Mark"] has been examined.

Caption mark of the application must tally with the drawing on file.

Subject mark is confusingly similar with the following marks on file:

a. "Mark" with Reg. No. SR-2659 for cigarettes.

b. "Mark VII" with Reg. No. 18723 for cigarettes.

c. "Mark Ten" with Reg. No. 11147 for cigarettes.

d. "Lark" with Reg. No. 10953 for cigarettes.

Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as amended.

Subject mark has no trademark significance and can not serve its purpose as to indicate the source and origin of goods.

Furthermore, the word "Mark" is generic and therefore incapable of exclusive appropriation.

Makati, Metro Manila, April 6, 1983. 4 (Emphasis supplied)

Petitioners also invited attention to a certification dated 8 August 1986 issued by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect that Fortune's application for the mark "MARK" for cigarettes was declared abandoned as of 16 February 1986 and was now deemed forfeited. In addition, petitioners explained in some detail how Fortune's use of its mark "MARK" was "destructive of [petitioners'] property right to [their] registered trademarks." 5 Further, petitioners assailed Fortune's argument that issuance of preliminary injunction would cause "loss of revenue and taxes to the Government" and that more damages would be sustained by Fortune than by petitioners since the petitioners do not market their cigarettes in the Philippines.

After Fortune had filed an Opposition to petitioners' Second Motion, the trial court, this time presided over by Judge Nicolas Galing, issued an Order dated 22 April 1987 denying once more the motion for issuance of a writ of preliminary injunction. In this order, Judge Galing relied on two (2) points: firstly, according to the trial judge, petitioners had not shown that the products they sought to protect from Fortune's "MARK" cigarettes were "in actual use and available for commercial purposes anywhere in the Philippines;" and secondly, it appeared that while Fortune's original application had been abandoned, it could be refiled and was in fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until the Director of Patents had definitely acted upon Fortune's application for registration of "MARK," petitioners' prayer for preliminary injunction could not be granted.

Petitioners then filed a Petition for Review with the Supreme Court, which Petition was docketed as G.R. No. 78141. The Court ordered respondents to file their Comments on the Petition and on 30 September 1987, the Court referred the Petition to the Court of Appeals.

In due course of time, the Court of Appeals, through Cacdac, Jr., J., 6 rendered a decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and ordering issuance of a writ of preliminary injunction upon filing of a bond by petitioners in the sum of P200,000.00 to be approved by the appellate court, "enjoining the private respondents, its agents, employees and representatives from manufacturing, selling and/or advertising "MARK" cigarettes until further orders." The Court of Appeals said in pertinent part:

There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII," "MARK TEN," and "LARK". (Annexes B, C and D, Petition). As found and reiterated by the Philippine

Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp. 106, 139 SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases.' (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by respondents. 7 (Emphasis supplied)

The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily granting Fortune's request for a permit to manufacture two (2) new brands of cigarettes, including one branded "MARK," and the caveat (earlier noted) 8 that the BIR's authorization would not give Fortune any protection against any person or entity whose rights may be prejudiced by infringement or unfair competition on the part of Fortune. The Court of Appeals also referred to the certificate dated 26 September 1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon request of Fortune's counsel stating that there was a pending application for registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on 16 September 1986, noting at the same time, that Director Sandico's certification contained the following caveat or qualification:

This certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register as contrary to the provisions of the Trademark Law, Republic Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases. (Emphasis supplied)

The Court of Appeals then went on to say that:

[We] believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. v. Quintillan, 125 SCRA 276).

The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same (Service Specialists, Inc. v. Sheriff of Manila. 145 SCRA 139). 9 (Emphasis supplied)

Fortune moved for reconsideration of the Decision of the Court of Appeals insisting that petitioners must first prove their "clear, unmistakable and unquestioned right to the writ, coupled with the possible damages it would suffer;" that petitioners had not suffered any "great and irreparable injury to speak of" because "petitioners have never done business in this country in the past nor in the future;" that, on the other hand, Fortune had been authorized by the BIR to manufacture "MARK" cigarettes, "thereby generating much needed funds for the Government;" that Fortune's application for registration of its brandname "MARK" with the Philippine Patent Office "still pending" and not "finally rejected" by the Director of Patents. On 12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues and arguments in Fortune's motion for reconsideration had been "fully discussed" in the Decision sought to be reconsidered, that no new arguments were raised, and accordingly denied the Motion for Reconsideration.

Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to File Counterbond" date 25 July 1989, where it reiterated the basic arguments it previously made.

A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" dated 17 August 1989 was next filed by Fortune. In this "Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had paid the amount of P120,120,735.28. Fortune also referred to its employees assigned to the manufacture of "MARK" cigarettes who were apparently apprehensive that their services would eventually be terminated and that they would join the ranks of the unemployed.

Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the "Supplemental Motion" of Fortune.

On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J. issued a Resolution lifting the preliminary injunction it had earlier granted upon the filing of counterbond by private respondent in the amount of P400,000.00 to answer for any damages petitioners may suffer as a consequence of such lifting. In its Resolution, the Court of Appeals referred to the "lots of workers employed [who] will be laid off as a consequence of the injunction" and that Government "will stand to lose the amount of specific taxes being paid by" Fortune. It when went on to say:

After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for Us to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction.

The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for such damages.

While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction the motion to file a counterbond is granted. 10 (Emphasis supplied)

Petitioners filed a Motion for Reconsideration, without success.

In the instant Petition, petitioners make the following basic submissions:

1. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it required, contrary to law and jurisprudence that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines;

2. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it lifted the injunction in violation of Section 6 of Rule 58 of the rules of Court;

3. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when, after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the trademark law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court. 11

The Court required private respondent to file a comment. The comment reiterated the basic arguments made by private respondent before the Court of Appeals:

a. the petitioners are not suffering any irreparable damage by the lifting of the preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based purely on speculation, since by judicial

admission, petitioners are not doing business in the Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or selling "MARK TEN," "MARK VII" or "LARK" in this country," notwithstanding "false allegation" that petitioners have been "using" the said trademarks "in commerce and trade" in the Philippines since 1963 up to the present.

b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that would have to be foregone by the Government considering that private respondent "paid an annual specific tax of P240 Million only on the manufacture and sale of "MARK cigarettes." Private respondent claims that, in contrast, petitioners which are foreign corporations "based in three different countries" have not contributed anything to Government tax revenues.

c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued upon the submission of a counter bond in double the amount of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound discretion of the Court of Appeals. Private respondent also stresses that the right of petitioners to the injunction was still being litigated before the trial court.

Reformulating the issues raised by the petitioners here, we think the principal issues may be reduced to the following: firstly, is there a clear legal right to the relief asked by petitioners in the form of a preliminary injunction to restrain private respondent from manufacturing, selling and distributing cigarettes under the trademark "MARK"? The second question is: are private respondent's acts complained of by petitioners causing irreparable injury to petitioners' rights in the premises? These two (2) basic issues are obviously related and need to be addressed together.

I

The first point that needs to be stressed is that petitioners have Philippine Certificates of Registration for their trademarks "MARK TEN", "MARK VII," and "LARK" in the Principal Register.

Upon the other hand, private respondent's trademark "MARK" is not registered in the Principal Register in the Office of the Director of Patents; private respondents is simply an applicant for registration of a mark, the status of which application may be noted later.

It is important to stress the legal effects of registration of a trademark in the Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as amended, sets out the principal legal effects of such registration:

Sec. 20. Certificate of registration prima facie evidence of validity. — A certificate of registration, of a mark or a trade name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. (Emphasis supplied)

In Lorenzana v. Macagba, 12 the Court distinguished between the effects of registration in the Principal Register and registration in the Supplemental Register in the following manner:

(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof. There is no such presumption in registrations in the Supplemental Register.

(2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or after registration, in a petition for cancellation.

Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves as notice that the registrant is using or has appropriated the trademark.") It is not subject to opposition although it may be cancelled after its

issuance. Corollarilly, registration in the Principal Register is a basis for an action for infringement, while registration in the Supplemental Register is not.

(3) In application for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registration in the Supplemental Register. Certificates of registration under both Registers are also different from each other.

(4) Proof of registration in the Principal Register may be filed with the Bureau of Customs to exclude foreign goods bearing infringing marks while it does not hold true for registrations in the Supplemental Register. 13 (Emphasis supplied)

When taken with the companion presumption of regularity of performance of official duty, it will be seen that issuance of a Certificate of Registration of a trademark in the Principal Register also gives rise to the presumption that all requirements of Philippine law necessary for a valid registration (including prior use in commerce in the Philippines for at least two [2] months) were complied with and satisfied.

In contrast, private respondent filed an application for registration of its mark "MARK" for cigarettes with the Director of Patents soon after it commenced manufacturing and selling cigarettes trademark with "MARK." This application was abandoned or "forfeited", 14 for failure of private respondent to file a necessary Paper with the Director of Patent. It also appears, however, that private respondent later re-filed or reinstated its application for registration of "MARK" 15 and that, so far as the record here before us is concerned, this application remains merely an application and has not been granted and a Certificate of Registration in the Principal Register issued. 16 While final action does not appear as yet to have been taken by the Director of Patents on private respondent's application, there was at least a preliminary determination of the trademark examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A. No. 166, as amended. 17

In the trial court, both Judge Reyes and Judge Galing took the position that until the Director of Patents shall have finally acted on private respondent's application for registration of "MARK," petitioners cannot be granted the relief of preliminary injunction. It is respectfully submitted that this position is both erroneous and unfortunate. In reliance upon that position, private respondent has kept its application for registration alive and pending. The Director of Patents in turn may well have refrained from taking final action on that application, even in the absence of a restraining order from the courts, out of deference to the courts. The pendency of the application before the Director of Patents is not in itself a reason for denying preliminary injunction. Our courts have jurisdiction and authority to determine whether or not "MARK" is an infringement on petitioners' registered trademarks. Under our case law, the issuance of a Certificate of Registration of a trademark in the Principal Register by the Director of Patents would not prevent a court from ruling on whether or not the trademark so granted registration is confusingly similar with a previously registered trademark, where such issue is essential for resolution of a case properly before the court. A fortiori, a mere application for registration cannot be a sufficient reason for denying injunctive relief, whether preliminary or definitive. In the case at bar, petitioners' suit for injunction and for damages for infringement, and their application for a preliminary injunction against private respondent, cannot be resolved without resolving the issue of claimed confusing similarity.

In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual copies or photographs of their registered marks as used in cigarettes. Private respondent has not, for its part, submitted the actual labels or packaging material used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an advertisement of "MARK" cigarettes. Private respondent has not included in the record a copy of its application for registration of "MARK" for cigarettes, which would include a facsimile of the trademark being applied for. It should be noted that "MARK" and "LARK," when read or pronounced orally, constitute idem sonans in striking degree. Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with private respondent's failure to explain how or why it chose, out of all the words in the English language, the word "mark" to refer to its cigarettes, lead me to the submission that there is a prima facie basis for holding, as the Patent Office has held and as the Court of Appeals did hold originally, that private respondent's "MARK" infringes upon petitioners' registered trademarks.

II

There is thus no question as to the legal rights of petitioners as holders of trademarks registered in the Philippines. Private respondent, however, resists and assails petitioners' effort to enforce their legal rights by

heavily underscoring the fact that petitioners are not registered to do business in the Philippines and are not in fact doing business in the Philippines. It is thus necessary to determine what consequences, if any, flow from this circumstance so far as enforcement of petitioners' rights as holders of registered Philippine trademarks is concerned.

It should be stressed at the outset that circumstance has no legal impact upon the right of petitioners to own and register their trademarks in the Philippines. Section 2 of R.A. No. 166 as amended expressly recognizes as registrable, under this statute, marks which are owned by corporations domiciled in any foreign country:

Sec. 2. What are registrable. — Trademarks, trade names and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trade marks, trade names or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (Emphasis suppplied)

It is also entirely clear that foreign corporations and corporations domiciled in a foreign country are not disabled from bringing suit in Philippine courts to protect their rights as holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No. 166, as amended, any foreign corporation which is a holder of a trademark registered under Philippine law may bring an action for infringement of such mark or for unfair competition or false designation of origin and false description "whether or not it has been licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint, subject to the proviso that:

. . . that the country of which the said foreign corporation or juristic person is a citizen or in which it is domiciled by treaty, convention or law, grants similar privilege to corporate or juristic persons of the Philippines. (Emphasis supplied)

The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris Convention"), to which the Philippines, the United States, Canada and Switzerland are all parties. 18 Article 2 of the Paris Convention provides in relevant part:

Article 2

(1) Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon national are complied with.

(2) However, no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights.

xxx xxx xxx

(Emphasis supplied)

Article 2, paragraph 1 of the Paris Convention embodies the principle of "national treatment" or "assimilation with nationals," one of the basic rules of the Convention. 19 Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada, Switzerland and the United States who are all countries of the Paris Union are entitled to enjoy in the Philippines, also a country of the Union, the advantages and protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of the Paris Convention restrains the Philippines from imposing a requirement of local incorporation or establishment of a local domicile as a pre-requisite for granting to foreign nationals the protection which nationals of the Philippines are entitled to under Philippine law in respect of their industrial property rights. It should be noted that Article 2, paragraph 2 also constitutes proof of compliance with

the requirement of reciprocity between, on the one hand, the Philippines and, on the other hand, Canada, Switzerland and the United States required under Section 21-A of R.A. No. 166 as amended.

The net effect of the statutory and treaty provisions above referred to is that a corporate national of a member country of the Paris Union is entitled to bring in Philippine courts an action for infringement of trademarks, or for unfair competition, without necessity for obtaining registration or a license to do business in the Philippines. Article 2 as quoted above is in effect with respect to all four (4) countries.

Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166 and before the Philippines became a party to the Paris Convention. In Western Equipment and Supplies Company, et al. v. Reyes, etc., et al., 20 petitioner Western Electrical Company, a U.S. manufacturer of electrical and telephone equipment and supplies not doing business in the Philippines, commenced action in a Philippine court to protect its corporate name from unauthorized use thereof by certain Philippine residents. The Philippine residents sought to organize a Philippine corporation to be known as "Western Electrical Company" for the purpose of manufacturing and selling electrical and telephone equipment in the Philippines. The local residents resisted the suit by contending, inter alia, that the petitioner Western Electrical Company had never transacted business in the Philippines and that registration of private respondent's articles of incorporation could not in any way injure petitioner. The Supreme Court, in rejecting this argument, stated that:

. . . a foreign corporation which has never done business in the Philippines — but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate name and tradename has a legal right to maintain an action in the [Philippines]. The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years in the doing of which it does not seek to enforce any legal or contract rights arising from or closing out of any business which it has transacted in the Philippines. . . . 21 (Emphasis supplied)

Similarly, in Asari Yoko v. Kee Boc, 22 a Japanese corporation, also not engaged in any business in the Philippines, successfully opposed an application for registration of its trademark "Race Brand" on shirts and undershirts by a local businessman, even though the Japanese company had not previously registered its own mark "Race Brand" in the Philippines.

Again, in General Garments Corporation v. Director of Patents and Puritan Sportswear Corporation, 23 Puritan Sportswear Corporation, an entity organized in Pennsylvania U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the mark "Puritan" which was registered in the name of petitioner General Garments Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the Philippines. Petitioner General Garments, on the other hand, contended that Puritan Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines, could not maintain an action for cancellation of a trademark. The Court, in upholding the Director of Patents' cancellation of the registration of the mark "Puritan" in the name of General Garments, said:

. . . .such mark should not have been registered in the first place (and consequently may be cancelled if so required) if it consists ofor comprises a mark or tradename which so resembles a mark or tradename . . . . previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers. 24 (Emphasis supplied)

In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25 petitioner Converse Rubber Corporation was an American manufacturer of rubber shoes, not doing business on its own in the Philippines and not licensed to do business in the Philippines, opposed the application for registration of the trademark "Universal Converse and Device" to be used also in rubber shoes and rubber slippers by private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the Director of Patents and holding that Universal's application must be rejected, the Supreme Court said:

The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered insignificant, considering that they appear to be of high expensive quality, which not too many basketball players can afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public, not only to

limited individuals. It is a matter of public knowledge that all brands of goods filter into the market, indiscriminately sold by jobbers, dealers and merchants not necessarily with the knowledge or consent of the manufacturer. Such actual sale of goods in the local market establishes trademark use which serves as the basis for any action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. The Director of Patents was, therefore, remiss in ruling that the proofs sales presented "was made by a single witness who had never dealt with nor had never known opposer {petitioner} . . . without Opposer having a direct or indirect hand in the transaction to be the basis of trademark pre-exemption. 26 (Emphasis supplied)

Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. Fernandez 27 La Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court recognized that those marks were "world famous trademarks which the Philippines, as a party to the Paris Union, is bound to protect." Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., 28 petitioner Del Monte Corporation was a company organized under the laws of the United States and not engaged in business in the Philippines. Because both the Philippines and the United States are signatories to the Convention of Paris, which grants to nationals of the parties the rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition, the Court, having found that private respondent's label was an infringement of Del Monte's trademark, held Del Monte entitled to recover damages.

In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et al, 29 petitioner Puma was a foreign corporation existing under the laws of the Federal Republic of Germany not registered to do business and not doing business in the Philippines, filed a complaint for infringement of trademark and for issuance of a writ of preliminary injunction against a local manufacturing company. Reversing the Court of Appeals, this Court held that Puma had legal capacity to bring the suit in the Philippines under Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris Convention to which both the Philippines and the Federal Republic of Germany are parties. The Court also noted that "Puma" is an internationally known brandname.

The relevancy of the doctrines set out in the cases above cited are conceded by my distinguished brother Melo, J. in the majority opinion. The majority opinion, however, goes on to say:

In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbols as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

With great respect, certain essential qualifications must be made respecting the above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them — i.e., "MARK TEN" and "LARK" — were registered in the Philippines on the basis of actual use in the Philippines, precisely in accordance with the requirements of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce and trade in the Philippines for at least two (2) months as required by the statute, is explicitly stated in the Certificates of Registration. The very fact that the appropriate Philippine Government office issued the Certificates of Registration necessarily gave rise to the presumption that such pre-registration use had in fact been shown to the satisfaction of the Philippine Patent Office (now the Bureau of Patents, Trademark and Technology Transfer ["BPTTT"]). It is important to note that respondent Fortune has not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in commerce in the Philippines had been shown. 30

The third mark of petitioners — "MARK VII" — was registered in the Philippines on the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in the country of origin and under the Paris Convention. In such registration, by the express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (pre-registration) use in commerce in the Philippines need not be alleged.

Whether the Philippine trademark was based on actual use in the Philippines (under Section 2-A) or on registration in a foreign country of origin (under Section 37), the statute appears to require that trademarks (at least trademarks not shown to be internationally "well-known") must continue to be used in trade and commerce in the Philippines. It is, however, essential to point out that such continued use, as a requirement for the continued right to the exclusive use of the registered trademark, is presumed so long as the Certificate of Registration remains outstanding and so long as the registered trademark owner complies with the requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the Certificate of Registration, showing that the trademark is still in use or showing that its non-use is not due to any intention to abandon the same. In the case at bar, again, respondent Fortune has not explicitly pretended that the petitioners' trademarks have been abandoned by non-use in trade and commerce in the Philippines although it appears to insinuate such non-use and abandonment by stressing that petitioners are not doing business in the Philippines.

That petitioners are not doing business and are not licensed to do business in the Philippines, does not by any means mean either that petitioners have not complied with the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use, or that petitioners' trademarks are not in fact used in trade and commerce in the Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into and be available for sale in the Philippines through the acts of importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought into the country and available for sale here in, e.g., duty-free shops, though not imported into or sold in the Philippines by petitioners themselves. There is no legal requirement that the foreign registrant itself manufacture and sell its products here. All the statute requires is the use in trade and commerce in the Philippines, and that can be carried out by third party manufacturers operating under license granted by the foreign registrant or by the importation and distribution of finished products by independent importers or traders. The "use" of the trademark in such instances by the independent third parties constitutes use of the foreign registrant's trademarks to the benefit of the foreign registrant. 31

III

We turn to petitioners' claim that they are suffering irreparable damage by reason of the manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic argument of private respondent was that petitioners had not shown any damages because they are not doing business in the Philippines. I respectfully maintain that this argument is specious and without merit.

That petitioners are not doing business and are not licensed to do business in the Philippines, does not necessarily mean that petitioners are not in a position to sustain, and do not in fact sustain, damage through trademark infringement on the part of a local enterprise. 32 Such trademark infringement by a local company may, for one thing, affect the volume of importation into the Philippines of cigarettes bearing petitioners' trademarks by independent or third party traders.

The damage which the petitioners claim they are sustaining by reason of the acts of private respondents, are not limited to impact upon the volume of actual imports into the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of its confusingly similar trademark "MARK" is invasive and destructive of petitioners property right in their registered trademarks because.

a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is effectively effaced by defendant's use of a confusingly similar trademark;

b) Plaintiffs would lose control of the reputation of their products as their reputation will depend on defendant's commercial activities and the quality of defendant's products;

c) The market in the Philippines for plaintiffs' products will be pre-empted;

d) Purchasers will think that defendant's goods are approved or sponsored by plaintiff;

e) Defendant will be allowed to benefit from the reputation of the plaintiffs' goods and trademarks;

f) Defendant will be effectively authorized to continually invade plaintiffs' property rights, for which invasion no fair and reasonable redness can be had in a court of law; and

g) Plaintiffs will lose their goodwill and trade and the value of their registered trademarks will irreparably diluted and the damages to be suffered by plaintiffs cannot be redressed fairly in terms of money. 33

Modern authorities on trademark law view trademarks as symbols which perform three (3) distinct functions: first, they indicate origin or ownership of the articles to which they are attached; second, they guarantee that those articles come up to a certain standard of quality; third, they advertise the articles they symbolize. 34

The first two (2) functions have long been recognized in trademark law which characterizes the goodwill or business reputation symbolized by a trademark as a property right protected by law. Thus, the owner of a trademark is held entitled to exclude others from the use of the same, or of a confusingly similar, mark where confusion results in diversion of trade or financial injury. At the same time, trademarks warn against the imitation or faking of products and prevent the imposition of fraud upon the public. The first two (2) functions of trademarks were aptly stressed in e.g., the La Chemise Lacoste case where the objectives of trademark protection were described in the following terms:

. . . to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad . . . . We buy a kitchen appliance, a household tool, perfume, a face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite lengthy — and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product . . . . 35

The third or advertisement function of trademark has become of especial importance given the modern technology of communication and transportation and the growth of international trade. 36 Through advertisement in the broadcast and print media, the owner of the trademark is able to establish a nexus between its trademark products and the public in regions where the owner does not itself manufacture or sell its own products. 37 Through advertisement, a well-established and well-earned reputation may be gained in countries where the trademark owner has itself no established business connection. 38 Goodwill may thus be seen to be much less closely confined territorially than, say, a hundred or fifty years ago. 39 It is no longer true that "a trademark of itself cannot travel to markets where there is no article to wear the badge and no trader to offer the article." 40 Advertisement of trademarks is geared towards the promotion of use of the marked article and the attraction of potential buyers and users; 41 by fixing the identity of the marked article in the public mind, it prepares the way for growth in such commerce whether the commerce be handled by the trademark owner itself or by its licensees or independent traders.

That a registered trademark has value in itself apart from the trade physically accompanying its use, has been recognized by our Court. In Ang v. Teodoro, 42 the Court was called upon the determine whether there was infringement in the use of the same trademark on articles which do not belong to the same class of goods which the lawful trademark owner manufactures and sells. In holding that there was infringing use in such case, the Court said:

. . . . such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably result. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark . . . The owner of a trademark or tradename has a property right in which he is entitled to protection, since there is damage to him in the form of confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. (Emphasis supplied)

In Sta. Ana v. Maliwat, 43 the Court, through J.B.L. Reyes, J., in holding that the use of the name "Flormen" with respect to shoes was infringement of the mark "Flormann" used in the men's wear such as shirts, polo shirts and pants, said:

Modern law recognizes that the protection to which the owner of a trade-mark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). . . . . 44 (Emphasis supplied)

Petitioners did not try to put a peso figure on their claimed damage arising from the erosion and possible eventual destruction of the symbolic value of their trademark. Such damage, while not easily quantifiable, is nonetheless real and effective. I submit, with respect, that such continuing damage falls clearly within the concept of irreparable damage or injury described in Social Security Commission v. Bayona 45 in the following terms:

Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no standard by which their amount can be measured with reasonable accuracy (Crouc v. Central Labor Council, 83 ALR, 193). "An irreparable injury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement" (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction consists of a serious charge of, or is destructive to, the property if affects, either physically or in the character in which it has been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92 P., 502).

Respondent corporations made a lengthy discourse on the matter of irreparable injury they may suffer if the injunction were not issued, but the array of figures they have laid out merely succeeded in proving that the damage, if any they may suffer, is susceptible of mathematical computation. It is not then irreparable. As already stated, this term has a definite meaning in law. It does not have reference to the amount of damages that may be caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will not apply the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446). 46

I next turn to private respondent's claim that issuance of an injunction would impose heavy damage upon itself and upon Government. As noted, private respondent stated that it had paid many millions of pesos as ad valorem and VAT taxes to the Government in 1988 and 1989 in connection with its "MARK" cigarettes. 47 Presumably, the total volume of its business associated with the manufacture and sale of cigarettes trademarked "MARK" would be even larger. In addition, private respondent suggests, albeit indirectly only, that hundreds if not thousands of its employees would find themselves unemployed if it were restrained from the manufacture and sale of "MARK" cigarettes.

Private respondent's claims concerning alleged damages both to itself and to the Government, which obviously loomed very large in the mind of the majority here, and of the Court of Appeals when it lifted the injunction it had issued, appear to me to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction which could restrain private respondent from manufacturing and selling cigarettes completely; petitioner do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one that restrains private respondent from using the trademark "MARK" on its cigarettes. There is nothing to prevent private respondent from continuing to manufacture and sell cigarettes under any of its already existing and registered trademarks, of which it has several, or under some new and specially created trademark(s). Realistically, private respondent, if enjoined, would lose only the value of the packaging material imprinted with the same trademark (which cigarettes and material may well be amenable to re-cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the apprehension on the part of the majority which private respondent tried diligently to foment — that the Government would lose many millions of pesos in tax revenues and that many employees would lose their jobs, if an injunction is issued — is more apparent than real. The damages private respondent would sustain from reinstatement of the preliminary injunction are clearly quantifiable in pesos.

Besides, as pointed out by petitioners, to pay heed to private respondent's creative economic argument would ultimately mean that the greater the volume of sales and the profits of the infringer, the greater would be the infringer's claim to be entitled to continue infringement. I respectfully submit that the law should not countenance such a cynical result.

My conclusion is that private respondent's claims concerning damage which it would sustain if the petitioners were granted the injunction they seek, did not constitute a sufficient basis for overturning the original decision of the Court of Appeals. The Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in effect disregarded everything that Court had set out in its original Decision. The mere offer and filing of a counterbond does not, by itself, provide a sufficient basis for lifting the preliminary injunction earlier granted. For all the elements which supported the original issuance of a preliminary injunction continued to exist. Private respondent's hyperbolic claims concerning the damages that it and the Government would sustain by reason of an injunction, had been made earlier both before the trial court and the Court of Appeals. Finally, it is not enough to say as private respondent says, that the Court of Appeals in granting its Motion to Dissolve the preliminary injunction was merely exercising its discretion; for the Court of Appeals obviously was also exercising its discretion when it rendered its original Decision granting the preliminary injunction.

I vote to grant due course to the petition for Certiorari, to set aside the Resolution of the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and to reinstate the Decision of that same Court dated 5 May 1989.

# Footnotes

1 Then presided over by Judge Pastor P. Reyes.2 Court of Appeals Decision, Rollo, p. 137.3 Rollo, p. 339.4 Id., p. 73.5 Id., p. 88.6 With the concurrence of Nocon and G.C. Paras, JJ.7 Rollo, p. 165.8 Note 3.9 Rollo, pp. 166-167.10 Rollo, pp. 53-54.11 Id. pp. 25-26.12 154 SCRA 723 (1987).13 154 SCRA at 728-729.14 Certification, dated 8 August 1986, Annex "I" of the Petition, Rollo, p. 74.15 Certification dated 30 January 1984, issued by Cesar C. San Diego, Director of Patents, certifying that as of that date, private respondent's "Application Serial No. 44008 for the registration of trademark "MARK" and design filed on 13 February 1981 was still pending appropriate action." (Rollo, p.—).16 This certification is quoted in the order dated 5 April 1984 of Judge Reyes; Rollo, p. 348.17 Section 4 (d) of R.A. No. 166, as amended, specifies the kinds of trademarks, tradenames or service marks which cannot be registered on the Principal Register:(d) consists of or comprises a mark or tradename which so resembles mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods or services of the applicant to cause confusion or mistake or to deceive purchasers; . . . .18 The Paris Convention was concurred in by the Senate by S.R. No. 69, May 10, 1965 and the Instrument of Ratification was signed by the President on October 11, 1965; List of Treaties and Other International Agreements of the Republic of the Philippines, p. 1 (1966; U.P. Law Center). The adhesion of the Philippines to the Convention became effective as of 27 September 1965; Canada on 12 June 1925; Switzerland on 7 July 1884; and the United States on 30 May 1887.The text of the Paris Convention and of the List of "Members-States of the International Union for the Protection of Industrial Property (Paris Union) as in April 1968" may be found in G.H.C. Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (1968).19 G.H.C. Bodenhausen, supra, p. 27.20 51 Phil., 115 (1927).21 51 Phil., at.22 1 SCRA 1 (1961).23 41 SCRA 50 (1971).24 41 SCRA at.25 147 SCRA 154 (1987).26 147 SCRA at 162.27 129 SCRA 373 (1984).28 181 SCRA 410 (1990).29 158 SCRA 233 (1988).30 Such an attack was apparently made in Pag-Asa Industrial Corporation v. Court of Appeals, 118 SCRA 526(1982) which the majority opinion cites.31 Accordingly, the importer or distributor does not acquire ownership of the trademark on the goods imported or distributed; e.g., Gabriel v. Perez, 55 SCRA 406 (1974); Unno Commercial Enterprises v. General Milling Corporation, 120 SCRA 804 (1983); Marvex Commercial Co., Inc. v. Petra Hawpia and Co., 18 SCRA 1178 (1966); Operators, Inc. v. Director of Patents, 15 SCRA 147 (1965).

32 See generally, Western Equipment and Supply Co. v. Reyes, 51 SCRA 115 (1927); Asari Yoko Co. v. Kee Boc, 1 S 1 a(1961); General Garments v. Director of Patents, 41 SCRA 50 (1971); La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984); Converse Rubber Corporation v. Universal Rubber Products, 147 SCRA 154 (1987).33 Petitioners' Second Motion for Issuance of Preliminary Injunction, filed with the trial court; Rollo, p. 88. See also the Petition for Certiorari filed with the Supreme Court, Rollo, p. 16.34 See 2 Callman, Unfair Competition and Trade Marks (1945), p. 804. See also Grass, "Territorial Scope of Trademark Rights," 44 U Miami L. Rev. 1075 (1990).35 La Chemise Lacoste, 129 SCRA at 403.36 See Schechter, "The Rational Basis of Trademark Protection," 40 Harv. L. Rev. 813 (1927); 2 Callman, supra at 810.37 2 Callman, supra at 811, citing Coca-Cola Company v. Brown, 60 T 2d 319.38 See generally, 1 Nims, "Unfair Competition and Trademark, S. 35A (1947), p. 149.39 See also 1 Nims, supra at 150.40 See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); see also Territorial Scope of Trademark Rights, supra at 1086.In Hanover Star Milling Company v. Metcalf, the United States Supreme Court realized that advertising had the potential for spreading business goodwill beyond the areas of actual market sales. The Court alluded to the possibility that, in certain instances, the protection of trademarks could extend beyond the zone of actual market penetration: "Into whatever markets the use of a trademark has extended, or its meaning has become known, there will the manufacturer or trader whose trade is pirated by an infringing use be entitled to protection and redress."41 See 2 Callman, supra at 811.42 74 Phil. 50 (1942).43 24 SCRA 1018 (1968).44 24 SCRA at 1025. In Faberge, Inc. v. Intermediate Appellate Court (G.R. No. 71189, 4 November 1992), a Third Division Decision, the Court held that the use of the trademark "Brute" for men's briefs, was not an infringement of the mark "Brut 33 and Device" for anti-perpirants, personal deodorant, shaving cream, after shave-shower lotion, hair spray and hair shampoo. This case turned on interpretation of Section 20 R.A. No. 166 as amended, which appeared to limit the exclusive right of the senior user to the goods specified in its Certificate of Registration. Faberge does not, as I read it, deny the existence of categories or damage or injury in trademark cases which transcend the quantifiable loss of volume of commercial sales. Moreover, the case at bar involves competing goods of one and the same class, i.e. cigarettes.45 5 SCRA 126 (1962). See further Phil. Virginia Tobacco Adm. v. De los Angeles, 164 SCRA 543 (1988); Yu v. Court of Appeals, G.R. No. 86683, 21 January 1993; Golding v. Balatbat, 36 Phil. 941 (1917); Liongson v. Martinez, 36 Phil. 948 (1917).46 5 SCRA at 130-131.47 See Certification, dated 11 August 1989, issued by Mr. Melchor Banares, Assistant BIR Commissioner, being Annex "A" to private respondent's "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" filed with the Court of Appeals; Rollo p. 221.


Manila

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.

D E C I S I O N

CORONA, J.:

In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the November 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998 decision,2 as modified by the June 24, 1999 order,3 of the Regional Trial Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition, and which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution denying their motion for reconsideration4 and (c) the aforesaid Makati RTC decision itself.

I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of California, United States of America (U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines and brandy products and sells them in many countries under different registered trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks.

Respondent domestic corporation, Andresons, has been Gallo Winery’s exclusive wine importer and distributor in the Philippines since 1991, selling these products in its own name and for its own account.5

Gallo Winery’s GALLO wine trademark was registered in the principal register of the Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of Registration No. 17021 which was renewed on November 16, 1991 for another 20 years.6 Gallo Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application Serial No. 901011-00073599-PN but the records do not disclose if it was ever approved by the Director of Patents.7

On the other hand, petitioners Mighty Corporation and La Campana and their sister company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation, manufacture, distribution and sale of tobacco products for which they have been using the GALLO cigarette trademark since 1973. 8

The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its manufacturer’s sworn statement as basis for BIR’s collection of specific tax on GALLO cigarettes.9

On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the registration of the GALLO cigarette trademark in the principal register of the then Philippine Patent Office.10

In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.11 On July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La Campana’s lifetime copyright claim over GALLO cigarette labels.12

http://www.lawphil.net/judjuris/juri2004/jul2004/gr_154342_2004.html#fnt1












Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing the GALLO trademark.13 BIR approved Mighty Corporation’s use of GALLO 100’s cigarette brand, under licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL 100’s cigarette brand on April 3, 1989.14

Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by Tobacco Industries, then by La Campana and finally by Mighty Corporation.15

On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO GALLO wines in the Philippines circa 1974 within the then U.S. military facilities only. By 1979, they had expanded their Philippine market through authorized distributors and independent outlets.16

Respondents claim that they first learned about the existence of GALLO cigarettes in the latter part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in a Davao supermarket wine cellar section.17 Forthwith, respondents sent a demand letter to petitioners asking them to stop using the GALLO trademark, to no avail.

II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and tradename infringement and unfair competition, with a prayer for damages and preliminary injunction.

Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention)18 and RA 166 (Trademark Law),19 specifically, Sections 22 and 23 (for trademark infringement),20 29 and 3021 (for unfair competition and false designation of origin) and 37 (for tradename infringement).22 They claimed that petitioners adopted the GALLO trademark to ride on Gallo Winery’s GALLO and ERNEST & JULIO GALLO trademarks’ established reputation and popularity, thus causing confusion, deception and mistake on the part of the purchasing public who had always associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winery’s wines. Respondents prayed for the issuance of a writ of preliminary injunction and ex parte restraining order, plus P2 million as actual and compensatory damages, at least P500,000 as exemplary and moral damages, and at least P500,000 as attorney’s fees and litigation expenses.23

In their answer, petitioners alleged, among other affirmative defenses, that: petitioner’s GALLO cigarettes and Gallo Winery’s wines were totally unrelated products; Gallo Winery’s GALLO trademark registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines were sold through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items compared to Gallo Winery’s high-priced luxury wines which cost between P98 to P242.50; the target market of Gallo Winery’s wines was the middle or high-income bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the rooster device with the manufacturer’s name clearly indicated as MIGHTY CORPORATION while, in the case of Gallo Winery’s wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and conduct, respondents were guilty of laches and estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO cigarettes.

In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit, respondent’s prayer for the issuance of a writ of preliminary injunction,25 holding that respondent’s GALLO trademark registration certificate covered wines only, that respondents’ wines and petitioners’ cigarettes were not related goods and respondents failed to prove material damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court.26

On August 19, 1993, the Makati RTC denied, for lack of merit, respondents’ motion for reconsideration. The court reiterated that respondents’ wines and petitioners’ cigarettes were not related goods since the likelihood of deception and confusion on the part of the consuming public was very remote. The trial court emphasized that it could not rely on foreign rulings cited by respondents "because the[se] cases were decided by foreign courts on the basis of unknown facts peculiar to each case or upon factual surroundings which may exist only within their















jurisdiction. Moreover, there [was] no showing that [these cases had] been tested or found applicable in our jurisdiction."27

On February 20, 1995, the CA likewise dismissed respondents’ petition for review on certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTC’s denial of the application for issuance of a writ of preliminary injunction against petitioners.28

After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition with respect to the GALLO trademark:

WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit:

a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons acting for them or under their instructions, from (i) using E & J’s registered trademark GALLO or any other reproduction, counterfeit, copy or colorable imitation of said trademark, either singly or in conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under the GALLO trademark.

b. ordering defendants to pay plaintiffs –

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

(ii) exemplary damages in the amount of PHP100,000.00;

(iii) attorney’s fees and expenses of litigation in the amount of PHP1,130,068.91;

(iv) the cost of suit.

SO ORDERED."29

On June 24, 1999, the Makati RTC granted respondent’s motion for partial reconsideration and increased the award of actual and compensatory damages to 10% of P199,290,000 or P19,929,000.30

On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioner’s motion for reconsideration.

III.

The Issues

Petitioners now seek relief from this Court contending that the CA did not follow prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual Property Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes and GALLO wines were identical, similar or related goods for the reason alone that they were purportedly forms of vice; [c] both goods passed through the same channels of trade and [d] petitioners were liable for trademark infringement, unfair competition and damages.31

Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure questions of law, and hence, must be dismissed outright.

IV.

Discussion






THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE COURT TO REVIEWTHE CA’S FACTUAL FINDINGS

As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of law"32 (that is, the doubt pertains to the application and interpretation of law to a certain set of facts) and not "questions of fact" (where the doubt concerns the truth or falsehood of alleged facts),33 otherwise, the petition will be denied. We are not a trier of facts and the Court of Appeals’ factual findings are generally conclusive upon us.34

This case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the factual issues concerning the goods’ similarity, identity, relation, channels of trade, and acts of trademark infringement and unfair competition is greatly dependent on the interpretation of applicable laws. The controversy here is not simply the identity or similarity of both parties’ trademarks but whether or not infringement or unfair competition was committed, a conclusion based on statutory interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to review the evidence on record:35

(1) the conclusion is grounded entirely on speculation, surmises, and conjectures;

(2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible;

(3) there is grave abuse of discretion;

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

(5) the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee;

(6) the findings are without citation of specific evidence on which they are based;

(7) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and

(8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted [by the evidence] on record.36

In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all factors to determine whether trademark infringement and/or unfair competition has been committed, we conclude that both the Court of Appeals and the trial court veered away from the law and well-settled jurisprudence.

Thus, we give due course to the petition.

THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE APPLICABLE LAWS,NOT THE INTELLECTUAL PROPERTY CODE

We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair competition committed during the effectivity of the Paris Convention and the Trademark Law.

Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the aforesaid governing laws but also under the IP Code which took effect only on January 1, 1998,37 or about five years after the filing of the complaint:

Defendants’ unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the IP Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on the part of the purchasing public.38 (Emphasis and underscoring supplied)

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








In the light of its finding that appellants’ use of the GALLO trademark on its cigarettes is likely to create confusion with the GALLO trademark on wines previously registered and used in the Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that appellants’ acts not only violated the provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. ( sic ) 8293) but also Article 6bis of the Paris Convention.39 (Emphasis and underscoring supplied)

We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case.

It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it has first been promulgated. A law that is not yet effective cannot be considered as conclusively known by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of the legislative power.40 Nova constitutio futuris formam imponere debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt must generally be resolved against the retroactive operation of laws, whether these are original enactments, amendments or repeals.41 There are only a few instances when laws may be given retroactive effect,42 none of which is present in this case.

The IP Code, repealing the Trademark Law,43 was approved on June 6, 1997. Section 241 thereof expressly decreed that it was to take effect only on January 1, 1998, without any provision for retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the present case within the parameters of the Trademark Law and the Paris Convention, the laws in force at the time of the filing of the complaint.

DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION

Although the laws on trademark infringement and unfair competition have a common conception at their root, that is, a person shall not be permitted to misrepresent his goods or his business as the goods or business of another, the law on unfair competition is broader and more inclusive than the law on trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from the trademark adoption and registration by the person whose goods or business is first associated with it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition, although the two subjects are entwined with each other and are dealt with together in the Trademark Law (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitor’s unfairness or fraud. Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end.44

In Del Monte Corporation vs. Court of Appeals,45 we distinguished trademark infringement from unfair competition:

(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another.

(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary.

Pertinent Provisions on Trademark Infringement under the Paris Convention and the Trademark Law

Article 6bis of the Paris Convention,46 an international agreement binding on the Philippines and the United States (Gallo Winery’s country of domicile and origin) prohibits "the [registration] or use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the [Paris] Convention and used for identical or similar goods. [This rule also applies] when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith." There is no time limit for seeking the prohibition of the use of marks used in bad faith.47

Thus, under Article 6bis of the Paris Convention, the following are the elements of trademark infringement:

(a) registration or use by another person of a trademark which is a reproduction, imitation or translation liable to create confusion,










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

(c) such trademark is used for identical or similar goods.

On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when, among others, he "uses without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services."49 Trademark registration and actual use are material to the complaining party’s cause of action.

Corollary to this, Section 20 of the Trademark Law50 considers the trademark registration certificate as prima facie evidence of the validity of the registration, the registrant’s ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of Patents51 and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-A52 of the Trademark Law emphasize the importance of the trademark’s actual use in commerce in the Philippines prior to its registration. In the adjudication of trademark rights between contending parties, equitable principles of laches, estoppel, and acquiescence may be considered and applied.53

Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following constitute the elements of trademark infringement:

(a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office

(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers,

(c) the trademark is used for identical or similar goods, and

(d) such act is done without the consent of the trademark registrant or assignee.

In summary, the Paris Convention protects well-known trademarks only (to be determined by domestic authorities), while the Trademark Law protects all trademarks, whether well-known or not, provided that they have been registered and are in actual commercial use in the Philippines. Following universal acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the Paris Convention (which is an international agreement) and the Trademark law (which is a municipal law) the latter will prevail.54

Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is limited only to goods identical or similar to those in respect of which such trademark is registered and only when there is likelihood of confusion. Under both laws, the time element in commencing infringement cases is material in ascertaining the registrant’s express or implied consent to another’s use of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may defeat the registrant’s otherwise valid cause of action.

Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of liability.

THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE TRADEMARK.








By respondents’ own judicial admission, the GALLO wine trademark was registered in the Philippines in November 1971 but the wine itself was first marketed and sold in the country only in 1974 and only within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO wines to the Philippines during that period.55 Nothing at all, however, was presented to evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter, prior to July 9, 1981.

On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and manufacturer’s sworn statement, it appears that petitioners and its predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56

In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,58 Converse Rubber Corporation vs. Universal Rubber Products, Inc.,59

Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. Intermediate Appellate Court,61 and Philip Morris vs. Court of Appeals,62 giving utmost importance to the actual commercial use of a trademark in the Philippines prior to its registration, notwithstanding the provisions of the Paris Convention:

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark.

Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) x x x

xxx xxx xxx

The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments.

xxx xxx xxx

In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using the trademark in commerce in the Philippines. Such a foreign corporation may have the personality to









file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEE RIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to 1973. However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated in Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared:

xxx xxx xxx

A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark.

xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence.

xxx xxx xxx

In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. (Exhibit E)

On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. (Exhibit 1-e to 1-o)

Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA 154 [1987]), respectively, are instructive:

The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines.

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For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. (Emphasis supplied.)

In view of the foregoing jurisprudence and respondents’ judicial admission that the actual commercial use of the GALLO wine trademark was subsequent to its registration in 1971 and to Tobacco Industries’ commercial use of the GALLO cigarette trademark in 1973, we rule that, on this account, respondents never enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of Tobacco Industries and its successors-in-interest, herein petitioners, either under the Trademark Law or the Paris Convention.

Respondents’ GALLO trademark registration is limited to wines only

We also note that the GALLO trademark registration certificates in the Philippines and in other countries expressly state that they cover wines only, without any evidence or indication that registrant Gallo Winery expanded or intended to expand its business to cigarettes.63

Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s exclusive right to use the GALLO trademark should be limited to wines, the only product indicated in its registration certificates. This strict statutory limitation on the exclusive right to use trademarks was amply clarified in our ruling in Faberge, Inc. vs. Intermediate Appellate Court:64

Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private respondent may be permitted to register the trademark "BRUTE" for briefs produced by it notwithstanding petitioner's vehement protestations of unfair dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant, talcum powder and toilet soap. Inasmuch as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner cannot and should not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is significant that petitioner failed to annex in its Brief the so-called "eloquent proof that petitioner indeed intended to expand its mark ‘BRUT’ to other goods" (Page 27, Brief for the Petitioner; page 202, Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may not vest an exclusive right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section 20 of the Trademark Law as applied to the documentary evidence adduced by petitioner, the certificate of registration issued by the Director of Patents can confer upon petitioner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United States Supreme Court in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description. Verily, this Court had the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed by the petitioner therein since the applicant utilized the emblem "Tango" for no other product than hair pomade in which petitioner does not deal.

This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem "BRUT 33" for briefs (page 25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law in point "does not require that the articles of manufacture of the previous user and late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register." (supra at page 1026).



Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration following the clear message conveyed by Section 20.

How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken Bayer (27 SCRA 1214 [1969]):

"Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law." (1226).

NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCEOF PETITIONERS’ AND RESPONDENTS’ GOODS OR BUSINESS

A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied in the light of each particular case. 65

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

In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the purchaser and [d] the registrant’s express or implied consent and other fair and equitable considerations.

Petitioners and respondents both use "GALLO" in the labels of their respective cigarette and wine products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement:

(a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered the approval of Acoje Mining’s application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy sauce, also belonged to Class 47;

(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68 we upheld the Patent Director’s registration of the same trademark CAMIA for Ng Sam’s ham under Class 47, despite Philippine Refining Company’s prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps;

(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69 we dismissed Hickok’s petition to cancel private respondent’s HICKOK trademark registration for its Marikina shoes as against petitioner’s earlier registration of the same trademark for handkerchiefs, briefs, belts and wallets;






(d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute resolution, we dismissed the petition for review for lack of merit and affirmed the Patent Office’s registration of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell Company’s opposition as the prior registrant of the same trademark for its gasoline and other petroleum products;

(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSO’s complaint for trademark infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and

(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaisha’s prior registration and use of the same trademark for its paints, chemical products, toner and dyestuff (Class 2).

Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable imitation"73 which has been defined as "such similarity in form, content, words, sound, meaning, special arrangement or general appearance of the trademark or tradename in their overall presentation or in their essential and substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article."74

Jurisprudence has developed two tests in determining similarity and likelihood of confusion in trademark resemblance:75

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

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals78 and its preceding cases.79

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.80

On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other.81

In comparing the resemblance or colorable imitation of marks, various factors have been considered, such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the likelihood of deception of the mark or name's tendency to confuse82 and the commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties.83

Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette trademark is the device of a large rooster facing left, outlined in black against a gold background. The rooster’s color is either green or red – green for GALLO menthols and red for GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of size and location on the labels.84

The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all to the product but was chosen merely as a trademark due to the fondness for fighting cocks of the son of petitioners’ president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).85















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Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette packs are the words "MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the identity of the manufacturer of the cigarettes.

On the other hand, GALLO Winery’s wine and brandy labels are diverse. In many of them, the labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof.87 Directly below or above these sketches is the entire printed name of the founder-owners, "ERNEST & JULIO GALLO" or just their surname "GALLO,"88 which appears in different fonts, sizes, styles and labels, unlike petitioners’ uniform casque-font bold-lettered GALLO mark.

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

The many different features like color schemes, art works and other markings of both products drown out the similarity between them – the use of the word “GALLO” ― a family surname for the Gallo 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 actually in competition; but confusion of business may arise between non-competing interests as well.90

Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the Paris Convention which proscribe trademark infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern concept of "related goods."91 Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same maker or manufacturer, trademark infringement occurs.92

Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks.93 They may also be those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of business, even though similar marks are used.94 Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant.95

In resolving whether goods are related,96 several factors come into play:

(a) the business (and its location) to which the goods belong

(b) the class of product to which the goods belong

(c) the product's quality, quantity, or size, including the nature of the package, wrapper or container 97

(d) the nature and cost of the 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 fields of manufacture102

(i) the conditions under which the article is usually purchased103 and



















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

The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.106 It is a weighing and balancing process. With reference to this ultimate question, and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the parties have a right to the relief sought.107

A very important circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in question.108 The "purchaser" is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.109 He is "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."110

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

Applying these legal precepts to the present case, petitioner’s use of the GALLO cigarette trademark is not likely to cause confusion or mistake, or to deceive the "ordinarily intelligent buyer" of either wines or cigarettes or both as to the identity of the goods, their source and origin, or identity of the business of petitioners and respondents.

Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the same class of goods. Respondents’ GALLO wines belong to Class 33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners’ GALLO cigarettes fall under Class 34.

We are mindful that product classification alone cannot serve as the decisive factor in the resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. But the mere fact that one person has adopted and used a particular trademark for his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. 112

Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) "they are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation" and (2) "they are grouped or classified in the same section of supermarkets and groceries."

We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines and cigarettes are related products within the contemplation of the Trademark Law and the Paris Convention.

First, anything –- not only wines and cigarettes ― can be used for pleasure and relaxation and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no sense.

Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products and the goods here involved, wines and cigarettes, have nothing whatsoever in common with respect to their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or containers.113

Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are sold in one store under the same roof does not automatically mean that buyers are likely to be confused as to the goods’ respective sources, connections or sponsorships. The fact that different products are available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.114












In this regard, we adopted the Director of Patents’ finding in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents:115

In his decision, the Director of Patents enumerated the factors that set respondent’s products apart from the goods of petitioner. He opined and we quote:

"I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments. 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 attribute to a common origin.

The observations and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers, would not, in any probability mistake one as the source of origin of the product of the other. (Emphasis supplied).

The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated products not likely to cause confusion vis-à-vis the goods or the business of the petitioners and respondents.

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

GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by middle-to-high-income earners while GALLO cigarettes appeal only to simple folks like farmers, fishermen, laborers and other low-income workers.116 Indeed, the big price difference of these two products is an important factor in proving that they are in fact unrelated and that they travel in different channels of trade. There is a distinct price segmentation based on vastly different social classes of purchasers.117

GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk vendors, small local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are imported, distributed and sold in the Philippines through Gallo Winery’s exclusive contracts with a domestic entity, which is currently Andresons. By respondents’ own testimonial evidence, GALLO wines are sold in hotels, expensive bars and restaurants, and high-end grocery stores and supermarkets, not through sari-sari stores or ambulant vendors.119

Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.:121

IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), aff’d, 222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER" on cigars because the fame of the plaintiff’s mark for scotch whiskey and because the plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker & Sons, placed great significance on the finding that the infringers use was a deliberate attempt to capitalize on the senior marks’ fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendant’s use of the mark "BLACK LABEL" for cigarettes because it was likely to cause confusion with the plaintiff’s well-known mark "BLACK LABEL" for beer.








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Those decisions, however, must be considered in perspective of the principle that tobacco products and alcohol products should be considered related only in cases involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances has been found to exist where there is a finding of unfair competition or where a ‘famous’ or ‘well-known mark’ is involved and there is a demonstrated intent to capitalize on that mark. For example, in John Walker & Sons, the court was persuaded to find a relationship between products, and hence a likelihood of confusion, because of the plaintiff’s long use and extensive advertising of its mark and placed great emphasis on the fact that the defendant used the trademark ‘Johnnie Walker with full knowledge of its fame and reputation and with the intention of taking advantage thereof.’ John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision in John Walker & Sons was ‘merely the law on the particular case based upon its own peculiar facts’); see also Alfred Dunhill, 350 F. Supp. At 1363 (defendant’s adoption of ‘Dunhill’ mark was not innocent). However, in Schenley, the court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary mark has long been used for diversified products emanating from a single source and a newcomer seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry practice and the facts of the case in order to determine the nature and extent of the relationship between the mark on the tobacco product and the mark on the alcohol product.

The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue.

xxx xxx xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name ‘Bailey’s’ as the mark for its cigarettes, to capitalize upon the fame of the ‘BAILEYS’ mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.

Taken as a whole, the evidence here demonstrates the absence of the ‘special circumstances’ in which courts have found a relationship between tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that BAILEYS liqueur, the world’s best selling liqueur and the second best selling in the United States, is a well-known product. That fact alone, however, is insufficient to invoke the special circumstances connection here where so much other evidence and so many other factors disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion. (Emphasis supplied).

In short, tobacco and alcohol products may be considered related only in cases involving special circumstances which exist only if a famous mark is involved and there is a demonstrated intent to capitalize on it. Both of these are absent in the present case.

THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK IN THE CONTEXTOF THE PARIS CONVENTION IN THIS CASE SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR SIMILAR GOODS

First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, after Tobacco Industries’ use of the GALLO cigarette trademark in 1973 and petitioners’ use of the same mark in 1984.

GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite element under both the Trademark Law and the Paris Convention.

Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary evidence that aside from Gallo Winery’s GALLO trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.A’s April 19, 1990 application for GALLO trademark registration and use for its "noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species and ice."122

Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,123 "GALLO" cannot be considered a "well-known" mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes are not identical or similar goods:

We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT:

"Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity.

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

‘The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate — if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename ‘Rapid Transportation,’ it does not necessarily follow that ‘Rapid’ can no longer be registered in Uganda, Fiji, or the Philippines.

This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed.

However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis of the Treaty of Paris. These conditions are:

a) the mark must be internationally known;

b) the subject of the right must be a trademark, not a patent or copyright or anything else;

c) the mark must be for use in the same or similar kinds of goods; and

d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985)’

From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25).

Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail." (Emphasis supplied.)

Consent of the Registrant and Other air, Just and Equitable Considerations





Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.124

Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents’ assertion is true, then both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing, distribution and sale of GALLO cigarettes and, on the other, respondents’ delay in enforcing their rights (not to mention implied consent, acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than respondents.

Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents’ goodwill in adopting the GALLO mark for their cigarettes which are totally unrelated to respondents’ GALLO wines. Thus, we rule out trademark infringement on the part of petitioners.

PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who commits any acts calculated to produce said result, is guilty of unfair competition. It includes the following acts:

(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public;

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man’s goods or business as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendant’s practices must always appear.125 On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark.

All told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair competition or damages.

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

Costs against respondents.

SO ORDERED.

Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.Carpio-Morales, J., no part..



Footnotes

1 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the Ninth Division.2 Penned by Acting Presiding Judge Bonifacio Sanz Maceda.3 Penned by Judge Reinato O. Quilala.4 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the former Ninth Division.5 Complaint, Exhibits "D" to "D-1," Records, pp. 1-2; TSN, June 9, 1997, Records, pp. 951-956.6 Exhibits "B" to "B-6," Records, pp. 80-86.7 Records, pp. 29-31.8 Answer, Records, pp. 255 and 264-266; TSN, April 13, 1993, Records, pp. 767, 780-796; TSN, October 27, 1997, Records, pp. 993-1000.9 Exhibits 9 to 12, Records, pp. 89-95, 267-268; TSN, October 27, 1997, Records, pp. 1005-1007.10 Records, pp. 255-256, 269 and 271.11 Records, pp. 256, 270.12 Exhibit 15, Records, pp. 104, 256, 272.13 Records, p. 256.14 Exhibits 13 and 14, Records, pp. 96-98.15 TSN, April 13, 1993, Records, pp. 780-796; TSN, December 14, 1993, Records, pp. 420-422; TSN, October 27, 1997, Records, pp. 993-1000.16 Complaint, Exhibit "D-2," Records, pp. 3, 110 and 328.17 Exhibit "A," Complainants’ Memorandum, Records, p. 127; TSN, December 14, 1993, Records, pp. 326, 432-433.18 CONVENTION OF PARIS FOR THE PROTECTION OF INDUSTRIAL PROPERTY of 20th March, 1883 revised at Brussels on 14th December, 1900, at Washington on 2nd June, 1911, at the Hague on 6th November, 1925, at London on 2nd June, 1934, and at Lisbon on 31st October, 1958

x x x x x x x x xArticle 6bis

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.(2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought.(3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith.

19 Republic Act No. 166 is entitled "An Act To Provide For The Registration And Protection Of Trademarks, Trade Names And Servicemarks, Defining Unfair Competition And False Marking And Providing Remedies Against The Same, And For Other Purposes".20 SEC. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

SEC. 23. Actions, and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or tradename may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or tradename was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing, may also be granted injunction.21 SEC. 29. Unfair competition, rights and remedies. — A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty-three, Chapter V hereof.Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.In particular, and without in any way limiting 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 appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

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(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

Chapter VIIFalse Designation of Origin and False

DescriptionSEC. 30. False designation of origin and false description forbidden. — Any person who shall affix, apply, annex or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to enter into commerce, shall be liable to a civil action for damages and injunction provided in section twenty-three, Chapter V hereof, by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.

22 Chapter XIProvisions in Reference to Foreign Industrial Property

SEC. 37. Rights of foreign registrants. — Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or tradenames, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section.No registration of a mark or tradename in the Philippines by a person described in the preceding paragraph of this section shall be granted until such mark or tradename has been registered in the country of origin of the applicant, unless the applicant alleges use in commerce.For the purposes of this section, the country of origin of the applicant is the country in which he has bona fide and effective industrial or commercial establishment, or if he has no such an establishment in the country in which he is domiciled, or if he has not a domicile in any of the countries described in the first paragraph of this section, the country of which he is a national.An application for registration of a mark or tradename under the provisions of this Act filed by a person described in the first paragraph of this section who has previously duly filed an application for registration of the same mark or tradename in one of the countries described in said paragraph shall be accorded the same force and effect as would be accorded to the same application if filed in the Philippines on the same date on which the application was first filed in such foreign country: Provided, That — (a) The application in the Philippines is filed within six months from the date on which the application was first filed in the foreign country; and within three months from the date of filing or within such time as the Director shall in his discretion grant, the applicant shall furnish a certified copy of the application for or registration in the country of origin of the applicant, together with a translation thereof into English, if not in the English language;(b) The application conforms as nearly as practicable to the requirements of this Act, but use in commerce need not be alleged;(c) The rights acquired by third parties before the date of the filing of the first application in the foreign country shall in no way be affected by a registration obtained on an application filed under this paragraph;(d) Nothing in this paragraph shall entitle the owner of a registration granted under this section to sue for acts committed prior to the date on which his mark or tradename was registered in this country unless the registration is based on use in commerce; and(e) A mark duly registered in the country of origin of the foreign applicant may be registered on the principal register if eligible, otherwise, on the supplemental register herein provided. The application thereof shall be accompanied by a certified copy of the application for or registration in the country of origin of the applicant. (As added by R.A. No. 638.)The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act.Tradenames of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks.Any person designated in the first paragraph of this section as entitled to the benefits and subject to the provisions of this Act shall be entitled to effective protection against unfair competition, and the remedies provided herein for infringement of marks and tradenames shall be available so far as they may be appropriate in repressing acts of unfair competition.Citizens or residents of the Philippines shall have the same benefits as are granted by this section to persons described in the first paragraph hereof.

23 Complaint, Exhibits "D-1" to "D-9," Record, pp. 1-10.24 Penned by Judge Francisco X. Velez.25 Records, pp. 159-160.26 Sec. 5. Preliminary injunction not granted without notice; issuance of restraining order. – No preliminary injunction shall be granted without notice to the defendant. If it shall appear from the facts shown by affidavits or by the verified complaint that great or irreparable injury would result to the applicant before the matter can be heard on notice, the judge to whom the application for preliminary injunction was made, may issue a restraining order to be effective only for a period of twenty days from the date of its issuance. Within the said twenty-day period, the judge must cause an order to be served on the defendant, requiring him to show cause, at a specified time and place, why the injunction should not be granted, and determine within the same period whether or not the preliminary injunction shall be granted, and shall accordingly issue the corresponding order. In the event that the application for preliminary injunction is denied, the restraining order is deemed automatically vacated.Nothing herein contained shall be construed to impair, affect or modify in any way any rights granted by, or rules pertaining to injunctions contained in, existing agrarian, labor or social legislation. (As amended by B.P. Blg. 224, approved April 16, 1982).27 Penned by Judge Velez; Records, pp. 302-304.28 Penned by Associate Justice Ramon Mabutas, Jr. and concurred in by Associate Justices Nathanael P. De Pano, Jr. and Artemon D. Luna of the Special First Division; Records, pp. 449-465.29 Penned by Judge Maceda; Records, pp. 651-652.30 Penned by Judge Quilala; Records, pp. 727-728. 31 Petition; Rollo, pp. 18-19.32 Rule 45, Section 2.












33 Ramos vs. Pepsi-Cola Bottling Co. of the P.I., 19 SCRA 289, 292 [1967]; Medina vs. Asistio, Jr., 191 SCRA 218, 223 [1990]; Caiña vs. People, 213 SCRA 309, 313 [1992].34 Moomba Mining Exploration Company vs . Court of Appeals , 317 SCRA 338 [1999].35 Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420 [1990].36 Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437, 443 [1993]; Philippine Nut Industry Inc. vs. Standard Brands, Inc., 224 SCRA 437, 443 [1993]; Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 [1989] citing Mendoza vs. Court of Appeals, 156 SCRA 597 [1987]; Manlapaz vs. Court of Appeals, 147 SCRA 238 [1987]; Sacay vs. Sandiganbayan, 142 SCRA 593, 609 [1986]; Guita vs. Court of Appeals, 139 SCRA 576 [1985]; Casanayan vs. Court of Appeals, 198 SCRA 333, 336 [1991]; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [1988] citing Tolentino vs. De Jesus, 56 SCRA 167 [1974]; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734 [1980]; Manero vs. Court of Appeals, 102 SCRA 817 [1981]; and Moran, Jr. vs. Court of Appeals, 133 SCRA 88 [1984].37 Sec. 241, Intellectual Property Code of the Philippines.38 Rollo, p. 191.39 Rollo, p. 71.40 Tolentino, Civil Code Of The Philippines Commentaries and Jurisprudence, Volume I, p. 19; See Articles 2 to 4 of the Civil Code of the Philippines.41 Ibid.42 Laws may be given retroactive effect only if they are:

(a) procedural statutes which prescribe rules and forms of procedures of enforcing rights or obtaining redress for their invasion (Subido vs . Sandiganbayan , 266 SCRA 379 [1997]; Primicias vs. Ocampo, 93 Phil. 446 [1953]; Bustos vs. Lucero, 81 Phil. 640 [1948]; Lopez vs. Gloria, 40 Phil. 26 [1919]; People vs. Sumilang, 77 Phil. 764 [1946])(b) remedial or curative statutes which cure errors and irregularities and validate judicial or administrative proceedings, acts of public officers, or private deeds and contracts that otherwise would not produce their intended consequences due to some statutory disability or failure to comply with technical rules (Government vs. Municipality of Binalonan, 32 Phil. 634 [1915]; Subido vs. Sandiganbayan, supra; Del Castillo vs. Securities and Exchange Commission, 96 Phil. 119 [1954]; Santos vs. Duata, 14 SCRA 1041 [1965]; Development Bank of the Philippines vs. Court of Appeals, 96 SCRA 342 [1980]; Alunan III vs . Mirasol , 276 SCRA 501 [1997])(c) laws interpreting others(d) laws creating new rights (Bona vs. Briones, 38 Phil. 276 [1918]; Intestate Estate of Bustamante vs. Cayas, 98 Phil. 107 [1955])(e) penal statutes insofar as they favor the accused who is not a habitual criminal (Article 22, Revised Penal Code) or(f) by express provision of the law, (Art. 4, Civil Code of the Philippines; Alba Vda. De Raz vs . Court of Appeals , 314 SCRA 36 [1999]), except in cases of ex post facto laws (U.S. vs. Diaz Conde, 42 Phil. 766 [1922]; U.S. vs. Gomez, 12 Phil. 279 [1908]) or impairment of obligation of contract. (Asiatic Petroleum vs. Llanes, 49 Phil. 466 [1926]).

43 Sec. 239, Intellectual Property Code of the Philippines.44 E. Spinner & Co. vs. Neuss Hesslein Corporation, 54 Phil. 225, 231-232 [1930].45 181 SCRA 410, 415 [1990].46 The Paris Convention is a compact among various member countries to accord in their own countries to citizens of the other contracting parties’ trademarks and other rights comparable to those accorded their own citizens by their domestic laws. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its citizen. (Emerald Garden Manufacturing Corp. vs. Court of Appeals, 251 SCRA 600 [1995]).47 See footnote 18 for full text.48 "conditions for the filing and registration of trademarks shall be determined in each country of the Union by its domestic law." (Art. 61, Paris Convention).49 See footnote 20 for full text.50 SEC 20. Certificate 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 registrant's ownership of the mark or tradename, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.51 SEC. 6. Classification of goods and services. – The Director shall establish a classification of goods and services, for the convenience of the Patent Office administration, but not to limit or extend the applicant’s rights. The applicant may register his mark or tradename in one application for any or all of the goods or services included in one class, upon or in connection with which he is actually using the mark or tradename. The Director may issue a single certificate for one mark or tradename registered in a plurality of classes upon payment of a fee equaling the sum of the fees for each registration in each class.52 SEC. 2. What are registrable. – Trademarks, tradenames, and servicemarks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trademarks, tradenames, or servicemarks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed. And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended by R.A. 865).SEC. 2-A. Ownership of trademarks, tradenames and servicemarks; how acquired. – Anyone who lawfully produces or deals in merchandise of any kind or engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a servicemark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, servicemark heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. 638).53 SEC. 9-A. Equitable principles to govern proceedings. – In opposition proceedings and in all other inter partes proceedings in the Patent Office under this Act, equitable principles of laches, estoppel, and acquiescence where applicable, may be considered and applied. (As added by R.A. No. 638).54 Philip Morris, Inc. vs. Court of Appeals, 224 SCRA 576 [1993].55 Exhibits "Q" to "R-2," Records, pp. 2075-2078.56 Exhibits "9" to "14," Records, pp. 90-98.57 251 SCRA 600, 619 [1995].58 118 SCRA 526 [1982].59 147 SCRA 154 [1987].


















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60 27 SCRA 1214 [1969].61 203 SCRA 583 [1991].62 224 SCRA 576 [1993].63 TSN, April 13, 1993, Records, p. 783; TSN, June 9, 1997, Records, p. 959.64 215 SCRA 316, 325 [1992].65 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336, 341 [1982].66 Sterling Products, International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214, 1227 [1969] citing 2 Callman, Unfair Competition and Trademarks, 1945 ed., p. 1006.67 38 SCRA 480 [1971].68 115 SCRA 472 [1982].69 116 SCRA 388 [1982].70 G.R. No. L-49145, May 21, 1979.71 116 SCRA 336 [1982].72 336 SCRA 266 [2000].73 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].74 Ruben Agpalo, Trademark Law and Practice in the Philippines [1990], p.41.75 Ibid.76 224 SCRA 437 [1993].77 Co Tiong vs. Director of Patents, 95 Phil. 1 [1954]; Lim Hoa vs. Director of Patents, 100 Phil. 214 [1956]; American Wire & Cable Co. vs. Director of Patents, 31 SCRA 544 [1970]; Phil. Nut Industry, Inc. vs. Standard Brands, Inc., 65 SCRA 575 [1975]; Converse Rubber Corp. vs. Universal Rubber Products, Inc., 147 SCRA 154 [1987].78 181 SCRA 410 [1990].79 Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., 7 SCRA 771 [1963]; Bristol Myers Co. vs. Director of Patents, 17 SCRA 128 [1966]; Fruit of the Loom, Inc. vs. Court of Appeals, 133 SCRA 405 [1984].80 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].81 Ibid.82 Ibid.83 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].84 Exhibits "1" to "4"; Records 2095-2097.85 TSN, October 27, 1997, Records, pp. 995-1000.86 Reply, Records, p. 293.87 Exhibits "N to Q".88 TSN, December 14, 1993, Records, pp. 414, 421 and 442.89 Exhibits "1" to "4."90 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336,341 [1982].91 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]; Arce vs. Selecta, 1 SCRA 253 [1961]; Chua Che vs. Phil. Patents Office, 13 SCRA 67 [1965]; Ang vs. Teodoro, 74 Phil. 50 [1942]; Khe vs. Lever Bros. Co., 49 O.G. 3891 [1941]; Ang Si Heng & Dee vs. Wellington Dept. Store, 92 Phil. 448 [1953]; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 [1971].92 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].93 Ibid.94 Ibid.95 I CALLMAN 1121 cited in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].96 It has been held that where the products are different, the prior owner’s chance of success is a function of many variables, such as the:

(a) strength of his mark(b) degree of similarity between the two marks(c) reciprocal of defendant’s good faith in adopting its own mark(d) quality of defendant’s product(e) proximity of the products(f) likelihood that the prior owner will bridge the gap(g) actual confusion, and(h) sophistication of the buyers. (Polaroid Corp. vs. Polaroid Elecs. Corp., 287 F. 2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 82 s. Ct. 36, 7 L. Ed. 2d 25 [1961]).

97 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437 [1993].98 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].99 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].100 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].101 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].102 Ibid.103 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].104 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].105 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].106 Thompson Medical Co. vs. Pfizer, Inc. 753 F. 2d 208, 225 USPQ 124 (2d Cir.) 1985.107 Kiki Undies Corp. vs. Promenade Hosiery Mills, Inc., 411 F. 2d 1097, 1099 (2d Cir. 1969), cert. denied, 396 U.S. 1094, 90 S. Ct. 707, 24 L. Ed. 698 [1970]; Lever Bros. Co. vs. American Bakeries Co., 693 F. 2d 251, C.A. N.Y., November 3, 1982.108 Mushroom Makers, Inc. vs. R.G. Barry Corp., 580 F. 2d 44, 47 (2d Cir. 1978), cert. denied, 439 U.S. 1116, 99 s. Ct. 1022, 59 L. Ed. 2d 75 [1979].109 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].110 Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190 [1921].111 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, et al. vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, et al., 224 SCRA 437 [1993]; Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].112 Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 115 SCRA 472 [1982].113 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437 [1993].114 California Fruit Growers Exchange vs. Sunkist Baking Co., 166 F. 2d 971, 76 U.S.P.Q. 85 (7th Cir. 1947); Hot Shot Quality Products, Inc. vs. Sifer’s Chemicals, Inc. 452 F.2d 1080, 172 U.S.P.Q. 350 (10th Cir. 1971); Federated Foods, Inc. vs. Ft. Howard
























































Paper Co., 544 F.2d 1098, 192 U.S.P.Q. 24; Faultless Starch Co. vs. Sales Producers Associates, Inc., 530 F. 2d 1400, 189 U.S.P.Q. (C.C.P.A. 1976); Lever Bros. Co. vs. American Bakeries Co., 693 F. 2d 251, 216 U.S.P.Q. 177 (2d Cir. 1982); Nestle Co. vs. Nash-Finch Co., 4 U.S.P.Q. 2d 1085 (T.T.A.B.).115 115 SCRA 472, 478 [1982].116 Answer, Records, p. 258; TSN, December 14, 1993, Records, p. 420; TSN, June 9, 1997, Records, p. 958; TSN, September 8, 1997, Records, p. 965-967.117 Emerald Manufacturing, 251 SCRA 600 [1995]; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 [1981]; Field Enterprises Educational Corp. vs. Grosset & Dunlap, Inc. 256 F. Supp. 382, 150 U.S.P.Q. 517 (S.D.N.Y. 1966); Haviland & Co. vs. Johann Haviland China Corp., 269 F. Supp. 928, 154 U.S.P.Q. 287 (S.D.N.Y. 1967); Estee Lauder, Inc. vs. The Gap, Inc., 108 F. 3d. 1503, 42 U.S.P.Q. 2d 1228(2nd Cir. 1997).118 Answer, Records, p. 257; TSN, April 13, 1993, Records, pp. 783; TSN, December 14, 1993, Records, p. 420; TSN, September 8, 1997, Records, pp. 966, 971-972.119 TSN, June 9, 1997, Record, pp. 952-958; TSN, December 14, 1993, Records, p. 432.120 297 F. Supp. 1330, 160 USPQ 303.121 26 F. Supp. 2d 815 (E.D. Va. 1998).122 Exhibit 18, Records, pp. 107-108.123 366 SCRA 266 [2000].124 52 Am. Jur. 577.125 Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd., 120 Phil. 434, 439 [1964].












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