SECOND DIVISION

[G.R. No. 161295. June 29, 2005]

JESSIE G. CHING, petitioner, vs. WILLIAM M. SALINAS, SR., WILLIAM M.

SALINAS, JR., JOSEPHINE L. SALINAS, JENNIFER Y. SALINAS,
ALONTO SOLAIMAN SALLE, JOHN ERIC I. SALINAS, NOEL M. YABUT
(Board of Directors and Officers of WILAWARE PRODUCT
CORPORATION),respondents.
DECISION
CALLEJO, SR., J.:

This petition for review on certiorari assails the Decision[1] and Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 70411 affirming the January 3, 2002 and
February 14, 2002 Orders[3] of the Regional Trial Court (RTC) of Manila, Branch 1,
which quashed and set aside Search Warrant Nos. 01-2401 and 01-2402 granted in
favor of petitioner Jessie G. Ching.
Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing
Co., the maker and manufacturer of a Utility Model, described as Leaf Spring Eye
Bushing for Automobile made up of plastic.
On September 4, 2001, Ching and Joseph Yu were issued by the National Library
Certificates of Copyright Registration and Deposit of the said work described therein
as Leaf Spring Eye Bushing for Automobile.[4]
On September 20, 2001, Ching requested the National Bureau of Investigation
(NBI) for police/investigative assistance for the apprehension and prosecution of
illegal manufacturers, producers and/or distributors of the works.[5]
After due investigation, the NBI filed applications for search warrants in the RTC
of Manila against William Salinas, Sr. and the officers and members of the Board of
Directors of Wilaware Product Corporation. It was alleged that the respondents
therein reproduced and distributed the said models penalized under Sections 177.1
and 177.3 of Republic Act (R.A.) No. 8293. The applications sought the seizure of
the following:
a.)

Undetermined quantity of Leaf spring eye bushing for automobile that are made up of
plastic polypropylene;

b.)

Undetermined quantity of Leaf spring eye bushing for automobile that are made up of
polyvinyl chloride plastic;

c.)

Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride

plastic;

d.)

Undetermined quantity of Dies and

manufacture/fabrication of items a to d;

jigs,

patterns and

flasks used

in the

e.)

Evidences of sale which include delivery receipts, invoices and official receipts.[6]

The RTC granted the application and issued Search Warrant Nos. 01-2401 and
01-2402 for the seizure of the aforecited articles.[7] In the inventory submitted by the
NBI agent, it appears that the following articles/items were seized based on the
search warrants:
Leaf Spring eye bushing
a) Plastic Polypropylene
- C190
- C240 rear
- C240 front
b) Polyvinyl Chloride Plastic
- C190
c) Vehicle bearing cushion
- center bearing cushion

27 }
40 }
41 }
13 }
11 }

Budder for C190 mold

Diesel Mold
a)
b)
c)
d)

BAG 1

Mold for spring eye bushing rear

Mold for spring eye bushing front
Mold for spring eye bushing for C190 1 set
Mold for C240 rear

e) Mold for spring eye bushing for L300

f) Mold for leaf spring eye bushing C190
with metal
g) Mold for vehicle bearing cushion

8 }
1 set
1 set
1 piece of the
set
2 sets
1 set
1 set[8]

The respondents filed a motion to quash the search warrants on the following
grounds:
2.
The copyright registrations were issued in violation of the Intellectual Property Code
on the ground that:
a)

the subject matter of the registrations are not artistic or literary;

b)

the subject matter of the registrations are spare parts of automobiles meaning
there (sic) are original parts that they are designed to replace. Hence, they
are not original.[9]

The respondents averred that the works covered by the certificates issued by the
National Library are not artistic in nature; they are considered automotive spare parts
and pertain to technology. They aver that the models are not original, and as such
are the proper subject of a patent, not copyright.[10]
In opposing the motion, the petitioner averred that the court which issued the
search warrants was not the proper forum in which to articulate the issue of the
validity of the copyrights issued to him. Citing the ruling of the Court in Malaloan v.
Court of Appeals,[11] the petitioner stated that a search warrant is merely a judicial
process designed by the Rules of Court in anticipation of a criminal case. Until his
copyright was nullified in a proper proceeding, he enjoys rights of a registered
owner/holder thereof.
On January 3, 2002, the trial court issued an Order[12] granting the motion, and
quashed the search warrant on its finding that there was no probable cause for its
issuance. The court ruled that the work covered by the certificates issued to the
petitioner pertained to solutions to technical problems, not literary and artistic as
provided in Article 172 of the Intellectual Property Code.

His motion for reconsideration of the order having been denied by the trial courts
Order of February 14, 2002, the petitioner filed a petition for certiorari in the CA,
contending that the RTC had no jurisdiction to delve into and resolve the validity of
the copyright certificates issued to him by the National Library. He insisted that his
works are covered by Sections 172.1 and 172.2 of the Intellectual Property Code.
The petitioner averred that the copyright certificates are prima facie evidence of its
validity, citing the ruling of the United States Court of Appeals inWildlife Express
Corporation v. Carol Wright Sales, Inc.[13] The petitioner asserted that the respondents
failed to adduce evidence to support their motion to quash the search warrants. The
petitioner noted that respondent William Salinas, Jr. was not being honest, as he was
able to secure a similar copyright registration of a similar product from the National
Library on January 14, 2002.
On September 26, 2003, the CA rendered judgment dismissing the petition on its
finding that the RTC did not commit any grave abuse of its discretion in issuing the
assailed order, to wit:
It is settled that preliminarily, there must be a finding that a specific offense must have been
committed to justify the issuance of a search warrant. In a number of cases decided by the
Supreme Court, the same is explicitly provided, thus:
The probable cause must be in connection with one specific offense, and the judge must,
before issuing the warrant, personally examine in the form of searching questions and
answers, in writing and under oath, the complainant and any witness he may produce, on facts
personally known to them and attach to the record their sworn statements together with any
affidavit submitted.
In the determination of probable cause, the court must necessarily resolve whether or not an
offense exists to justify the issuance or quashal of the search warrant.
In the instant case, the petitioner is praying for the reinstatement of the search warrants issued,
but subsequently quashed, for the offense of Violation of Class Designation of Copyrightable
Works under Section 177.1 in relation to Section 177.3 of Republic Act 8293, when the objects
subject of the same, are patently not copyrightable.
It is worthy to state that the works protected under the Law on Copyright are: literary or
artistic works (Sec. 172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and
Vehicle Bearing Cushion fall on neither classification. Accordingly, if, in the first place, the
item subject of the petition is not entitled to be protected by the law on copyright, how can
there be any violation?[14]
The petitioners motion for reconsideration of the said decision suffered the same
fate. The petitioner forthwith filed the present petition for review on certiorari,
contending that the revocation of his copyright certificates should be raised in a direct
action and not in a search warrant proceeding.
The petitioner posits that even assuming ex argumenti that the trial court may
resolve the validity of his copyright in a proceeding to quash a search warrant for
allegedly infringing items, the RTC committed a grave abuse of its discretion when it
declared that his works are not copyrightable in the first place. He claims that R.A.
No. 8293, otherwise known as the Intellectual Property Code of the Philippines, which
took effect on January 1, 1998, provides in no uncertain terms that copyright
protection automatically attaches to a work by the sole fact of its creation, irrespective
of its mode or form of expression, as well as of its content, quality or purpose. [15] The
law gives a non-inclusive definition of work as referring to original intellectual

creations in the literary and artistic domain protected from the moment of their
creation; and includes original ornamental designs or models for articles of
manufacture, whether or not registrable as an industrial design and other works of
applied art under Section 172.1(h) of R.A. No. 8293.
As such, the petitioner insists, notwithstanding the classification of the works as
either literary and/or artistic, the said law, likewise, encompasses works which may
have a bearing on the utility aspect to which the petitioners utility designs were
classified. Moreover, according to the petitioner, what the Copyright Law protects is
the authors intellectual creation, regardless of whether it is one with utilitarian
functions or incorporated in a useful article produced on an industrial scale.
The petitioner also maintains that the law does not provide that the intended use
or use in industry of an article eligible for patent bars or invalidates its registration
under the Law on Copyright. The test of protection for the aesthetic is not beauty and
utility, but art for the copyright and invention of original and ornamental design for
design patents.[16] In like manner, the fact that his utility designs or models for articles
of manufacture have been expressed in the field of automotive parts, or based on
something already in the public domain does not automatically remove them from the
protection of the Law on Copyright.[17]
The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives
the same presumption to an affidavit executed by an author who claims copyright
ownership of his work.
The petitioner adds that a finding of probable cause to justify the issuance of a
search warrant means merely a reasonable suspicion of the commission of the
offense. It is not equivalent to absolute certainty or a finding of actual and positive
cause.[18] He assists that the determination of probable cause does not concern the
issue of whether or not the alleged work is copyrightable. He maintains that to justify
a finding of probable cause in the issuance of a search warrant, it is enough that
there exists a reasonable suspicion of the commission of the offense.
The petitioner contends that he has in his favor the benefit of the presumption that
his copyright is valid; hence, the burden of overturning this presumption is on the
alleged infringers, the respondents herein. But this burden cannot be carried in a
hearing on a proceeding to quash the search warrants, as the issue therein is
whether there was probable cause for the issuance of the search warrant. The
petitioner concludes that the issue of probable cause should be resolved without
invalidating his copyright.
In their comment on the petition, the respondents aver that the work of the
petitioner is essentially a technical solution to the problem of wear and tear in
automobiles, the substitution of materials, i.e., from rubber to plastic matter of
polyvinyl chloride, an oil resistant soft texture plastic material strong enough to
endure pressure brought about by the vibration of the counter bearing and thus
brings bushings. Such work, the respondents assert, is the subject of copyright
under Section 172.1 of R.A. No. 8293. The respondents posit that a technical
solution in any field of human activity which is novel may be the subject of a patent,
and not of a copyright. They insist that the certificates issued by the National Library
are only certifications that, at a point in time, a certain work was deposited in the said
office. Furthermore, the registration of copyrights does not provide for automatic
protection. Citing Section 218.2(b) of R.A. No. 8293, the respondents aver that no

copyright is said to exist if a party categorically questions its existence and legality.
Moreover, under Section 2, Rule 7 of the Implementing Rules of R.A. No. 8293, the
registration and deposit of work is not conclusive as to copyright outlay or the time of
copyright or the right of the copyright owner. The respondents maintain that a
copyright exists only when the work is covered by the protection of R.A. No. 8293.
The petition has no merit.
The RTC had jurisdiction to delve into and resolve the issue whether the
petitioners utility models are copyrightable and, if so, whether he is the owner of a
copyright over the said models. It bears stressing that upon the filing of the
application for search warrant, the RTC was duty-bound to determine whether
probable cause existed, in accordance with Section 4, Rule 126 of the Rules of
Criminal Procedure:
SEC. 4. Requisite for issuing search warrant. A search warrant shall not issue but upon
probable cause in connection with one specific offense to be determined personally by the
judge after examination under oath or affirmation of the complainant and the witnesses he
may produce, and, particularly, describing the place to be searched and the things to be seized.
In Solid Triangle Sales Corporation v. The Sheriff of RTC QC , Br. 93,[19] the Court
held that in the determination of probable cause, the court must necessarily resolve
whether or not an offense exists to justify the issuance of a search warrant or the
quashal of one already issued by the court. Indeed, probable cause is deemed to
exist only where facts and circumstances exist which could lead a reasonably
cautious and prudent man to believe that an offense has been committed or is being
committed. Besides, in Section 3, Rule 126 of the Rules of Criminal Procedure, a
search warrant may be issued for the search and seizure of personal property (a)
subject of the offense; (b) stolen or embezzled and other proceeds or fruits of the
offense; or (c) used or intended to be used as the means of committing an offense.
The RTC is mandated under the Constitution and Rules of Criminal Procedure to
determine probable cause. The court cannot abdicate its constitutional obligation by
refusing to determine whether an offense has been committed. [20] The absence of
probable cause will cause the outright nullification of the search warrant.[21]
For the RTC to determine whether the crime for infringement under R.A. No. 8293
as alleged in an application is committed, the petitioner-applicant was burdened to
prove that (a) respondents Jessie Ching and Joseph Yu were the owners of
copyrighted material; and (b) the copyrighted material was being copied and
distributed by the respondents. Thus, the ownership of a valid copyright is essential.
[22]

Ownership of copyrighted material is shown by proof of originality and

copyrightability. By originality is meant that the material was not copied, and
evidences at least minimal creativity; that it was independently created by the author
and that it possesses at least same minimal degree of creativity.[23] Copying is shown
by proof of access to copyrighted material and substantial similarity between the two
works.[24] The applicant must thus demonstrate the existence and the validity of his
copyright because in the absence of copyright protection, even original creation may
be freely copied.[25]
By requesting the NBI to investigate and, if feasible, file an application for a
search warrant for infringement under R.A. No. 8293 against the respondents, the

petitioner thereby authorized the RTC (in resolving the application), to delve into and
determine the validity of the copyright which he claimed he had over the utility
models. The petitioner cannot seek relief from the RTC based on his claim that he
was the copyright owner over the utility models and, at the same time, repudiate the
courts jurisdiction to ascertain the validity of his claim without running afoul to the
doctrine of estoppel.
To discharge his burden, the applicant may present the certificate of registration
covering the work or, in its absence, other evidence. [26] A copyright certificate
provides prima facieevidence of originality which is one element of copyright validity.
It constitutes prima facie evidence of both validity and ownership[27] and the validity of
the facts stated in the certificate. [28] The presumption of validity to a certificate of
copyright registration merely orders the burden of proof. The applicant should not
ordinarily be forced, in the first instance, to prove all the multiple facts that underline
the validity of the copyright unless the respondent, effectively challenging them, shifts
the burden of doing so to the applicant.[29] Indeed, Section 218.2 of R.A. No. 8293
provides:
218.2. In an action under this Chapter:
(a)
Copyright shall be presumed to subsist in the work or other subject matter to which the
action relates if the defendant does not put in issue the question whether copyright subsists in
the work or other subject matter; and
(b)
Where the subsistence of the copyright is established, the plaintiff shall be presumed to
be the owner of the copyright if he claims to be the owner of the copyright and the defendant
does not put in issue the question of his ownership.
A certificate of registration creates no rebuttable presumption of copyright validity
where other evidence in the record casts doubt on the question. In such a case,
validity will not be presumed.[30]
To discharge his burden of probable cause for the issuance of a search warrant
for violation of R.A. No. 8293, the petitioner-applicant submitted to the RTC
Certificate of Copyright Registration Nos. 2001-197 and 2001-204 dated September
3, 2001 and September 4, 2001, respectively, issued by the National Library covering
work identified as Leaf Spring Eye Bushing for Automobile and Vehicle Bearing
Cushion both classified under Section 172.1(h) of R.A. No. 8293, to wit:
SEC. 172. Literary and Artistic Works. 172.1. Literary and artistic works, hereinafter
referred to as works, are original intellectual creations in the literary and artistic domain
protected from the moment of their creation and shall include in particular:
...
(h)
Original ornamental designs or models for articles of manufacture, whether or not
registrable as an industrial design, and other works of applied art.
Related to the provision is Section 171.10, which provides that a work of applied
art is an artistic creation with utilitarian functions or incorporated in a useful article,
whether made by hand or produced on an industrial scale.
But, as gleaned from the specifications appended to the application for a
copyright certificate filed by the petitioner, the said Leaf Spring Eye Bushing for
Automobile is merely a utility model described as comprising a generally cylindrical

body having a co-axial bore that is centrally located and provided with a
perpendicular flange on one of its ends and a cylindrical metal jacket surrounding the
peripheral walls of said body, with the bushing made of plastic that is either polyvinyl
chloride or polypropylene.[31] Likewise, the Vehicle Bearing Cushion is illustrated as a
bearing cushion comprising a generally semi-circular body having a central hole to
secure a conventional bearing and a plurality of ridges provided therefore, with said
cushion bearing being made of the same plastic materials.[32] Plainly, these are not
literary or artistic works. They are not intellectual creations in the literary and artistic
domain, or works of applied art. They are certainly not ornamental designs or one
having decorative quality or value.
It bears stressing that the focus of copyright is the usefulness of the artistic
design, and not its marketability. The central inquiry is whether the article is a work of
art.[33] Works for applied art include all original pictorials, graphics, and sculptural
works that are intended to be or have been embodied in useful article regardless of
factors such as mass production, commercial exploitation, and the potential
availability of design patent protection.[34]
As gleaned from the description of the models and their objectives, these articles
are useful articles which are defined as one having an intrinsic utilitarian function that
is not merely to portray the appearance of the article or to convey information.
Indeed, while works of applied art, original intellectual, literary and artistic works are
copyrightable, useful articles and works of industrial design are not.[35] A useful article
may be copyrightable only if and only to the extent that such design incorporates
pictorial, graphic, or sculptural features that can be identified separately from, and are
capable of existing independently of the utilitarian aspects of the article.
We agree with the contention of the petitioner (citing Section 171.10 of R.A. No.
8293), that the authors intellectual creation, regardless of whether it is a creation with
utilitarian functions or incorporated in a useful article produced on an industrial scale,
is protected by copyright law. However, the law refers to a work of applied art which
is an artistic creation. It bears stressing that there is no copyright protection for
works of applied art or industrial design which have aesthetic or artistic features that
cannot be identified separately from the utilitarian aspects of the article. [36] Functional
components of useful articles, no matter how artistically designed, have generally
been denied copyright protection unless they are separable from the useful article.[37]
In this case, the petitioners models are not works of applied art, nor artistic
works. They are utility models, useful articles, albeit with no artistic design or value.
Thus, the petitioner described the utility model as follows:
LEAF SPRING EYE BUSHING FOR AUTOMOBILE
Known bushings inserted to leaf-spring eye to hold leaf-springs of automobile are made of
hard rubber. These rubber bushings after a time, upon subjecting them to so much or
intermittent pressure would eventually wore (sic) out that would cause the wobbling of the
leaf spring.
The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for
automobile that is made up of plastic.
Another object of this utility model is to provide a leaf-spring eye bushing for automobiles
made of polyvinyl chloride, an oil resistant soft texture plastic or polypropylene, a hard

plastic, yet both causes cushion to the leaf spring, yet strong enough to endure pressure
brought about by the up and down movement of said leaf spring.
Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that
has a much longer life span than the rubber bushings.
Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that
has a very simple construction and can be made using simple and ordinary molding
equipment.
A further object of this utility model is to provide a leaf-spring eye bushing for automobile
that is supplied with a metal jacket to reinforce the plastic eye bushing when in engaged with
the steel material of the leaf spring.
These and other objects and advantages will come to view and be understood upon a reading
of the detailed description when taken in conjunction with the accompanying drawings.
Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present
utility model;
Figure 2 is a sectional view taken along line 2-2 of Fig. 1;
Figure 3 is a longitudinal sectional view of another embodiment of this utility model;
Figure 4 is a perspective view of a third embodiment; and
Figure 5 is a sectional view thereof.
Referring now to the several views of the drawings wherein like reference numerals
designated same parts throughout, there is shown a utility model for a leaf-spring eye bushing
for automobile generally designated as reference numeral 10.
Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial
bore 12 centrally provided thereof.
As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular
flange 13 on one of its ends and a cylindrical metal jacket 14 surrounding the peripheral walls
15 of said body 11. When said leaf-spring bushing 10 is installed, the metal jacket 14 acts
with the leaf-spring eye (not shown), which is also made of steel or cast steel. In effect, the
bushing 10 will not be directly in contact with steel, but rather the metal jacket, making the
life of the bushing 10 longer than those without the metal jacket.
In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil
resistant soft texture plastic or a hard polypropylene plastic, both are capable to endure the
pressure applied thereto, and, in effect, would lengthen the life and replacement therefor.
Figure 3, on the other hand, shows the walls 16 of the co-axial bore 12 of said bushing 10 is
insertably provided with a steel tube 17 to reinforce the inner portion thereof. This steel tube
17 accommodates or engages with the leaf-spring bolt (not shown) connecting the leaf spring
and the automobiles chassis.
Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and
cylindrical as to its construction. Said another embodiment is also made of polypropylene or
polyvinyl chloride plastic material. The steel tube 17 and metal jacket 14 may also be applied
to this embodiment as an option thereof. [38]
VEHICLE BEARING CUSHION

Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of
hard rubber. These rubber bushings after a time, upon subjecting them to so much or
intermittent pressure would eventually be worn out that would cause the wobbling of the
center bearing.
The primary object of this utility model therefore is to provide a vehicle-bearing cushion that
is made up of plastic.
Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl
chloride, an oil resistant soft texture plastic material which causes cushion to the propellers
center bearing, yet strong enough to endure pressure brought about by the vibration of the
center bearing.
Yet, an object of this utility model is to provide a vehicle-bearing cushion that has a much
longer life span than rubber bushings.
Still an object of this utility model is to provide a vehicle bearing cushion that has a very
simple construction and can be made using simple and ordinary molding equipment.
These and other objects and advantages will come to view and be understood upon a reading
of the detailed description when taken in conjunction with the accompanying drawings.
Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and
Figure 2 is a sectional view thereof.
Referring now to the several views of the drawing, wherein like reference numeral designate
same parts throughout, there is shown a utility model for a vehicle-bearing cushion generally
designated as reference numeral 10.
Said bearing cushion 10 comprises of a generally semi-circular body 11, having central hole
12 to house a conventional bearing (not shown). As shown in Figure 1, said body 11 is
provided with a plurality of ridges 13 which serves reinforcing means thereof.
The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical
resistant plastic material which is strong, durable and capable of enduring severe pressure
from the center bearing brought about by the rotating movement of the propeller shaft of the
vehicle.[39]
A utility model is a technical solution to a problem in any field of human activity
which is new and industrially applicable. It may be, or may relate to, a product, or
process, or an improvement of any of the aforesaid. [40] Essentially, a utility model
refers to an invention in the mechanical field. This is the reason why its object is
sometimes described as a device or useful object.[41] A utility model varies from an
invention, for which a patent for invention is, likewise, available, on at least three
aspects: first, the requisite of inventive step[42] in a patent for invention is not
required; second, the maximum term of protection is only seven years [43] compared to
a patent which is twenty years,[44] both reckoned from the date of the application; and
third, the provisions on utility model dispense with its substantive examination [45] and
prefer for a less complicated system.
Being plain automotive spare parts that must conform to the original structural
design of the components they seek to replace, the Leaf Spring Eye Bushing and
Vehicle Bearing Cushion are not ornamental. They lack the decorative quality or
value that must characterize authentic works of applied art. They are not even artistic
creations with incidental utilitarian functions or works incorporated in a useful article.

In actuality, the personal properties described in the search warrants are mechanical
works, the principal function of which is utility sansany aesthetic embellishment.
Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing
Cushion as included in the catch-all phrase other literary, scholarly, scientific and
artistic works in Section 172.1(a) of R.A. No. 8293. Applying the principle
of ejusdem generis which states that where a statute describes things of a particular
class or kind accompanied by words of a generic character, the generic word will
usually be limited to things of a similar nature with those particularly enumerated,
unless there be something in the context of the state which would repel such
inference,[46] the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not
copyrightable, being not of the same kind and nature as the works enumerated in
Section 172 of R.A. No. 8293.
No copyright granted by law can be said to arise in favor of the petitioner despite
the issuance of the certificates of copyright registration and the deposit of the Leaf
Spring Eye Bushing and Vehicle Bearing Cushion. Indeed, in Joaquin, Jr. v.
Drilon[47] and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,[48] the
Court ruled that:
Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent
right granted by the statute, and not simply a pre-existing right regulated by it. Being a
statutory grant, the rights are only such as the statute confers, and may be obtained and
enjoyed only with respect to the subjects and by the persons, and on terms and conditions
specified in the statute. Accordingly, it can cover only the works falling within the statutory
enumeration or description.
That the works of the petitioner may be the proper subject of a patent does not
entitle him to the issuance of a search warrant for violation of copyright laws. In Kho
v. Court of Appeals[49] and Pearl & Dean (Phil.), Incorporated v. Shoemart,
Incorporated,[50] the Court ruled that these copyright and patent rights are completely
distinct and separate from one another, and the protection afforded by one cannot be
used interchangeably to cover items or works that exclusively pertain to the others.
The Court expounded further, thus:
Trademark, copyright and patents are different intellectual property rights that cannot be
interchanged with one another. A trademark is any visible sign capable of distinguishing the
goods (trademark) or services (service mark) of an enterprise and shall include a stamped or
marked container of goods. In relation thereto, a trade name means the name or designation
identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual creations in the literary and artistic
domain protected from the moment of their creation. Patentable inventions, on the other hand,
refer to any technical solution of a problem in any field of human activity which is new,
involves an inventive step and is industrially applicable.
The petitioner cannot find solace in the ruling of the United States Supreme Court
in Mazer v. Stein[51] to buttress his petition. In that case, the artifacts involved in that
case were statuettes of dancing male and female figures made of semi-vitreous
china. The controversy therein centered on the fact that although copyrighted as
works of art, the statuettes were intended for use and used as bases for table
lamps, with electric wiring, sockets and lampshades attached. The issue raised was
whether the statuettes were copyright protected in the United States, considering that
the copyright applicant intended primarily to use them as lamp bases to be made and
sold in quantity, and carried such intentions into effect. At that time, the Copyright

Office interpreted the 1909 Copyright Act to cover works of artistic craftsmanship
insofar as their form, but not the utilitarian aspects, were concerned. After reviewing
the history and intent of the US Congress on its copyright legislation and the
interpretation of the copyright office, the US Supreme Court declared that the
statuettes were held copyrightable works of art or models or designs for works of art.
The High Court ruled that:
Works of art (Class G) (a) In General. This class includes works of artistic
craftsmanship, in so far as their form but not their mechanical or utilitarian aspects are
concerned, such as artistic jewelry, enamels, glassware, and tapestries, as well as all works
belonging to the fine arts, such as paintings, drawings and sculpture.
So we have a contemporaneous and long-continued construction of the statutes by the agency
charged to administer them that would allow the registration of such a statuette as is in
question here.[52]
The High Court went on to state that [t]he dichotomy of protection for the
aesthetic is not beauty and utility but art for the copyright and the invention of original
and ornamental design for design patents. Significantly, the copyright office
promulgated a rule to implement Mazer to wit:
[I]f the sole intrinsic function of an article is its utility, the fact that the work is unique and
attractively shaped will not qualify it as a work of art.
In this case, the bushing and cushion are not works of art. They are, as the
petitioner himself admitted, utility models which may be the subject of a patent.
IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for
lack of merit. The assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 70411 are AFFIRMED. Search Warrant Nos. 01-2401 and 01-2402
issued on October 15, 2001 are ANNULLED AND SET ASIDE. Costs against the
petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

E.Y. INDUSTRIAL SALES, INC.

and ENGRACIO YAP,
Petitioners,

- versus -

G.R. No. 184850

Present:
CORONA, C.J., Chairperson,
VELASCO, JR.,
LEONARDO - DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

SHEN DAR ELECTRICITY AND

Promulgated:
MACHINERY CO., LTD.,
Respondent. October 20, 2010
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the
February 21, 2008 Decision[1] and the October 6, 2008 Resolution[2] rendered by the Court
of Appeals (CA) in CA-G.R. SP No. 99356 entitled Shen Dar Electricity and Machinery
Co., Ltd. v. E.Y. Industrial Sales, Inc. and Engracio Yap.
The assailed decision reversed the Decision dated May 25, 2007 [3] issued by the
Director General of the Intellectual Property Office (IPO) in Inter Partes Case No. 142004-00084. The IPO Director General upheld Certificate of Registration (COR) No. 41999-005393 issued by the IPO for the trademark VESPA in favor of petitioner E.Y.
Industrial Sales, Inc. (EYIS), but ordered the cancellation of COR No. 4-1997-121492,
also for the trademark VESPA, issued in favor of respondent Shen Dar Electricity and
Machinery Co., Ltd. (Shen Dar). The Decision of the IPO Director General, in effect,
affirmed the Decision dated May 29, 2006[4] issued by the Director of the Bureau of Legal
Affairs (BLA) of the IPO.
The Facts

EYIS is a domestic corporation engaged in the production, distribution and sale of

air compressors and other industrial tools and equipment. [5] Petitioner Engracio Yap is the
Chairman of the Board of Directors of EYIS.[6]
Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the
manufacture of air compressors.[7]
Both companies claimed to have the right to register the trademark VESPA for air
compressors.
From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales
contracts. In the Sales Contract dated April 20, 2002, [8] for example, Shen Dar would
supply EYIS in one (1) year with 24 to 30 units of 40-ft. containers worth of air
compressors identified in the Packing/Weight Lists simply as SD-23, SD-29, SD-31, SD32, SD-39, SD-67 and SD-68. In the corresponding Bill of Ladings, the items were
described merely as air compressors.[9] There is no documentary evidence to show that
such air compressors were marked VESPA.
On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492
with the IPO for the mark VESPA, Chinese Characters and Device for use on air
compressors and welding machines.[10]
On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393,
also for the mark VESPA, for use on air compressors. [11] On January 18, 2004, the IPO
issued COR No. 4-1999-005393 in favor of EYIS.[12] Thereafter, on February 8, 2007,
Shen Dar was also issued COR No. 4-1997-121492.[13]
In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of
EYIS COR with the BLA.[14] In the Petition, Shen Dar primarily argued that the issuance
of the COR in favor of EYIS violated Section 123.1 paragraphs (d), (e) and (f) of Republic
Act No. (RA) 8293, otherwise known as the Intellectual Property Code (IP Code), having
first filed an application for the mark. Shen Dar further alleged that EYIS was a mere
distributor of air compressors bearing the mark VESPA which it imported from Shen
Dar. Shen Dar also argued that it had prior and exclusive right to the use and registration
of the mark VESPA in the Philippines under the provisions of the Paris Convention.[15]
In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of
the mark VESPA being the sole assembler and fabricator of air compressors since the
early 1990s. They further alleged that the air compressors that Shen Dar allegedly
supplied them bore the mark SD for Shen Dar and not VESPA. Moreover, EYIS
argued that Shen Dar, not being the owner of the mark, could not seek protection from the
provisions of the Paris Convention or the IP Code.[16]
Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor
of EYIS and against Shen Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition for Cancellation is, as it is

hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for the
mark VESPA granted in the name of E.Y. Industrial Sales, Inc. on 9 January 2007 is
hereby upheld.
Let the filewrapper of VESPA subject matter of this case be forwarded to the
Administrative, Financial and Human Resource Development Services Bureau for issuance
and appropriate action in accordance with this DECISION and a copy thereof furnished to
the Bureau of Trademarks for information and update of its records.
SO ORDERED.[17]

Shen Dar appealed the decision of the BLA Director to the Director General of the
IPO. In the appeal, Shen Dar raised the following issues:
1. Whether the BLA Director erred in ruling that Shen Dar failed to present
evidence;
2. Whether the registration of EYIS application was proper considering that
Shen Dar was the first to file an application for the mark; and
3. Whether the BLA Director correctly ruled that EYIS is the true owner of the
mark.[18]
Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the
COR issued in favor of EYIS while cancelling the COR of Shen Dar, the dispositive
portion of which reads:
WHEREFORE, premises considered, the appeal is DENIED. Certificate of
Registration No. 4-1999-005393 for the mark VESPA for air compressor issued in favor of
Appellee is hereby upheld. Consequently, Certificate of Registration No. 4-1997-121492
for the mark VESPA, Chinese Characters & Device for goods air compressor and spot
welding machine issued in favor of Appellant is hereby ordered cancelled.
Let a copy of this Decision as well as the records of this case be furnished and
returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also
the Directors of the Bureau of Trademarks, the Administrative, Financial and Human
Resources Development Services Bureau, and the Documentation, Information and
Technology Transfer Bureau be furnished a copy of this Decision for information,
guidance, and records purposes.[19]

Shen Dar appealed the above decision of the IPO Director General to the CA where
Shen Dar raised the following issues:
1.
2.
3.
4.
5.

Whether Shen Dar is guilty of forum shopping;

Whether the first-to-file rule applies to the instant case;
Whether Shen Dar presented evidence of actual use;
Whether EYIS is the true owner of the mark VESPA;
Whether the IPO Director General erred in cancelling Shen Dars COR No. 41997-121492 without a petition for cancellation; and

6. Whether Shen Dar sustained damages.[20]

In the assailed decision, the CA reversed the IPO Director General and ruled in
favor of Shen Dar. The dispositive portion states:
WHEREFORE, premises considered, the petition is GRANTED. Consequently, the
assailed decision of the Director General of the Intellectual Property Office dated May 25,
2007 is hereby REVERSED and SET ASIDE. In lieu thereof, a new one is entered: a)
ordering the cancellation of Certificate of Registration No. 4-1999-005393 issued on
January 19, 2004 for the trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b)
ordering the restoration of the validity of Certificate of Registration No. 4-1997-121492 for
the trademark VESPA in favor of Shen Dar Electricity and Machinery Co., Ltd. No
pronouncement as to costs.
SO ORDERED.[21]

In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not
formally offer its evidence before the BLA, such evidence was properly attached to the
Petition for Cancellation. As such, Shen Dars evidence may be properly considered. The
CA also enunciated that the IPO failed to properly apply the provisions of Sec. 123.1(d) of
RA 8293, which prohibits the registration of a trademark in favor of a party when there is
an earlier filed application for the same mark. The CA further ruled that Shen Dar should
be considered to have prior use of the mark based on the statements made by the parties in
their respective Declarations of Actual Use. The CA added that EYIS is a mere importer
of the air compressors with the mark VESPA as may be gleaned from its receipts which
indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be
considered an owner of the mark.[22]
EYIS filed a motion for reconsideration of the assailed decision which the CA
denied in the assailed resolution.
Hence, the instant appeal.
Issues
EYIS and Yap raise the following issues in their petition:
A.

Whether the Director General of the IPO correctly upheld the rights of Petitioners
over the trademark VESPA.

B.

Whether the Director General of the IPO can, under the circumstances, order the
cancellation of Respondents certificate of registration for VESPA, which has been
fraudulently obtained and erroneously issued.

C.

Whether the Honorable Court of Appeals was justified in reversing the findings of
fact of the IPO, which affirm the rights of Petitioner EYIS over the trademark
VESPA and when such findings are supported by the evidence on record.

D.

Whether this Honorable Court may review questions of fact considering that the
findings of the Court of Appeals and the IPO are in conflict and the conclusions of
the appellee court are contradicted by the evidence on record.[23]

The Ruling of the Court

The appeal is meritorious.
First Issue:
Whether this Court may review the questions of fact presented
Petitioners raise the factual issue of who the true owner of the mark is. As a general
rule, this Court is not a trier of facts. However, such rule is subject to exceptions.
In New City Builders, Inc. v. National Labor Relations Commission,[24] the Court
ruled that:
We are very much aware that the rule to the effect that this Court is not a trier of
facts admits of exceptions. As we have stated in Insular Life Assurance Company, Ltd. vs.
CA:
[i]t is a settled rule that in the exercise of the Supreme Courts power of review, the
Court is not a trier of facts and does not normally undertake the re-examination of
the evidence presented by the contending parties during the trial of the case
considering that the findings of facts of the CA are conclusive and binding on the
Court. However, the Court had recognized several exceptions to this rule, to wit:
(1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of facts are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the
case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondent; (10) when the findings of fact
are premised on the supposed absence of evidence and contradicted by the evidence
on record; and (11) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion. (Emphasis supplied.)

In the instant case, the records will show that the IPO and the CA made differing
conclusions on the issue of ownership based on the evidence presented by the
parties. Hence, this issue may be the subject of this Courts review.
Second Issue:
Whether evidence presented before the BLA must be formally offered
Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce
evidence in support of its allegations as required under Office Order No. 79, Series of
2005, Amendments to the Regulations on Inter Partes Proceedings, having failed to
formally offer its evidence during the proceedings before it. The BLA ruled:

At the outset, we note petitioners failure to adduce any evidence in support of its
allegations in the Petition for Cancellation. Petitioner did not file nor submit its marked
evidence as required in this Bureaus Order No. 2006-157 dated 25 January 2006 in
compliance with Office Order No. 79, Series of 2005, Amendments to the Regulations
on Inter Partes Proceedings.[25] x x x

In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No.
03, Series of 2005, which states:
Section 2.4. In all cases, failure to file the documentary evidences in accordance
with Sections 7 and 8 of the rules on summary proceedings shall be construed as a waiver
on the part of the parties. In such a case, the original petition, opposition, answer and the
supporting documents therein shall constitute the entire evidence for the parties subject to
applicable rules.

The CA concluded that Shen Dar needed not formally offer its evidence but merely
needed to attach its evidence to its position paper with the proper markings, [26] which it did
in this case.
The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall
establish the procedure for the application for the registration of a trademark, as well as the
opposition to it:
Section 10. The Bureau of Legal Affairs.
the following functions:

The Bureau of Legal Affairs shall have

xxxx
10.3. The Director General may by Regulations establish the procedure to govern
the implementation of this Section.

Thus, the Director General issued Office Order No. 79, Series of 2005 amending
the regulations on Inter Partes Proceedings, Sec. 12.1 of which provides:
Section 12. Evidence for the Parties
12.1. The verified petition or opposition, reply if any, duly marked affidavits of the
witnesses, and the documents submitted, shall constitute the entire evidence for the
petitioner or opposer. The verified answer, rejoinder if any, and the duly marked affidavits
and documents submitted shall constitute the evidence for the respondent. Affidavits,
documents and other evidence not submitted and duly marked in accordance with the
preceding sections shall not be admitted as evidence.

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and
9 which, in turn, provide:
Section 7. Filing of Petition or Opposition
7.1. The petition or opposition, together with the affidavits of witnesses and
originals of the documents and other requirements, shall be filed with the Bureau,

provided, that in case of public documents, certified copies shall be allowed in lieu of the
originals. The Bureau shall check if the petition or opposition is in due form as provided in
the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5, Section 3; Rule 6,
Section 9; Rule 7, Sections 3 and 5; Rule 8, Sections 3 and 4. For petition for cancellation
of layout design (topography) of integrated circuits, Rule 3, Section 3 applies as to the
form and requirements. The affidavits, documents and other evidence shall be marked
consecutively as Exhibits beginning with the letter A.
Section 8. Answer
8.1. Within three (3) working days from receipt of the petition or opposition, the
Bureau shall issue an order for the respondent to file an answer together with the affidavits
of witnesses and originals of documents, and at the same time shall notify all parties
required to be notified in the IP Code and these Regulations, provided, that in case of
public documents, certified true copies may be submitted in lieu of the originals. The
affidavits and documents shall be marked consecutively as Exhibits beginning with the
number 1.
Section 9. Petition or Opposition and Answer must be verified Subject to Rules 7
and 8 of these regulations, the petition or opposition and the answer must be verified.
Otherwise, the same shall not be considered as having been filed.

In other words, as long as the petition is verified and the pieces of evidence
consisting of the affidavits of the witnesses and the original of other documentary evidence
are attached to the petition and properly marked in accordance with Secs. 7.1 and 8.1
abovementioned, these shall be considered as the evidence of the petitioner. There is no
requirement under the abovementioned rules that the evidence of the parties must be
formally offered to the BLA.
In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the
Regulations on Inter Partes Proceedings, the BLA is not bound by technical rules of
procedure. The evidence attached to the petition may, therefore, be properly considered in
the resolution of the case.

Third Issue:
Whether the IPO Director General can
validly cancel Shen Dars Certificate of Registration

In his Decision, the IPO Director General stated that, despite the fact that the instant
case was for the cancellation of the COR issued in favor of EYIS, the interests of justice
dictate, and in view of its findings, that the COR of Shen Dar must be cancelled. The
Director General explained:
Accordingly, while the instant case involves a petition to cancel the registration of
the Appellees trademark VESPA, the interest of justice requires that Certificate of
Registration No. 4-1997-121492 be cancelled. While the normal course of proceedings
should have been the filing of a petition for cancellation of Certificate of Registration No.
4-1997-121492, that would involve critical facts and issues that have already been resolved
in this case. To allow the Applicant to still maintain in the Trademark Registry Certificate

of Registration No. 4-1997-121492 would nullify the exclusive rights of Appellee as the
true and registered owner of the mark VESPA and defeat the purpose of the trademark
registration system.[27]

Shen Dar challenges the propriety of such cancellation on the ground that there was
no petition for cancellation as required under Sec. 151 of RA 8293.
Office Order No. 79, Series of 2005, provides under its Sec. 5 that:
Section 5. Rules of Procedure to be followed in the conduct of hearing of Inter
Partes cases. The rules of procedure herein contained primarily apply in the conduct of
hearing of Inter Partes cases. The Rules of Court may be applied suppletorily. The Bureau
shall not be bound by strict technical rules of procedure and evidence but may adopt,
in the absence of any applicable rule herein, such mode of proceedings which is
consistent with the requirements of fair play and conducive to the just, speedy and
inexpensive disposition of cases, and which will give the Bureau the greatest
possibility to focus on the contentious issues before it. (Emphasis supplied.)

The above rule reflects the oft-repeated legal principle that quasi-judicial and
administrative bodies are not bound by technical rules of procedure. Such principle,
however, is tempered by fundamental evidentiary rules, including due process. Thus, we
ruled in Aya-ay, Sr. v. Arpaphil Shipping Corp.:[28]
That administrative quasi-judicial bodies like the NLRC are not bound by technical
rules of procedure in the adjudication of cases does not mean that the basic rules on
proving allegations should be entirely dispensed with. A party alleging a critical fact must
still support his allegation with substantial evidence. Any decision based on
unsubstantiated allegation cannot stand as it will offend due process.
x x x The liberality of procedure in administrative actions is subject to limitations
imposed by basic requirements of due process. As this Court said in Ang Tibay v. CIR, the
provision for flexibility in administrative procedure does not go so far as to justify orders
without a basis in evidence having rational probative value. More specifically, as held in
Uichico v. NLRC:
It is true that administrative and quasi-judicial bodies like the NLRC are not
bound by the technical rules of procedure in the adjudication of cases. However,
this procedural rule should not be construed as a license to disregard certain
fundamental evidentiary rules.

This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis:[29]

While it is true that administrative or quasi-judicial bodies like the NLRC are not
bound by the technical rules of procedure in the adjudication of cases, this procedural rule
should not be construed as a license to disregard certain fundamental evidentiary
rules. The evidence presented must at least have a modicum of admissibility for it to have
probative value. Not only must there be some evidence to support a finding or conclusion,
but the evidence must be substantial. Substantial evidence is more than a mere scintilla. It
means such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion. Thus, even though technical rules of evidence are not strictly complied with

before the LA and the NLRC, their decision must be based on evidence that must, at the
very least, be substantial.

The fact that no petition for cancellation was filed against the COR issued to Shen
Dar does not preclude the cancellation of Shen Dars COR. It must be emphasized that,
during the hearing for the cancellation of EYIS COR before the BLA, Shen Dar tried to
establish that it, not EYIS, was the true owner of the mark VESPA and, thus, entitled to
have it registered. Shen Dar had more than sufficient opportunity to present its evidence
and argue its case, and it did. It was given its day in court and its right to due process was
respected. The IPO Director Generals disregard of the procedure for the cancellation of a
registered mark was a valid exercise of his discretion.
Fourth Issue:
Whether the factual findings of the IPO are binding on the CA
Next, petitioners challenge the CAs reversal of the factual findings of the BLA that
Shen Dar and not EYIS is the prior user and, therefore, true owner of the mark. In arguing
its position, petitioners cite numerous rulings of this Court where it was enunciated that the
factual findings of administrative bodies are given great weight if not conclusive upon the
courts when supported by substantial evidence.
We agree with petitioners that the general rule in this jurisdiction is that the factual
findings of administrative bodies deserve utmost respect when supported by
evidence. However, such general rule is subject to exceptions.
In Fuentes v. Court of Appeals,[30] the Court established the rule of conclusiveness of
factual findings of the CA as follows:
Jurisprudence teaches us that (a)s a rule, the jurisdiction of this Court in cases
brought to it from the Court of Appeals x x x is limited to the review and revision of errors
of law allegedly committed by the appellate court, as its findings of fact are deemed
conclusive. As such this Court is not duty-bound to analyze and weigh all over again the
evidence already considered in the proceedings below. This rule, however, is not without
exceptions. The findings of fact of the Court of Appeals, which are as a general rule
deemed conclusive, may admit of review by this Court:
(1) when the factual findings of the Court of Appeals and the trial court are
contradictory;
(2) when the findings are grounded entirely on speculation, surmises, or
conjectures;
(3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation of facts;
(5) when the appellate court, in making its findings, goes beyond the issues of the
case, and such findings are contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension

of facts;
(7) when the Court of Appeals fails to notice certain relevant facts which, if
properly considered, will justify a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the specific
evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals are premised on the absence
of evidence but such findings are contradicted by the evidence on record. (Emphasis
supplied.)

Thereafter, in Villaflor v. Court of Appeals,[31] this Court applied the above principle
to factual findings of quasi-judicial bodies, to wit:
Proceeding by analogy, the exceptions to the rule on conclusiveness of factual
findings of the Court of Appeals, enumerated in Fuentes vs. Court of Appeals, can also be
applied to those of quasi-judicial bodies x x x. (Emphasis supplied.)

Here, the CA identified certain material facts that were allegedly overlooked by the
BLA and the IPO Director General which it opined, when correctly appreciated, would
alter the result of the case. An examination of the IPO Decisions, however, would show
that no such evidence was overlooked.
First, as to the date of first use of the mark by the parties, the CA stated:
To begin with, when respondents-appellees filed its application for registration of
the VESPA trademark on July 28, 1999, they stated under oath, as found in their
DECLARATION OF ACTUAL USE, that their first use of the mark was on December 22,
1998. On the other hand, [Shen Dar] in its application dated June 09, 1997 stated, likewise
under oath in their DECLARATION OF ACTUAL USE, that its first use of the mark was
in June 1996. This cannot be made any clearer. [Shen Dar] was not only the first to file an
application for registration but likewise first to use said registrable mark.[32]

Evidently, the CA anchors its finding that Shen Dar was the first to use the mark on
the statements of the parties in their respective Declarations of Actual Use. Such
conclusion is premature at best. While a Declaration of Actual Use is a notarized
document, hence, a public document, it is not conclusive as to the fact of first use of a
mark. The declaration must be accompanied by proof of actual use as of the date
claimed. In a declaration of actual use, the applicant must, therefore, present evidence of
such actual use.
The BLA ruled on the same issue, as follows:
More importantly, the private respondents prior adoption and continuous use of the
mark VESPA on air compressors is bolstered by numerous documentary evidence
consisting of sales invoices issued in the name of E.Y. Industrial and Bill of Lading

(Exhibits 4 to 375). Sales Invoice No. 12075 dated March 27, 1995 antedates
petitioners date of first use on January 1, 1997 indicated in its trademark application filed
on June 9, 1997 as well as the date of first use in June of 1996 as indicated in the
Declaration of Actual Use submitted on December 3, 2001 (Exhibit 385). The use by
respondent registrant in the concept of owner is shown by commercial documents, sales
invoices unambiguously describing the goods as VESPA air compressors. Private
respondents have sold the air compressors bearing the VESPA to various locations in
the Philippines, as far as Mindanao and the Visayas since the early 1990s. We carefully
inspected the evidence consisting of three hundred seventy-one (371) invoices and
shipment documents which show that VESPA air compressors were sold not only in
Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City,
Cagayan de Oro City, Davao City, to name a few. There is no doubt that it is through
private respondents efforts that the mark VESPA used on air compressors has gained
business goodwill and reputation in the Philippines for which it has validly acquired
trademark rights. Respondent E.Y. Industrials right has been preserved until the passage of
RA 8293 which entitles it to register the same.[33]

Comparatively, the BLAs findings were founded upon the evidence presented by
the parties. An example of such evidence is Invoice No. 12075 dated March 29,
1995[34] where
EYIS
sold
four
units
of
VESPA
air
compressors
to Veteran Paint Trade Center. Shen Dar failed to rebut such evidence. The truth, as
supported by the evidence on record, is that EYIS was first to use the mark.
Moreover, the discrepancy in the date provided in the Declaration of Actual Use
filed by EYIS and the proof submitted was appropriately considered by the BLA, ruling as
follows:
On the contrary, respondent EY Industrial was able to prove the use of the mark
VESPA on the concept of an owner as early as 1991. Although Respondent E.Y.
indicated in its trademark application that its first use was in December 22, 1998, it was
able to prove by clear and positive evidence of use prior to such date.
In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23 November
1966, the High Court clarified: Where an applicant for registration of a trademark states
under oath the date of his earliest use, and later on he wishes to carry back his first date of
use to an earlier date, he then takes on the greater burden of presenting clear and
convincing evidence of adoption and use as of that earlier date. (B.R. Baker Co. vs.
Lebrow Bros., 150 F. 2d 580.)[35]

The CA further found that EYIS is not a manufacturer of air compressors but merely
imports and sells them as a wholesaler and retailer. The CA reasoned:
Conversely, a careful perusal of appellees own submitted receipts shows that
it is not manufacturer but an importer, wholesaler and retailer. This fact is
corroborated by the testimony of a former employee of appellees. Admittedly too,
appellees are importing air compressors from [Shen Dar] from 1997 to 2004. These
matters, lend credence to [Shen Dars] claim that the letters SD followed by a number
inscribed in the air compressor is only to describe its type, manufacturer business name
and capacity. The VESPA mark is in the sticker which is attached to the air compressors.
The ruling of the Supreme Court, in the case of UNNO Commercial Enterprises, Inc. vs.
General Milling Corporation et al., is quite enlightening, thus We quote:

The term owner does not include the importer of the goods bearing the
trademark, trade name, service mark, or other mark of ownership, unless such
importer is actually the owner thereof in the country from which the goods are
imported. Thus, this Court, has on several occasions ruled that where the
applicants alleged ownership is not shown in any notarial document and the
applicant appears to be merely an importer or distributor of the merchandise
covered by said trademark, its application cannot be granted.[36]

This is a non sequitur. It does not follow. The fact that EYIS described itself in its
sales invoice as an importer, wholesaler and retailer does not preclude its being a
manufacturer. Sec. 237 of the National Internal Revenue Code states:
Section 237. Issuance of Receipts or Sales or Commercial Invoices. All persons
subject to an internal revenue tax shall, for each sale and transfer of merchandise or for
services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered
receipts or sale or commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature of
service: Provided, however, That where the receipt is issued to cover payment made as
rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall
show the name, business style, if any, and address of the purchaser, customer or client.
The original of each receipt or invoice shall be issued to the purchaser, customer or
client at the time the transaction is effected, who, if engaged in business or in the exercise
of profession, shall keep and preserve the same in his place of business for a period of
three (3) years from the close of the taxable year in which such invoice or receipt was
issued, while the duplicate shall be kept and preserved by the issuer, also in his place of
business, for a like period.
The Commissioner may, in meritorious cases, exempt any person subject to an
internal revenue tax from compliance with the provisions of this Section. (Emphasis
supplied.)

Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the
Bureau of Internal Revenue defined a Sales Invoice and identified its required information
as follows:
Sales Invoices (SI)/Cash Invoice (CI) is written account of goods sold or services
rendered and the prices charged therefor used in the ordinary course of business evidencing
sale and transfer or agreement to sell or transfer of goods and services. It contains the
same information found in the Official Receipt.
Official Receipt (OR) is a receipt issued for the payment of services rendered or
goods sold. It contains the following information:
a. Business name and address;
b. Taxpayer Identification Number;
c. Name of printer (BIR Permit No.) with inclusive serial number of booklets and
date of issuance of receipts.

There is no requirement that a sales invoice should accurately state the nature of all
the businesses of the seller. There is no legal ground to state that EYIS declaration in
its sales invoices that it is an importer, wholesaler and retailer is restrictive and would
preclude its being a manufacturer.

From the above findings, there was no justifiable reason for the CA to disregard the
factual findings of the IPO. The rulings of the IPO Director General and the BLA Director
were supported by clear and convincing evidence. The facts cited by the CA and Shen Dar
do not justify a different conclusion from that of the IPO. Hence, the findings of the BLA
Director and the IPO Director General must be deemed as conclusive on the CA.
Fifth Issue:
Whether EYIS is the true owner of the mark VESPA
In any event, given the length of time already invested by the parties in the instant
case, this Court must write finis to the instant controversy by determining, once and for all,
the true owner of the mark VESPA based on the evidence presented.
RA 8293 espouses the first-to-file rule as stated under Sec. 123.1(d) which states:
Section 123. Registrability. - 123.1. A mark cannot be registered if it:
xxxx
(d) Is identical with a registered mark belonging to a different proprietor or a mark
with an earlier filing or priority date, in respect of:
(i) The same goods or services, or
(ii) Closely related goods or services, or
(iii) If it nearly resembles such a mark as to be likely to deceive or cause
confusion. (Emphasis supplied.)

Under this provision, the registration of a mark is prevented with the filing of an
earlier application for registration. This must not, however, be interpreted to mean that
ownership should be based upon an earlier filing date. While RA 8293 removed the
previous requirement of proof of actual use prior to the filing of an application for
registration of a mark, proof of prior and continuous use is necessary to establish
ownership of a mark. Such ownership constitutes sufficient evidence to oppose the
registration of a mark.
Sec. 134 of the IP Code provides that any person who believes that he would be
damaged by the registration of a mark x x x may file an opposition to the application. The
term any person encompasses the true owner of the mark the prior and continuous
user.
Notably, the Court has ruled that the prior and continuous use of a mark may even
overcome the presumptive ownership of the registrant and be held as the owner of the
mark. As aptly stated by the Court in Shangri-la International Hotel Management, Ltd. v.
Developers Group of Companies, Inc.:[37]
Registration, without more, does not confer upon the registrant an absolute right to
the registered mark. The certificate of registration is merely a prima facie proof that the
registrant is the owner of the registered mark or trade name. Evidence of prior and

continuous use of the mark or trade name by another can overcome the presumptive
ownership of the registrant and may very well entitle the former to be declared owner
in an appropriate case.
xxxx
Ownership of a mark or trade name may be acquired not necessarily by registration
but by adoption and use in trade or commerce. As between actual use of a mark without
registration, and registration of the mark without actual use thereof, the former prevails
over the latter. For a rule widely accepted and firmly entrenched, because it has come
down through the years, is thatactual use in commerce or business is a pre-requisite to
the acquisition of the right of ownership.
xxxx
By itself, registration is not a mode of acquiring ownership. When the applicant is
not the owner of the trademark being applied for, he has no right to apply for
registration of the same. Registration merely creates a prima facie presumption of the
validity of the registration, of the registrants ownership of the trademark and of the
exclusive right to the use thereof. Such presumption, just like the presumptive regularity in
the performance of official functions, is rebuttable and must give way to evidence to the
contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the

parties, is that EYIS is the prior user of the mark. The exhaustive discussion on the matter
made by the BLA sufficiently addresses the issue:
Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation
engaged in buying, importing, selling, industrial machineries and tools, manufacturing,
among others since its incorporation in 1988. (Exhibit 1). Indeed private respondents
have submitted photographs (Exhibit 376, 377, 378, 379) showing an assembly
line of its manufacturing or assembly process.
More importantly, the private respondents prior adoption and continuous use of the
mark VESPA on air compressors is bolstered by numerous documentary evidence
consisting of sales invoices issued in the name of respondent EY Industrial and Bills of
Lading. (Exhibits 4 to 375). Sales Invoice No. 12075 dated March 27, 1995 antedates
petitioners date of first use in January 1, 1997 indicated in its trademark application filed
in June 9, 1997 as well as the date of first use in June of 1996 as indicated in the
Declaration of Actual Use submitted on December 3, 2001 (Exhibit 385). The use by
respondent-registrant in the concept of owner is shown by commercial documents, sales
invoices unambiguously describing the goods as VESPA air compressors. Private
respondents have sold the air compressors bearing the VESPA to various locations in
the Philippines, as far as Mindanao and the Visayas since the early 1990s. We carefully
inspected the evidence consisting of three hundred seventy one (371) invoices and
shipment documents which show that VESPA air compressors were sold not only in
Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City,
Cagayan de Oro City, Davao City to name a few. There is no doubt that it is through
private respondents efforts that the mark VESPA used on air compressors has gained
business goodwill and reputation in the Philippines for which it has validly acquired
trademark rights. Respondent EY Industrials right has been preserved until the passage of
RA 8293 which entitles it to register the same. x x x[38]

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its
decision. More importantly, Shen Dar failed to present sufficient evidence to prove its
own prior use of the mark VESPA. We cite with approval the ruling of the BLA:
[Shen Dar] avers that it is the true and rightful owner of the trademark VESPA
used on air compressors. The thrust of [Shen Dars] argument is that respondent E.Y.
Industrial Sales, Inc. is a mere distributor of the VESPA air compressors. We disagree.
This conclusion is belied by the evidence. We have gone over each and every
document attached as Annexes A, A 1-48 which consist of Bill of Lading and Packing
Weight List. Not one of these documents referred to a VESPA air compressor. Instead, it
simply describes the goods plainly as air compressors which is type SD and not
VESPA. More importantly, the earliest date reflected on the Bill of Lading was on May
5, 1997. (Annex A-1). [Shen Dar] also attached as Annex B a purported Sales
Contract with respondent EY Industrial Sales dated April 20, 2002. Surprisingly, nowhere
in the document does it state that respondent EY Industrial agreed to sell VESPA air
compressors. The document only mentions air compressors which if genuine merely
bolsters respondent Engracio Yaps contention that [Shen Dar] approached them if it could
sell the Shen Dar or SD air compressor. (Exhibit 386) In its position paper, [Shen
Dar] merely mentions of Bill of Lading constituting respondent as consignee in 1993 but
never submitted the same for consideration of this Bureau. The document is also not signed
by [Shen Dar]. The agreement was not even drafted in the letterhead of either [Shen Dar]
nor [sic] respondent registrant. Our only conclusion is that [Shen Dar] was not able to
prove to be the owner of the VESPA mark by appropriation. Neither was it able to prove
actual commercial use in the Philippines of the mark VESPA prior to its filing of a
trademark application in 9 June 1997.[39]

As such, EYIS must be considered as the prior and continuous user of the mark
VESPA and its true owner. Hence, EYIS is entitled to the registration of the mark in its
name.
WHEREFORE, the petition is hereby GRANTED. The CAs February 21, 2008
Decision
and
October
6,
2008
Resolution
in
CA-G.R.
SP
No.
99356 are herebyREVERSED and SET ASIDE. The Decision dated May 25, 2007
issued by the IPO Director General in Inter Partes Case No. 14-2004-00084 and the
Decision dated May 29, 2006 of the BLA Director of the IPO are hereby REINSTATED.
No costs.
SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

Republic of the Philippines

Supreme Court
Baguio City
SECOND DIVISION
SUPERIOR COMMERCIAL
ENTERPRISES, INC.,
Petitioner,
-

versus -

KUNNAN ENTERPRISES LTD.

AND SPORTS CONCEPT &
DISTRIBUTOR, INC.,
Respondents.

G.R. No. 169974

Present:
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
Promulgated:
April 20, 2010

x-----------------------------------------------------------------------------------------x
DECISION
BRION, J.:
We review in this petition for review on certiorari[1] the (1) decision[2] of the Court
of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial
Court of Quezon City, Branch 85 (RTC),[3] and dismissed the petitioner Superior
Commercial Enterprises, Inc.s (SUPERIOR) complaint for trademark infringement and
unfair competition (with prayer for preliminary injunction) against the respondents
Kunnan Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS
CONCEPT); and (2) the CA resolution[4] that denied SUPERIORs subsequent motion for
reconsideration. The RTC decision that the CA reversed found the respondents liable for
trademark infringement and unfair competition, and ordered them to pay
SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorneys fees, and costs of the
suit.
THE FACTUAL ANTECEDENTS
On February 23, 1993, SUPERIOR[5] filed a complaint for trademark infringement
and unfair competition with preliminary injunction against KUNNAN [6] and SPORTS
CONCEPT[7] with the RTC, docketed as Civil Case No. Q-93014888.
In support of its complaint, SUPERIOR first claimed to be the owner of the
trademarks, trading styles, company names and business names[8] KENNEX,

[9]

KENNEX & DEVICE,[10] PRO KENNEX[11] and PRO-KENNEX (disputed

trademarks).[12] Second, it also asserted its prior use of these trademarks, presenting as
evidence of ownership the Principal and Supplemental Registrations of these trademarks in
its name. Third, SUPERIOR also alleged that it extensively sold and advertised sporting
goods and products covered by its trademark registrations. Finally, SUPERIOR presented
as evidence of its ownership of the disputed trademarks the preambular clause of the
Distributorship Agreement dated October 1, 1982 (Distributorship Agreement) it executed
with KUNNAN, which states:
Whereas, KUNNAN intends to acquire the ownership of KENNEX
trademark registered by the [sic] Superior in the Philippines. Whereas, the
[sic] Superior is desirous of having been appointed [sic] as the sole distributor by
KUNNAN in the territory of the Philippines. [Emphasis supplied.][13]

In its defense, KUNNAN disputed SUPERIORs claim of ownership and maintained

that SUPERIOR as mere distributor from October 6, 1982 until December 31, 1991
fraudulently registered the trademarks in its name. KUNNAN alleged that it was
incorporated in 1972, under the name KENNEX Sports Corporation for the purpose of
manufacturing and selling sportswear and sports equipment; it commercially marketed its
products in different countries, including the Philippines since 1972.[14] It created and first
used PRO KENNEX, derived from its original corporate name, as a distinctive
trademark for its products in 1976. KUNNAN also alleged that it registered the PRO
KENNEX trademark not only in the Philippines but also in 31 other countries, and widely
promoted the KENNEX and PRO KENNEX trademarks through worldwide
advertisements in print media and sponsorships of known tennis players.
On October 1, 1982, after the expiration of its initial distributorship agreement with
another company,[15] KUNNAN appointed SUPERIOR as its exclusive distributor in
the Philippines under a Distributorship Agreement whose pertinent provisions state:[16]
Whereas, KUNNAN intends to acquire ownership of KENNEX trademark
registered by the Superior in the Philippines. Whereas, the Superior is
desirous of having been appointed [sic] as the sole distributor by KUNNAN
in the territory of the Philippines.
Now, therefore, the parties hereto agree as follows:
1. KUNNAN in accordance with this Agreement, will appoint the sole
distributorship right to Superior in the Philippines, and this Agreement
could be renewed with the consent of both parties upon the time of
expiration.
2. The Superior, in accordance with this Agreement, shall assign the
ownership of KENNEX trademark, under the registration of Patent
Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic]
of its ten (10) years contract of distributorship, and it is required that the
ownership of the said trademark shall be genuine, complete as a whole and
without any defects.

3. KUNNAN will guarantee to the Superior that no other third parties will be
permitted to supply the KENNEX PRODUCTS in the Philippines except
only to the Superior. If KUNNAN violates this stipulation, the transfer of the
KENNEX trademark shall be null and void.
4. If there is a necessity, the Superior will be appointed, for the protection of
interest of both parties, as the agent in the Philippines with full power to
exercise and granted the power of attorney, to pursue any case of Pirating,
Infringement and Counterfeiting the [sic] KENNEX trade mark in the
Philippine territory.
5. The Superior will be granted from [sic] KUNNANs approval before making
and selling any KENNEX products made in the Philippines and the other
countries, and if this is the situation, KUNNAN is entitled to have a royalty
of 5%-8% of FOB as the right.
6. Without KUNNANs permission, the Superior cannot procure other goods
supply under KENNEX brand of which are not available to supply [sic] by
KUNNAN. However, in connection with the sporting goods, it is permitted
that the Superior can procure them under KENNEX brand of which are not
available to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that SUPERIOR was obligated to assign
the ownership of the KENNEX trademark to KUNNAN, the latter claimed that the
Certificate of Registration for the KENNEX trademark remained with SUPERIOR because
Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIORs President and General
Manager, misled KUNNANs officers into believing that KUNNAN was not qualified to
hold the same due to the many requirements set by the Philippine Patent Office that
KUNNAN could not meet.[17] KUNNAN further asserted that SUPERIOR deceived it
into assigning its applications for registration of the PRO KENNEX trademark in favor
of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent
provisions state:[18]
1.
In consideration of the distributorship relationship between KUNNAN
and Superior, KUNNAN, who is the seller in the distributorship
relationship, agrees to assign the following trademark applications owned by
itself in the Philippines to Superior who is the buyer in the distributorship
relationship.
Trademark
PROKENNEX
PROKENNEX
PROKENNEX

Application Number
49999
49998
49997

Class
28
25
18

2.
Superior shall acknowledge that KUNNAN is still the real and
truthful owner of the abovementioned trademarks, and shall agree that it
will not use the right of the abovementioned trademarks to do anything
which is unfavourable or harmful to KUNNAN.

3.
Superior agrees that it will return back the abovementioned
trademarks to KUNNAN without hesitation at the request of KUNNAN at
any time. KUNNAN agrees that the cost for the concerned assignment of the
abovementioned trademarks shall be compensated by KUNNAN.
4.
Superior agrees that the abovementioned trademarks when requested by
KUNNAN shall be clean and without any incumbency.
5.
Superior agrees that after the assignment of the abovementioned
trademarks, it shall have no right to reassign or license the said trademarks to
any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair competition
case before the RTC, KUNNAN filed with the now defunct Bureau of Patents,
Trademarks and Technology Transfer [19] separate Petitions for the Cancellation of
Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed
as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition
to Application Serial Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101
and 4102 (Consolidated Petitions for Cancellation) involving the KENNEX and PRO
KENNEX trademarks.[20] In essence, KUNNAN filed the Petition for Cancellation and
Opposition on the ground that SUPERIOR fraudulently registered and appropriated the
disputed trademarks; as mere distributor and not as lawful owner, it obtained the
registrations and assignments of the disputed trademarks in violation of the terms of the
Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended.
[21]

On December 3, 1991, upon the termination of its distributorship agreement

with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new
distributor. Subsequently, KUNNAN also caused the publication of a Notice and Warning
in the Manila Bulletins January 29, 1993 issue, stating that (1) it is the owner of the
disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and
(3) it appointed SPORTS CONCEPT as its exclusive distributor. This notice
promptedSUPERIOR to file its Complaint for Infringement of Trademark and Unfair
Competition with Preliminary Injunction against KUNNAN.[22]
The RTC Ruling
On March 31, 1998, the RTC issued its decision [23] holding KUNNAN liable for
trademark infringement and unfair competition. The RTC also issued a writ of preliminary
injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed
trademarks.
The RTC found that SUPERIOR sufficiently proved that it was the first user and
owner of the disputed trademarks in the Philippines, based on the findings of the Director
of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was rightfully entitled
to register the mark KENNEX as user and owner thereof. It also considered the

Whereas clause of the Distributorship Agreement, which categorically stated that

KUNNAN intends to acquire ownership of [the] KENNEX trademark registered
bySUPERIOR in the Philippines. According to the RTC, this clause amounts to
KUNNANs express recognition of SUPERIORs ownership of the KENNEX trademarks.
[24]

KUNNAN and SPORTS CONCEPT appealed the RTCs decision to the CA where
the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained
thatSUPERIOR was merely its distributor and could not be the owner of the disputed
trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and
numerous valid registrations.

Intervening Developments:
The IPO and CA Rulings
In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a
Manifestation and Motion praying that the decision of the Bureau of Legal Affairs
(BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the
Consolidated Petitions for Cancellation be made of record and be considered by the
CA in resolving the case.[25] The BLA ruled in this decision
In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and
convincingly established its rights to the mark PRO KENNEX. It was proven
that actual use by Respondent-Registrant is not in the concept of an owner but as
a mere distributor (Exhibits I, S to S-1, P and P-1 and Q and Q-2)
and as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50
SCRA 406, a mere distributor of a product bearing a trademark, even if
permitted to use said trademark has no right to and cannot register the said
trademark.
WHEREFORE, there being sufficient evidence to prove that the
Petitioner-Opposer (KUNNAN) is the prior user and owner of the

trademark PRO-KENNEX, the consolidated Petitions for Cancellation and

the Notices of Opposition are hereby GRANTED. Consequently, the
trademark PRO-KENNEX bearing Registration Nos. 41032, 40326, 39254,
4730, 49998 for the mark PRO-KENNEX issued in favor of Superior
Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal
Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark
application Nos. 84565 and 84566, likewise for the registration of the mark
PRO-KENNEX are hereby REJECTED.
Let the file wrappers of PRO-KENNEX subject matter of these cases be
forwarded to the Administrative Finance and Human Resources Development
Services Bureau (AFHRDSB) for appropriate action in accordance with this
Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for
information and update of its record.[26]

On February 4, 2005, KUNNAN again filed another Manifestation requesting that

the IPO Director Generals decision on appeal dated December 8, 2004,
denyingSUPERIORs appeal, be given weight in the disposition of the case. [27] The
dispositive portion of the decision reads:[28]
WHEREFORE, premises considered, there is no cogent reason to disturb
Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the
Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the
appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director Generals
ruling before the Court of Appeals on a petition for review under Rule 43 of the Rules of
Court, docketed as CAG.R. SP No. 87928 (Registration Cancellation Case). On August
30, 2007, the CA rendered its decision dismissing SUPERIORs petition.[29] On December
3, 2007, the CA decision was declared final and executory and entry of judgment was
accordingly made. Hence, SUPERIORs registration of the disputed trademarks now
stands effectively cancelled.
The CA Ruling
On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing
and setting aside the RTCs decision of March 31, 1998. [30] It dismissed SUPERIORs
Complaint for Infringement of Trademark and Unfair Competition with Preliminary
Injunction on the ground that SUPERIOR failed to establish by preponderance of evidence
its claim of ownership over the KENNEX and PRO KENNEX trademarks. The CA found
the Certificates of Principal and Supplemental Registrations and the whereas clause of
the Distributorship Agreement insufficient to support SUPERIORs claim of ownership
over the disputed trademarks.
The CA stressed that SUPERIORs possession of the aforementioned Certificates of
Principal Registration does not conclusively establish its ownership of the disputed
trademarks as dominion over trademarks is not acquired by the fact of registration alone;
[31]
at best, registration merely raises a presumption of ownership that can be rebutted by

contrary evidence.[32] The CA further emphasized that the Certificates of Supplemental

Registration issued in SUPERIORs name do not even enjoy the presumption of ownership
accorded to registration in the principal register; it does not amount to a prima
facie evidence of the validity of registration or of the registrants exclusive right to use the
trademarks in connection with the goods, business, or services specified in the certificate.
[33]

In contrast with the failure of SUPERIORs evidence, the CA found that KUNNAN
presented sufficient evidence to rebut SUPERIORs presumption of ownership over the
trademarks. KUNNAN established that SUPERIOR, far from being the rightful owner of
the disputed trademarks, was merely KUNNANs exclusive distributor. This conclusion
was based on three pieces of evidence that, to the CA, clearly established
that SUPERIOR had no proprietary interest over the disputed trademarks.
First, the CA found that the Distributorship Agreement, considered in its entirety,
positively confirmed that SUPERIOR sought to be the KUNNANs exclusive
distributor. The CA based this conclusion on the following provisions of the
Distributorship Agreement:
(1) that SUPERIOR was desirous of [being] appointed as the sole distributor by
KUNNAN in the territory of the Philippines;
(2) that KUNNAN will appoint the sole distributorship right to Superior in
the Philippines; and
(3) that no third parties will be permitted to supply KENNEX PRODUCTS in
the Philippines except only to Superior.

The CA thus emphasized that the RTC erred in unduly relying on the first whereas
clause, which states that KUNNAN intends to acquire ownership of [the] KENNEX
trademark registered by SUPERIOR in the Philippines without considering the entirety of
the Distributorship Agreement indicating that SUPERIOR had been merely appointed by
KUNNAN as its distributor.
Second, the CA also noted that SUPERIOR made the express undertaking in the
Assignment Agreement to acknowledge that KUNNAN is still the real and truthful owner
of the [PRO KENNEX] trademarks, and that it shall agree that it will not use the right of
the abovementioned trademarks to do anything which is unfavourable or harmful to
KUNNAN. To the CA, these provisions are clearly inconsistent with SUPERIORs claim
of ownership of the disputed trademarks. The CA also observed that although the
Assignment Agreement was a private document, its authenticity and due execution was
proven by the similarity of Mr. Tan Bon Diongs signature in the Distributorship
Agreement and the Assignment Agreement.
Third, the CA also took note of SUPERIORs Letter dated November 12, 1986
addressed to Brig. Gen. Jose Almonte, identifying itself as the sole and exclusive licensee
and distributor in the Philippines of all its KENNEX and PRO-KENNEX

products. Attached to the letter was an agreement with KUNNAN, identifying the latter
as the foreign manufacturer of all KENNEX products. The CA concluded that in this
letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN,
and even in its transactions with third persons.
Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and
had no right to the registration of the disputed trademarks since the right to register a
trademark is based on ownership. Citing Section 4 of Republic Act No. 166 [34] and
established jurisprudence,[35] the CA held that SUPERIOR as an exclusive distributor
did not acquire any proprietary interest in the principals (KUNNANs) trademark.
The CA denied SUPERIORs motion for reconsideration for lack of merit in its
Resolution dated October 4, 2005.
THE PETITION
In the present petition, SUPERIOR raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL
OWNER OF THE TRADEMARKS KENNEX AND PRO-KENNEX IN
THE PHILIPPINES
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN
HOLDING
THAT PETITIONER SUPERIOR IS
A MERE
DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN REVERSING AND SETTING ASIDE THE DECISION OF THE
REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q93-14888, LIFTING THE PRELIMINARY INJUNCTION ISSUED
AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT AND
DISMISSING THE COMPLAINT FOR INFRINGEMENT OF
TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY
INJUNCTION

THE COURTS RULING

We do not find the petition meritorious.
On the Issue of Trademark Infringement

We first consider the effect of the final and executory decision in the Registration
Cancellation Case on the present case. This decision - rendered after the CA decision for
trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the
present case) - states:
As to whether respondent Kunnan was able to overcome the presumption
of ownership in favor of Superior, the former sufficiently established the
fraudulent registration of the questioned trademarks by Superior. The
Certificates of Registration No. SR-4730 (Supplemental Register) and 33487
(Principal Register) for the KENNEX trademark were fraudulently obtained by
petitioner Superior. Even before PROKENNEX products were imported
by Superior into the Philippines, the same already enjoyed popularity in various
countries and had been distributed worldwide, particularly among the sports and
tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the
registration thereof in the Philippines under its name when it knew fully well that
it did not own nor did it manufacture the PROKENNEX
products. Superior claimed ownership of the subject marks and failed to disclose
in its application with the IPO that it was merely a distributor of KENNEX and
PROKENNEX products in the Philippines.
While Superior accepted the obligation to assign Certificates of
Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the
appointment by the latter as its exclusive distributor, Superior however breached
its obligation and failed to assign the same to Kunnan. In a letter dated 13
February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan
that the latter cannot own trademarks in the Philippines. Thus, Kunnan was
misled into assigning to Superior its (Kunnans) own application for the disputed
trademarks. In the same assignment document, however. Superior was bound to
ensure that the PROKENNEX trademarks under Registration Nos. 40326,
39254, and 49998 shall be returned to Kunnan clean and without any
incumbency when requested by the latter.
In fine, We see no error in the decision of the Director General of the IPO
which affirmed the decision of the Director of the Bureau of Legal Affairs
canceling the registration of the questioned marks in the name of petitioner
Superior and denying its new application for registration, upon a finding that
Superior is not the rightful owner of the subject marks.
WHEREFORE, the foregoing considered, the petition is DISMISSED.
The CA decided that the registration of the KENNEX and PRO KENNEX
trademarks should be cancelled because SUPERIOR was not the owner of, and could
not in the first place have validly registered these trademarks. Thus, as of the finality
of the CA decision on December 3, 2007, these trademark registrations were effectively
cancelled and SUPERIOR was no longer the registrant of the disputed trademarks.

Section 22 of Republic Act No. 166, as amended (RA 166), [36] the law applicable
to this case, defines trademark infringement as follows:
Section 22.
Infringement, what
[1] shall use, without the consent

constitutes. Any person who

of the registrant, any reproduction,

counterfeit, copy or colorable imitation of anyregistered mark or trade-name 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 [2] reproduce, counterfeit,
copy, or colorably imitateany such mark or trade-name and apply such
reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be usedupon 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. [Emphasis
supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for
infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred
upon the registrant under the provisions of RA 166[37] terminates when the judgment or
order of cancellation has become final, viz:
Section 19. Cancellation of registration. - If the Director finds that a case for cancellation
has been made out he shall order the cancellation of the registration. The order shall not
become effective until the period for appeal has elapsed, or if appeal is taken, until the
judgment on appeal becomes final. When the order or judgment becomes final, any
right conferred by such registration upon the registrant or any person in interest of
record shall terminate. Notice of cancellation shall be published in the Official Gazette.
[Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark

has the effect of depriving the registrant of protection from infringement from the moment
judgment or order of cancellation has become final.[38]
In the present case, by operation of law, specifically Section 19 of RA 166, the
trademark infringement aspect of SUPERIORs case has been rendered moot and
academic in view of the finality of the decision in the Registration Cancellation Case. In
short, SUPERIOR is left without any cause of action for trademark infringement since the
cancellation of registration of a trademark deprived it of protection from infringement
from the moment judgment or order of cancellation became final. To be sure, in a
trademark infringement, title to the trademark is indispensable to a valid cause of action
and such title is shown by its certificate of registration. [39] With its certificates of
registration
over
the
disputed
trademarks
effectively
cancelled
with
finality, SUPERIORs case for trademark infringement lost its legal basis and no longer
presented a valid cause of action.
Even assuming that SUPERIORs case for trademark infringement had not been
rendered moot and academic, there can be no infringement committed by KUNNAN who
was adjudged with finality to be the rightful owner of the disputed trademarks in the
Registration Cancellation Case. Even prior to the cancellation of the registration of the
disputed trademarks, SUPERIOR as a mere distributor and not the owner cannot assert
any protection from trademark infringement as it had no right in the first place to the
registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of

any inequitable conduct on the part of the manufacturer, an exclusive distributor who
employs the trademark of the manufacturer does not acquire proprietary rights of the
manufacturer, and a registration of the trademark by the distributor as such belongs to
the manufacturer, provided the fiduciary relationship does not terminate before
application for registration is filed.[40] Thus, the CA in the Registration Cancellation Case
correctly held:
As a mere distributor, petitioner Superior undoubtedly had no right to
register the questioned mark in its name. Well-entrenched in our jurisdiction is
the rule that the right to register a trademark should be based on
ownership. When the applicant is not the owner of the trademark being applied
for, he has no right to apply for the registration of the same. Under the
Trademark Law, only the owner of the trademark, trade name or service mark
used to distinguish his goods, business or service from the goods, business or
service of others is entitled to register the same. An exclusive distributor does
not acquire any proprietary interest in the principals trademark and cannot
register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIORs present
case for trademark infringement. The doctrine of res judicata embraces two (2)
concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47,
and the second is "conclusiveness of judgment" under paragraph (c) thereof.
In the present case, the second concept conclusiveness of judgment
applies. Under the concept of res judicata by conclusiveness of judgment, a final
judgment or decree on the merits by a court of competent jurisdiction is conclusive of the
rights of the parties or their privies in all later suits on points and matters determined in
the former suit.[41] Stated differently, facts and issues actually and directly resolved in a
former suit cannot again be raised in any future case between the same parties, even if the
latter suit may involve a different cause of action.[42] This second branch of the principle
of res judicata bars the re-litigation of particular facts or issues in another litigation
between the same parties on a different claim or cause of action.[43]
Because the Registration Cancellation Case and the present case involve the same
parties, litigating with respect to and disputing the same trademarks, we are bound to
examine how one case would affect the other. In the present case, even if the causes of
action of the Registration Cancellation Case (the cancellation of trademark registration)
differs from that of the present case (the improper or unauthorized use of trademarks), the
final judgment in the Registration Cancellation Case is nevertheless conclusive on the
particular facts and issues that are determinative of the present case.
To establish trademark infringement, the following elements must be proven: (1) the
validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use
of the mark or its colorable imitation by the alleged infringer results in likelihood of
confusion.[44]

Based on these elements, we find it immediately obvious that the second element
the plaintiffs ownership of the mark was what the Registration Cancellation
Casedecided with finality. On this element depended the validity of the registrations that,
on their own, only gave rise to the presumption of, but was not conclusive on, the issue of
ownership.[45]
In no uncertain terms, the appellate court in the Registration Cancellation Case
ruled that SUPERIOR was a mere distributor and could not have been the owner,
and was thus an invalid registrant of the disputed trademarks. Significantly, these are
the exact terms of the ruling the CA arrived at in the present petition now under our
review. Thus, whether with one or the other, the ruling on the issue of ownership of the
trademarks is the same. Given, however, the final and executory ruling in the Registration
Cancellation Case on the issue of ownership that binds us and the parties, any further
discussion and review of the issue of ownership although the current CA ruling is legally
correct and can stand on its own merits becomes a pointless academic discussion.
On the Issue of Unfair Competition
Our review of the records shows that the neither the RTC nor the CA made any
factual findings with respect to the issue of unfair competition. In its
Complaint,SUPERIOR alleged that:[46]
17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises,
Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc.
as its alleged distributor for sportswear and sporting goods bearing the trademark
PRO-KENNEX. For this reason, on January 20, 1993, the plaintiff, through
counsel, wrote the defendant Sports Concept and Distributors Inc. advising said
defendant that the trademark PRO-KENNEX was registered and owned by the
plaintiff herein.
18. The above information was affirmed by an announcement made by the
defendants in The Manila Bulletin issue of January 29, 1993, informing the
public that defendant Kunnan Enterprises, Ltd. has appointed the defendant
Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and
sporting goods and equipment bearing the trademarks KENNEX and PROKENNEX which trademarks are owned by and registered in the name of
plaintiff herein as alleged hereinabove.
x x x x
27. The acts of defendants, as previously complained herein, were designed to
and are of the nature so as to create confusion with the commercial activities of
plaintiff in the Philippines and is liable to mislead the public as to the nature and
suitability for their purposes of plaintiffs business and the defendants acts are
likely to discredit the commercial activities and future growth of plaintiffs
business.

From jurisprudence, unfair competition has been defined as the passing off (or

palming off) or attempting to pass off upon the public of the goods or business of one
person as the goods or business of another with the end and probable effect of deceiving
the public. The essential elements of unfair competition[47] are (1) confusing similarity in
the general appearance of the goods; and (2) intent to deceive the public and defraud a
competitor.[48]
Jurisprudence also formulated the following true test of unfair
competition: whether the acts of the defendant have the intent of deceiving or are
calculated to deceive the ordinary buyer making his purchases under the ordinary
conditions of the particular trade to which the controversy relates. One of the essential
requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive,
actual or probable must be shown before the right to recover can exist.[49]
In the present case, no evidence exists showing that KUNNAN ever attempted to
pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those
ofSUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to
KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any
evidence to show that KUNNAN by the above-cited acts intended to deceive the public as
to the identity of the goods sold or of the manufacturer of the goods sold. InMcDonalds
Corporation v. L.C. Big Mak Burger, Inc.,[50] we held that there can be trademark
infringement without unfair competition such as when the infringer discloses on the
labels containing the mark that he manufactures the goods, thus preventing the
public from being deceived that the goods originate from the trademark owner. In
this case, no issue of confusion arises because the same manufactured products are sold;
only the ownership of the trademarks is at issue. Furthermore, KUNNANs January 29,
1993 notice by its terms prevents the public from being deceived that the goods originated
from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of
the goods bearing the trademarks KENNEX and PRO KENNEX. This notice states in
full:[51]
NOTICE AND WARNING
Kunnan Enterprises Ltd. is the owner and first user of the internationallyrenowned trademarks KENNEX and PRO KENNEX for sportswear and sporting
goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks
KENNEX and PRO KENNEX in the industrial property offices of at least 31
countries worldwide where KUNNAN Enterprises Ltd. has been selling its
sportswear and sporting goods and equipment bearing the KENNEX and PRO
KENNEX trademarks.
Kunnan Enterprises Ltd. further informs the public that it had terminated
its Distributorship Agreement with Superior Commercial Enterprises, Inc. on
December 31, 1991. As a result,Superior Commercial Enterprises, Inc. is no
longer authorized to sell sportswear and sporting goods and equipment
manufactured by Kunnan Enterprises Ltd. and bearing the trademarks
KENNEX and PRO KENNEX.
x x x x

In its place, KUNNAN has appointed SPORTS CONCEPT AND

DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and
sporting goods and equipment bearing the trademarks KENNEX and PRO
KENNEX. The public is advised to buy sporting goods and equipment
bearing these trademarks only from SPORTS CONCEPT AND
DISTRIBUTORS, INC. to ensure that the products they are buying are
manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.]

Finally, with the established ruling that KUNNAN is the rightful owner of the
trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN
under trademarks registered in SUPERIORs name, the latter is left with no effective right
to make a claim. In other words, with the CAs final ruling in the Registration
Cancellation Case, SUPERIORs case no longer presents a valid cause of action. For this
reason, the unfair competition aspect of the SUPERIORs case likewise falls.
WHEREFORE, premises considered, we DENY Superior Commercial Enterprises,
Inc.s petition for review on certiorari for lack of merit. Cost against petitionerSuperior
Commercial Enterprises, Inc.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 194307

November 20, 2013

BIRKENSTOCK ORTHOPAEDIE GMBH AND CO. KG (formerly BIRKENSTOCK ORTHOPAEDIE

GMBH),Petitioner,
vs.
PHILIPPINE SHOE EXPO MARKETING CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari are the Court of Appeals (CA) Decision dated June 25, 2010
and Resolution dated October 27, 2010 in CA-G.R. SP No. 112278 which reversed and set aside the
Intellectual Property Office (IPO) Director Generals Decision dated December 22, 2009 that allowed the
registration of various trademarks in favor of petitioner Birkenstock Orthopaedie GmbH & Co. KG.
1

The Facts

Petitioner, a corporation duly organized and existing under the laws of Germany, applied for various
trademark registrations before the IPO, namely: (a) "BIRKENSTOCK" under Trademark Application Serial No.
(TASN) 4-1994-091508 for goods falling under Class 25 of the International Classification of Goods and
Services (Nice Classification) with filing date of March 11, 1994; (b) "BIRKENSTOCK BAD HONNEF -RHEIN
& DEVICE COMPRISING OF ROUND COMPANY SEAL AND REPRESENTATION OF A FOOT, CROSS AND
SUNBEA M" under TASN 4-1994-091509 for goods falling under Class 25 of the Nice Classification with filing
date of March 11, 1994; and (c) "BIRKENSTOCK BAD HONNEF-RHEIN & DEVICE COMPRISING OF
ROUND COMPANY SEAL AND REPRESENTATION OF A FOOT, CROSS AND SUNBEAM" under TASN 41994-095043 for goods falling under Class 10 of the Nice Classification with filing date of September 5, 1994
(subject applications).
5

However, registration proceedings of the subject applications were suspended in view of an existing
registration of the mark "BIRKENSTOCK AND DEVICE" under Registration No. 56334 dated October 21,
1993 (Registration No. 56334) in the name of Shoe Town International and Industrial Corporation, the
predecessor-in-interest of respondent Philippine Shoe Expo Marketing Corporation. In this regard, on May
27, 1997 petitioner filed a petition for cancellation of Registration No. 56334 on the ground that it is the lawful
and rightful owner of the Birkenstock marks (Cancellation Case). During its pendency, however, respondent
and/or its predecessor-in-interest failed to file the required 10th Year Declaration of Actual Use (10th Year
DAU) for Registration No. 56334 on or before October 21, 2004, thereby resulting in the cancellation of such
mark. Accordingly, the cancellation case was dismissed for being moot and academic.
6

10

The aforesaid cancellation of Registration No. 56334 paved the way for the publication of the subject
applications in the IPO e-Gazette on February 2, 2007. In response, respondent filed three (3) separate
verified notices of oppositions to the subject applications docketed as Inter Partes Case Nos. 14-2007-00108,
14-2007-00115, and 14-2007-00116, claiming, inter alia, that: (a) it, together with its predecessor-in-interest,
has been using Birkenstock marks in the Philippines for more than 16 years through the mark
"BIRKENSTOCK AND DEVICE"; (b) the marks covered by the subject applications are identical to the one
covered by Registration No. 56334 and thus, petitioner has no right to the registration of such marks; (c) on
November 15, 1991, respondents predecessor-in-interest likewise obtained a Certificate of Copyright
Registration No. 0-11193 for the word "BIRKENSTOCK" ; (d) while respondent and its predecessor-in-interest
failed to file the 10th Yea r DAU, it continued the use of "BIRKENSTOCK AND DEVICE" in lawful commerce;
11

12

and (e) to record its continued ownership and exclusive right to use the "BIRKENSTOCK" marks, it has filed
TASN 4-2006-010273 as a " re-application " of its old registration, Registration No. 56334. On November 13,
2007, the Bureau of Legal Affairs (BLA) of the IPO issued Order No. 2007-2051 consolidating the aforesaid
inter partes cases (Consolidated Opposition Cases).
13

14

The Ruling of the BLA

In its Decision dated May 28, 2008, the BLA of the IPO sustained respondents opposition, thus, ordering the
rejection of the subject applications. It ruled that the competing marks of the parties are confusingly similar
since they contained the word "BIRKENSTOCK" and are used on the same and related goods. It found
respondent and its predecessor-in-interest as the prior user and adopter of "BIRKENSTOCK" in the
Philippines, while on the other hand, petitioner failed to present evidence of actual use in the trade and
business in this country. It opined that while Registration No. 56334 was cancelled, it does not follow that prior
right over the mark was lost, as proof of continuous and uninterrupted use in trade and business in the
Philippines was presented. The BLA likewise opined that petitioners marks are not well -known in the
Philippines and internationally and that the various certificates of registration submitted by petitioners were all
photocopies and, therefore, not admissible as evidence.
15

16

Aggrieved, petitioner appealed to the IPO Director General.

The Ruling of the IPO Director General

In his Decision dated December 22, 2009, the IPO Director General reversed and set aside the ruling of the
BLA, thus allowing the registration of the subject applications. He held that with the cancellation of
Registration No. 56334 for respondents failure to file the 10th Year DAU, there is no more reason to reject the
subject applications on the ground of prior registration by another proprietor. More importantly, he found that
the evidence presented proved that petitioner is the true and lawful owner and prior user of "BIRKENSTOCK"
marks and thus, entitled to the registration of the marks covered by the subject applications. The IPO
Director General further held that respondents copyright for the word "BIRKENSTOCK" is of no moment since
copyright and trademark are different forms of intellectual property that cannot be interchanged.
17

18

19

20

Finding the IPO Director Generals reversal of the BLA unacceptable, respondent filed a petition for review
with the CA.

Ruling of the CA

In its Decision dated June 25, 2010, the CA reversed and set aside the ruling of the IPO Director General
and reinstated that of the BLA. It disallowed the registration of the subject applications on the ground that the
marks covered by such applications "are confusingly similar, if not outright identical" with respondents
mark. It equally held that respondents failure to file the 10th Year DAU for Registration No. 56334 "did not
deprive petitioner of its ownership of the BIRKENSTOCK mark since it has submitted substantial evidence
showing its continued use, promotion and advertisement thereof up to the present." It opined that when
respondents predecessor-in-interest adopted and started its actual use of "BIRKENSTOCK," there is neither
an existing registration nor a pending application for the same and thus, it cannot be said that it acted in bad
faith in adopting and starting the use of such mark. Finally, the CA agreed with respondent that petitioners
documentary evidence, being mere photocopies, were submitted in violation of Section 8.1 of Office Order
No. 79, Series of 2005 (Rules on Inter Partes Proceedings).
21

22

23

24

Dissatisfied, petitioner filed a Motion for Reconsideration dated July 20, 2010, which was, however, denied in
a Resolution dated October 27, 2010. Hence, this petition.
25

26

27

Issues Before the Court

The primordial issue raised for the Courts resolution is whether or not the subject marks should be allowed
registration in the name of petitioner.

The Courts Ruling

The petition is meritorious.

A. Admissibility of Petitioners Documentary Evidence.

In its Comment dated April 29, 2011, respondent asserts that the documentary evidence submitted by
petitioner in the Consolidated Opposition Cases, which are mere photocopies, are violative of Section 8.1 of
the Rules on Inter Partes Proceedings, which requires certified true copies of documents and evidence
presented by parties in lieu of originals. As such, they should be deemed inadmissible.
28

29

The Court is not convinced.

It is well-settled that "the rules of procedure are mere tools aimed at facilitating the attainment of justice, rather
than its frustration. A strict and rigid application of the rules must always be eschewed when it would subvert
the primary objective of the rules, that is, to enhance fair trials and expedite justice. Technicalities should
never be used to defeat the substantive rights of the other party. Every party-litigant must be afforded the
amplest opportunity for the proper and just determination of his cause, free from the constraints of
technicalities." "Indeed, the primordial policy is a faithful observance of [procedural rules], and their relaxation
or suspension should only be for persuasive reasons and only in meritorious cases, to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure
prescribed." This is especially true with quasi-judicial and administrative bodies, such as the IPO, which are
not bound by technical rules of procedure. On this score, Section 5 of the Rules on Inter Partes Proceedings
provides:
30

31

32

Sec. 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases. The rules of
procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases. The Rules of Court
may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure and
evidence but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is
consistent with the requirements of fair play and conducive to the just, speedy and inexpensive disposition of
cases, and which will give the Bureau the greatest possibility to focus on the contentious issues before it.
(Emphasis and underscoring supplied)

In the case at bar, while petitioner submitted mere photocopies as documentary evidence in the Consolidated
Opposition Cases, it should be noted that the IPO had already obtained the originals of such documentary
evidence in the related Cancellation Case earlier filed before it. Under this circumstance and the merits of the
instant case as will be subsequently discussed, the Court holds that the IPO Director Generals relaxation of
procedure was a valid exercise of his discretion in the interest of substantial justice.
33

Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive issues.

B. Registration and ownership of "BIRKENSTOCK."

Republic Act No. (RA) 166, the governing law for Registration No. 56334, requires the filing of a DAU on
specified periods, to wit:
34

35

Section 12. Duration. Each certificate of registration shall remain in force for twenty years: Provided, That
registrations under the provisions of this Act shall be cancelled by the Director, unless within one year
following the fifth, tenth and fifteenth anniversaries of the date of issue of the certificate of registration, the

registrant shall file in the Patent Office an affidavit showing that the mark or trade-name is still in use or
showing that its non-use is due to special circumstance which excuse such non-use and is not due to any
intention to abandon the same, and pay the required fee.

The Director shall notify the registrant who files the above- prescribed affidavits of his acceptance or refusal
thereof and, if a refusal, the reasons therefor. (Emphasis and underscoring supplied)

The aforementioned provision clearly reveals that failure to file the DAU within the requisite period results in
the automatic cancellation of registration of a trademark. In turn, such failure is tantamount to the
abandonment or withdrawal of any right or interest the registrant has over his trademark.
36

In this case, respondent admitted that it failed to file the 10th Year DAU for Registration No. 56334 within the
requisite period, or on or before October 21, 2004. As a consequence, it was deemed to have abandoned or
withdrawn any right or interest over the mark "BIRKENSTOCK." Neither can it invoke Section 236 of the IP
Code which pertains to intellectual property rights obtained under previous intellectual property laws, e.g., RA
166, precisely because it already lost any right or interest over the said mark.
37

Besides, petitioner has duly established its true and lawful ownership of the mark "BIRKENSTOCK."

Under Section 2 of RA 166, which is also the law governing the subject applications, in order to register a
trademark, one must be the owner thereof and must have actually used the mark in commerce in the
Philippines for two (2) months prior to the application for registration. Section 2-A of the same law sets out to
define how one goes about acquiring ownership thereof. Under the same section, it is clear that actual use in
commerce is also the test of ownership but the provision went further by saying that the mark must not have
been so appropriated by another. Significantly, to be an owner, Section 2-A does not require that the actual
use of a trademark must be within the Philippines. Thus, under RA 166, one may be an owner of a mark due
to its actual use but may not yet have the right to register such ownership here due to the owners failure to
use the same in the Philippines for two (2) months prior to registration.
38

39

40

It must be emphasized that registration of a trademark, by itself, is not a mode of acquiring ownership. If the
applicant is not the owner of the trademark, he has no right to apply for its registration. Registration merely
creates a prima facie presumption of the validity of the registration, of the registrants ownership of the
trademark, and of the exclusive right to the use thereof. Such presumption, just like the presumptive regularity
in the performance of official functions, is rebuttable and must give way to evidence to the contrary.
1wphi1

41

Clearly, it is not the application or registration of a trademark that vests ownership thereof, but it is the
ownership of a trademark that confers the right to register the same. A trademark is an industrial property over
which its owner is entitled to property rights which cannot be appropriated by unscrupulous entities that, in
one way or another, happen to register such trademark ahead of its true and lawful owner. The presumption of
ownership accorded to a registrant must then necessarily yield to superior evidence of actual and real
ownership of a trademark.

The Courts pronouncement in Berris Agricultural Co., Inc. v. Abyadang is instructive on this point:
42

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or
distributor of the goods made available to the purchasing public. x x x A certificate of registration of a mark,
once issued, constitutes prima facie evidence of the validity of the registration, of the registrants ownership of
the mark, and of the registrants exclusive right to use the same in connection with the goods or services and
those that are related thereto specified in the certificate. x x x In other words, the prima facie presumption
brought about by the registration of a mark may be challenged and overcome in an appropriate action, x x x
by evidence of prior use by another person, i.e. , it will controvert a claim of legal appropriation or of
ownership based on registration by a subsequent user. This is because a trademark is a creation of use and
belongs to one who first used it in trade or commerce. (Emphasis and underscoring supplied)
43

In the instant case, petitioner was able to establish that it is the owner of the mark "BIRKENSTOCK." It

submitted evidence relating to the origin and history of "BIRKENSTOCK" and its use in commerce long before
respondent was able to register the same here in the Philippines. It has sufficiently proven that
"BIRKENSTOCK" was first adopted in Europe in 1774 by its inventor, Johann Birkenstock, a shoemaker, on
his line of quality footwear and thereafter, numerous generations of his kin continuously engaged in the
manufacture and sale of shoes and sandals bearing the mark "BIRKENSTOCK" until it became the entity now
known as the petitioner. Petitioner also submitted various certificates of registration of the mark
"BIRKENSTOCK" in various countries and that it has used such mark in different countries worldwide,
including the Philippines.
44

On the other hand, aside from Registration No. 56334 which had been cancelled, respondent only presented
copies of sales invoices and advertisements, which are not conclusive evidence of its claim of ownership of
the mark "BIRKENSTOCK" as these merely show the transactions made by respondent involving the same.

45

In view of the foregoing circumstances, the Court finds the petitioner to be the true and lawful owner of the
mark "BIRKENSTOCK" and entitled to its registration, and that respondent was in bad faith in having it
registered in its name. In this regard, the Court quotes with approval the words of the IPO Director General,
viz.:

The facts and evidence fail to show that [respondent] was in good faith in using and in registering the mark
BIRKENSTOCK. BIRKENSTOCK, obviously of German origin, is a highly distinct and arbitrary mark. It is very
remote that two persons did coin the same or identical marks. To come up with a highly distinct and
uncommon mark previously appropriated by another, for use in the same line of business, and without any
plausible explanation, is incredible. The field from which a person may select a trademark is practically
unlimited. As in all other cases of colorable imitations, the unanswered riddle is why, of the millions of terms
and combinations of letters and designs available, [respondent] had to come up with a mark identical or so
closely similar to the [petitioners] if there was no intent to take advantage of the goodwill generated by the
[petitioners] mark. Being on the same line of business, it is highly probable that the [respondent] knew of the
existence of BIRKENSTOCK and its use by the [petitioner], before [respondent] appropriated the same mark
and had it registered in its name.
46

WHEREFORE, the petition is GRANTED. The Decision dated June 25, 2010 and Resolution dated October
27, 2010 of the Court of Appeals in CA-G.R. SP No. 112278 are REVERSED and SET ASIDE. Accordingly,
the Decision dated December 22, 2009 of the IPO Director General is hereby REINSTATED.SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
BERRIS AGRICULTURAL
CO., INC.,
Petitioner,

- versus -

NORVY ABYADANG,
Respondent.

G.R. No. 183404

Present:
VELASCO, JR., J.,*
NACHURA,**
Acting Chairperson,
LEONARDO-DE CASTRO,***
BRION,**** and
MENDOZA, JJ.
Promulgated:
October 13, 2010

x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

This petition for review[1] on certiorari under Rule 45 of the Rules of Court seeks
the reversal of the Decision dated April 14, 2008 [2] and the Resolution dated June 18,
2008[3] of the Court of Appeals (CA) in CA-G.R. SP No. 99928.
The antecedents
On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS
Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the
Intellectual Property Office (IPO) a trademark application for the mark NS D-10 PLUS
for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The
application, under Application Serial No. 4-2004-00450, was given due course and was
published in the IPO e-Gazette for opposition on July 28, 2005.
On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business
address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs

(IPO-BLA) a Verified Notice of Opposition[4] against the mark under application allegedly
because NS D-10 PLUS is similar and/or confusingly similar to its registered trademark
D-10 80 WP, also used for Fungicide (Class 5) with active ingredient 80%
Mancozeb. The opposition was docketed as IPC No. 14-2005-00099.
After an exchange of pleadings, on April 28, 2006, Director Estrellita BeltranAbelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-24 [5] (BLA
decision), the dispositive portion of which reads
WHEREFORE, viewed in the light of all the foregoing, this Bureau finds
and so holds that Respondent-Applicants mark NS D-10 PLUS is confusingly
similar to the Opposers mark and as such, the opposition is
hereby SUSTAINED. Consequently, trademark application bearing Serial No.
4-2004-00450 for the mark NS D-10 PLUS filed on January 16, 2004 by
Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the
International Classification of goods is, as it is hereby, REJECTED.
Let the filewrapper of the trademark NS D-10 PLUS subject matter
under consideration be forwarded to the Administrative, Financial and Human
Resources Development Services Bureau (AFHRDSB) for appropriate action in
accordance with this Order with a copy to be furnished the Bureau of Trademark
(BOT) for information and to update its records.
SO ORDERED.[6]

Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition
to the motion.
On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D) [7] (BLA
resolution), denying the motion for reconsideration and disposing as follows
IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed
by the Respondent-Applicant is hereby DENIED FOR LACK OF
MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS.
Let the filewrapper of the trademark NS D-10 PLUS subject matter
under consideration be forwarded to the Bureau of Trademarks for appropriate
action in accordance with this Resolution.
SO ORDERED.[8]

Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the
Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 1406-13.
With the filing of the parties respective memoranda, Director General Adrian S.
Cristobal, Jr. of the IPPDG rendered a decision dated July 20, 2007,[9] ruling as follows

Wherefore,
premises
considered[,]
the
appeal
is
hereby
DENIED. Accordingly, the appealed Decision of the Director is hereby
AFFIRMED.
Let a copy of this Decision as well as the trademark application and
records be furnished and returned to the Director of Bureau of Legal Affairs for
appropriate action. Further, let also the Directors of the Bureau of Trademarks,
the Administrative, Financial and Human Resources Development Services
Bureau, and the library of the Documentation, Information and Technology
Transfer Bureau be furnished a copy of this Decision for information, guidance,
and records purposes.
SO ORDERED.[10]

Undeterred, Abyadang filed a petition for review[11] before the CA.

In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held
In sum, the petition should be granted due to the following reasons:
1) petitioners mark NS D-10 PLUS is not confusingly similar with
respondents trademark D-10 80 WP; 2) respondent failed to establish its
ownership of the mark D-10 80 WP and 3) respondents trademark registration
for D-10 80 WP may be cancelled in the present case to avoid multiplicity of
suits.
WHEREFORE, the petition is GRANTED. The decision dated July 20,
2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-200500099) is REVERSED and SET ASIDE, and a new one is entered giving due
course to petitioners application for registration of the mark NS D-10 PLUS,
and canceling respondents trademark registration for D-10 80 WP.
SO ORDERED.[12]

Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the
CA denied the motion for lack of merit. Hence, this petition anchored on the following
arguments
I.

The Honorable Court of Appeals finding that there exists no confusing

similarity between Petitioners and respondents marks is based on
misapprehension of facts, surmise and conjecture and not in accord with
the Intellectual Property Code and applicable Decisions of this Honorable
Court [Supreme Court].

II.

The Honorable Court of Appeals Decision reversing and setting aside the
technical findings of the Intellectual Property Office even without a
finding or, at the very least, an allegation of grave abuse of discretion on
the part of said agency is not in accord with law and earlier
pronouncements of this Honorable Court [Supreme Court].

III.

The Honorable Court of Appeals Decision ordering the cancellation of

herein Petitioners duly registered and validly existing trademark in the
absence of a properly filed Petition for Cancellation before the Intellectual
Property Office is not in accord with the Intellectual Property Code and
applicable Decisions of this Honorable Court [Supreme Court]. [13]

The basic law on trademark, infringement, and unfair competition is Republic Act
(R.A.) No. 8293[14] (Intellectual Property Code of the Philippines), specifically Sections
121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable
law was R.A. No. 166,[15] as amended.
Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166,
but merely provided in Section 239.1[16] that Acts and parts of Acts inconsistent with it
were repealed. In other words, only in the instances where a substantial and irreconcilable
conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the
provisions of the latter be deemed repealed.
R.A. No. 8293 defines a mark as any visible sign capable of distinguishing the
goods (trademark) or services (service mark) of an enterprise and shall include a stamped
or marked container of goods.[17] It also defines a collective mark as any visible sign
designated as such in the application for registration and capable of distinguishing the
origin or any other common characteristic, including the quality of goods or services of
different enterprises which use the sign under the control of the registered owner of the
collective mark.[18]
On the other hand, R.A. No. 166 defines a trademark as any distinctive word,
name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish them from those
manufactured, sold, or dealt by another.[19] A trademark, being a special property, is
afforded protection by law. But for one to enjoy this legal protection, legal protection
ownership of the trademark should rightly be established.
The ownership of a trademark is acquired by its registration and its actual use by the
manufacturer or distributor of the goods made available to the purchasing public. Section
122[20] of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its
valid registration with the IPO. A certificate of registration of a mark, once issued,
constitutes prima facie evidence of the validity of the registration, of the registrants
ownership of the mark, and of the registrants exclusive right to use the same in connection
with the goods or services and those that are related thereto specified in the certificate.
[21]
R.A. No. 8293, however, requires the applicant for registration or the registrant to file a
declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3)
years from the filing of the application for registration; otherwise, the application shall be
refused or the mark shall be removed from the register.[22] In other words, the prima
facie presumption brought about by the registration of a mark may be challenged and

overcome, in an appropriate action, by proof of the nullity of the registration or of non-use

of the mark, except when excused.[23] Moreover, the presumption may likewise be
defeated by evidence of prior use by another person, i.e., it will controvert a claim of legal
appropriation or of ownership based on registration by a subsequent user. This is because
a trademark is a creation of use and belongs to one who first used it in trade or commerce.
[24]

The determination of priority of use of a mark is a question of fact. Adoption of the

mark alone does not suffice. One may make advertisements, issue circulars, distribute
price lists on certain goods, but these alone will not inure to the claim of ownership of the
mark until the goods bearing the mark are sold to the public in the market. Accordingly,
receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers,
best prove the actual use of a mark in trade and commerce during a certain period of time.
[25]

In the instant case, both parties have submitted proof to support their claim of
ownership of their respective trademarks.
Culled from the records, Berris, as oppositor to Abyadangs application for
registration of his trademark, presented the following evidence: (1) its trademark
application dated November 29, 2002[26] with Application No. 4-2002-0010272; (2) its IPO
certificate of registration dated October 25, 2004,[27] with Registration No. 4-2002010272 and July 8, 2004 as the date of registration; (3) a photocopy of its
packaging[28] bearing the mark D-10 80 WP; (4) photocopies of its sales invoices and
official receipts;[29]and (5) its notarized DAU dated April 23, 2003,[30] stating that the mark
was first used on June 20, 2002, and indicating that, as proof of actual use, copies of
official receipts or sales invoices of goods using the mark were attached as Annex B.
On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of
the packaging[31] for his marketed fungicide bearing mark NS D-10 PLUS; (2)
Abyadangs Affidavit dated February 14, 2006,[32] stating among others that the mark NS
D-10 PLUS was his own creation derived from: N for Norvy, his name; S for Soledad,
his wifes name; D the first letter for December, his birth month; 10 for October, the
10th month of the year, the month of his business name registration; and PLUS to connote
superior quality; that when he applied for registration, there was nobody applying for a
mark similar to NS D-10 PLUS; that he did not know of the existence of Berris or any of
its products; that D-10 could not have been associated with Berris because the latter
never engaged in any commercial activity to sell D-10 80 WP fungicide in the local
market; and that he could not have copied Berris mark because he registered his
packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3)
Certification dated December 19, 2005[33] issued by the FPA, stating that NS D-10 PLUS
is owned and distributed by NS Northern Organic Fertilizer, registered with the FPA since
May 26, 2003, and had been in the market since July 30, 2003; (4) Certification dated
October 11, 2005[34] issued by the FPA, stating that, per monitoring among dealers in
Region I and in the Cordillera Administrative Region registered with its office, the
Regional Officer neither encountered the fungicide with mark D-10 80 WP nor did the
FPA provincial officers from the same area receive any report as to the presence or sale of

Berris product; (5) Certification dated March 14, 2006[35] issued by the FPA, certifying
that all pesticides must be registered with the said office pursuant to Section 9 [36] of
Presidential Decree (P.D.) No. 1144[37] and Section 1, Article II of FPA Rules and
Regulations No. 1, Series of 1977; (6) Certification dated March 16, 2006 [38] issued by the
FPA, certifying that the pesticide D-10 80 WP was registered by Berris on November 12,
2004; and (7) receipts from Sunrise Farm Supply [39] in La Trinidad, Benguet of the sale of
Abyadangs goods referred to as D-10 and D-10+.
Based on their proffered pieces of evidence, both Berris and Abyadang claim to be
the prior user of their respective marks.

We rule in favor of Berris.

Berris was able to establish that it was using its mark D-10 80 WP since June 20,
2002, even before it filed for its registration with the IPO on November 29, 2002, as
shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau
of Trademarks of the IPO on April 25, 2003, [40] and which stated that it had an attachment
as Annex B sales invoices and official receipts of goods bearing the mark. Indeed, the
DAU, being a notarized document, especially when received in due course by the IPO, is
evidence of the facts it stated and has the presumption of regularity, entitled to full faith
and credit upon its face. Thus, the burden of proof to overcome the presumption of
authenticity and due execution lies on the party contesting it, and the rebutting evidence
should be clear, strong, and convincing as to preclude all controversy as to the falsity of
the certificate.[41] What is more, the DAU is buttressed by the Certification dated April 21,
2006[42] issued by the Bureau of Trademarks that Berris mark is still valid and existing.
Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is
fraudulent based only on his assumption that Berris could not have legally used the mark
in the sale of its goods way back in June 2002 because it registered the product with the
FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on
Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because
it sold its product without prior registration with the FPA, is a distinct and separate matter
from the jurisdiction and concern of the IPO. Thus, even a determination of violation by
Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had
used the mark D-10 80 WP earlier than its FPA registration in 2004.
Furthermore, even the FPA Certification dated October 11, 2005, stating that the
office had neither encountered nor received reports about the sale of the fungicide D-10
80 WP within Region I and the Cordillera Administrative Region, could not negate the
fact that Berris was selling its product using that mark in 2002, especially considering that
it first traded its goods in Calauan, Laguna, where its business office is located, as stated in
the DAU.
Therefore, Berris, as prior user and prior registrant, is the owner of the mark D-10
80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No.

8293, which provides

Sec. 147. Rights Conferred.
147.1. The owner of a registered mark shall have the exclusive right to
prevent all third parties not having the owners consent from using in the course
of trade identical or similar signs or containers for goods or services which are
identical or similar to those in respect of which the trademark is registered where
such use would result in a likelihood of confusion. In case of the use of an
identical sign for identical goods or services, a likelihood of confusion shall be
presumed.
147.2. The exclusive right of the owner of a well-known mark defined in
Subsection 123.1(e) which is registered in the Philippines, shall extend to goods
and services which are not similar to those in respect of which the mark is
registered: Provided, That use of that mark in relation to those goods or services
would indicate a connection between those goods or services and the owner of
the registered mark: Provided, further, That the interests of the owner of the
registered mark are likely to be damaged by such use.

Now, we confront the question, Is Abyadangs mark NS D-10 PLUS confusingly

similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO
registration of the former?
We answer in the affirmative.
According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is
identical with a registered mark belonging to a different proprietor with an earlier filing or
priority date, with respect to: (1) the same goods or services; (2) closely related goods or
services; or (3) near resemblance of such mark as to likely deceive or cause confusion.
In determining similarity and likelihood of confusion, jurisprudence has developed
teststhe Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses
on the similarity of the prevalent or dominant features of the competing trademarks that
might cause confusion, mistake, and deception in the mind of the purchasing
public. Duplication or imitation is not necessary; neither is it required that the mark
sought to be registered suggests an effort to imitate. Given more consideration are the
aural and visual impressions created by the marks on the buyers of goods, giving little
weight to factors like prices, quality, sales outlets, and market segments.[43]
In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of
the marks as applied to the products, including the labels and packaging, in determining
confusing similarity. The discerning eye of the observer must focus not only on the
predominant words but also on the other features appearing on both labels so that the
observer may draw conclusion on whether one is confusingly similar to the other.[44]
Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS,
as appearing on their respective packages, one cannot but notice that both have a common

component which is D-10. On Berris package, the D-10 is written with a bigger font
than the 80 WP. Admittedly, the D-10 is the dominant feature of the mark. The D10, being at the beginning of the mark, is what is most remembered of it. Although, it
appears in Berris certificate of registration in the same font size as the 80 WP, its
dominancy in the D-10 80 WP mark stands since the difference in the form does not
alter its distinctive character.[45]
Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D-10
PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to
occur. Undeniably, both marks pertain to the same type of goods fungicide with 80%
Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables,
and ornamental plants, using the same dosage and manner of application. They also
belong to the same classification of goods under R.A. No. 8293. Both depictions of D10, as found in both marks, are similar in size, such that this portion is what catches the
eye of the purchaser. Undeniably, the likelihood of confusion is present.
This likelihood of confusion and mistake is made more manifest when the Holistic
Test is applied, taking into consideration the packaging, for both use the same type of
material (foil type) and have identical color schemes (red, green, and white); and the
marks are both predominantly red in color, with the same phrase BROAD SPECTRUM
FUNGICIDE written underneath.
Considering these striking similarities, predominantly the D-10, the buyers of
both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could
be an upgraded formulation of the D-10 80 WP.
Moreover, notwithstanding the finding of the IPPDG that the D-10 is a fanciful
component of the trademark, created for the sole purpose of functioning as a trademark,
and does not give the name, quality, or description of the product for which it is used, nor
does it describe the place of origin, such that the degree of exclusiveness given to the mark
is closely restricted,[46] and considering its challenge by Abyadang with respect to the
meaning he has given to it, what remains is the fact that Berris is the owner of the mark
D-10 80 WP, inclusive of its dominant feature D-10, as established by its prior use,
and prior registration with the IPO. Therefore, Berris properly opposed and the IPO
correctly rejected Abyadangs application for registration of the mark NS D-10 PLUS.
Verily, the protection of trademarks as intellectual property is intended not only to
preserve the goodwill and reputation of the business established on the goods bearing the
mark through actual use over a period of time, but also to safeguard the public as
consumers against confusion on these goods.[47] On this matter of particular concern,
administrative agencies, such as the IPO, by reason of their special knowledge and
expertise over matters falling under their jurisdiction, are in a better position to pass
judgment thereon. Thus, their findings of fact in that regard are generally accorded great
respect, if not finality by the courts, as long as they are supported by substantial evidence,
even if such evidence might not be overwhelming or even preponderant. It is not the task
of the appellate court to weigh once more the evidence submitted before the administrative

body and to substitute its own judgment for that of the administrative agency in respect to
sufficiency of evidence.[48]
Inasmuch as the ownership of the mark D-10 80 WP fittingly belongs to Berris,
and because the same should not have been cancelled by the CA, we consider it proper not
to belabor anymore the issue of whether cancellation of a registered mark may be done
absent a petition for cancellation.
WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14,
2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No.
99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated
April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 142005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-06-13
are REINSTATED. Costs against respondent.
SO ORDERED.

THIRD DIVISION

PROSOURCE INTERNATIONAL, INC., G.R. No. 180073

Petitioner,
Present:

- versus -

HORPHAG RESEARCH
MANAGEMENT SA,
Respondent.

CORONA, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
November 25, 2009

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Court of Appeals (CA) Decision [1] dated July 27,
2007and Resolution[2] dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed
decision affirmed the Regional Trial Court (RTC)[3] Decision[4] dated January 16, 2006 and
Order[5] dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied
petitioners motion for reconsideration.
The facts are as follows:
Respondent Horphag Research Management SA is a corporation duly organized and
existing under the laws of Switzerland and the owner[6] of trademark PYCNOGENOL, a
food supplement sold and distributed by Zuellig Pharma Corporation. Respondent later
discovered that petitioner Prosource International, Inc. was also distributing a similar food
supplement using the mark PCO-GENOLS since 1996. [7] This prompted respondent to
demand that petitioner cease and desist from using the aforesaid mark.[8]
Without notifying respondent, petitioner discontinued the use of, and withdrew from
the market, the products under the name PCO-GENOLS as of June 19, 2000. It, likewise,
changed its mark from PCO-GENOLS to PCO-PLUS.[9]

On August 22, 2000, respondent filed a Complaint[10] for Infringement of Trademark

with Prayer for Preliminary Injunction against petitioner, praying that the latter cease and
desist from using the brand PCO-GENOLS for being confusingly similar with
respondents trademark PYCNOGENOL. It, likewise, prayed for actual and nominal
damages, as well as attorneys fees.[11]
In its Answer,[12] petitioner contended that respondent could not file the infringement
case considering that the latter is not the registered owner of the trademark
PYCNOGENOL, but one Horphag Research Limited. It, likewise, claimed that the two
marks were not confusingly similar. Finally, it denied liability, since it discontinued the
use of the mark prior to the institution of the infringement case. Petitioner thus prayed for
the dismissal of the complaint. By way of counterclaim, petitioner prayed that respondent
be directed to pay exemplary damages and attorneys fees.[13]
During the pre-trial, the parties admitted the following:
1. Defendant [petitioner] is a corporation duly organized and existing
under the laws of the Republic of the Philippines with business address at No. 7
Annapolis Street, Greenhills, San Juan, Metro Manila;
2. The trademark PYCNOGENOL of the plaintiff is duly registered with
the Intellectual Property Office but not with the Bureau of Food and Drug
(BFAD).
3. The defendants product PCO-GENOLS is duly registered with the
BFAD but not with the Intellectual Property Office (IPO).
4. The defendant corporation discontinued the use of and had withdrawn
from the market the products under the name of PCO-GENOLS as of June 19,
2000, with its trademark changed from PCO-GENOLS to PCO-PLUS.
5. Plaintiff corporation sent a demand letter to the defendant dated 02
June 2000.[14]

On January 16, 2006, the RTC decided in favor of respondent. It observed that
PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which appears to be
merely descriptive and thus open for trademark registration by combining it with other
words. The trial court, likewise, concluded that the marks, when read, sound similar, and
thus confusingly similar especially since they both refer to food supplements. The court
added that petitioners liability was not negated by its act of pulling out of the market the
products bearing the questioned mark since the fact remains that from 1996 until June
2000, petitioner had infringed respondents product by using the trademark PCOGENOLS. As respondent manifested that it was no longer interested in recovering actual
damages, petitioner was made to answer only for attorneys fees amounting to P50,000.00.
[15]
For lack of sufficient factual and legal basis, the court dismissed petitioners
counterclaim. Petitioners motion for reconsideration was likewise denied.
On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate

court explained that under the Dominancy or the Holistic Test, PCO-GENOLS is
deceptively similar to PYCNOGENOL. It also found just and equitable the award of
attorneys fees especially since respondent was compelled to litigate.[16]
Hence, this petition, assigning the following errors:
I.

THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE

RULING OF THE LOWER [COURT] THAT RESPONDENTS
TRADEMARK P[YC]NOGENOLS (SIC) WAS INFRINGED BY
PETITIONERS PCO-GENOLS.

II.

THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE

AWARD OF ATTORNEYS FEES IN FAVOR OF RESPONDENT
HORPHAG RESEARCH MANAGEMENT S.A. IN THE AMOUNT OF
Php50,000.00.[17]

The petition is without merit.

It must be recalled that respondent filed a complaint for trademark infringement
against petitioner for the latters use of the mark PCO-GENOLS which the former claimed
to be confusingly similar to its trademark PYCNOGENOL. Petitioners use of the
questioned mark started in 1996 and ended in June 2000. The instant case should thus be
decided in light of the provisions of Republic Act (R.A.) No. 166 [18] for the acts committed
until December 31, 1997, and R.A. No. 8293[19] for those committed from January 1, 1998
until June 19, 2000.
A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant on his goods to
identify and distinguish them from those manufactured, sold, or dealt by others.
Inarguably, a trademark deserves protection.[20]
Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define
what constitutes trademark infringement, as follows:
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 of 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. 155. Remedies; Infringement. Any person who shall, without the

consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark or the same container or a dominant feature
thereof in connection with the sale, offering for sale, distribution, advertising of
any goods or services including other preparatory steps necessary to carry out
the sale of any goods or services on or in connection with which such use is
likely to cause confusion, or to cause mistake, or to deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark
or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake,
or to deceive, shall be liable in a civil action for infringement by the registrant
for the remedies hereinafter set forth: Provided, That infringement takes place at
the moment any of the acts stated in Subsection 155.1 or this subsection are
committed regardless of whether there is actual sale of goods or services using
the infringing material.

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and
20 thereof, 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)
[It] 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)

[T]he trademark is used for identical or similar goods[;] and

(d)
[S]uch act is done without the consent of the trademark registrant
[21]
or assignee.

On the other hand, the elements of infringement under R.A. No. 8293 are as follows:
(1) The trademark being infringed is registered in the Intellectual Property Office;
however, in infringement of trade name, the same need not be registered;
(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably
imitated by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for
sale, or advertising of any goods, business or services; or the infringing mark or
trade name 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;
(4) The use or application of the infringing mark or trade name is likely to cause
confusion or mistake or to deceive purchasers or others as to the goods or services
themselves or as to the source or origin of such goods or services or the identity of
such business; and
(5) It is without the consent of the trademark or trade name owner or the assignee
thereof.[22]

In the foregoing enumeration, it is the element of likelihood of confusion that is

the gravamen of trademark infringement. But likelihood of confusion is a relative
concept. The particular, and sometimes peculiar, circumstances of each case are
determinative of its existence. Thus, in trademark infringement cases, precedents must be
evaluated in the light of each particular case.[23]
In determining similarity and likelihood of confusion, jurisprudence has developed
two tests: the Dominancy Test and the Holistic or Totality Test. The Dominancy Test
focuses on the similarity of the prevalent features of the competing trademarks that might
cause confusion and deception, thus constituting infringement.[24] If the competing
trademark contains the main, essential and 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 to deceive purchasers. [25] Courts will consider more
the aural and visual impressions created by the marks in the public mind, giving little
weight to factors like prices, quality, sales outlets, and market segments.[26]
In contrast, the Holistic Test entails a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing
similarity.[27] The discerning eye of the observer must focus not only on the predominant
words but also on the other features appearing on both labels in order that the observer
may draw his conclusion whether one is confusingly similar to the other.[28]
The trial and appellate courts applied the Dominancy Test in determining whether
there was a confusing similarity between the marks PYCNOGENOL and PCOGENOL. Applying the test, the trial court found, and the CA affirmed, that:
Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix
GENOL which on evidence, appears to be merely descriptive and furnish no
indication of the origin of the article and hence, open for trademark registration
by the plaintiff thru combination with another word or phrase such as
PYCNOGENOL, Exhibits A to A-3. Furthermore, although the letters Y

between P and C, N between O and C and S after L are missing in the

[petitioners] mark PCO-GENOLS, nevertheless, when the two words are
pronounced, the sound effects are confusingly similar not to mention that they
are both described by their manufacturers as a food supplement and thus,
identified as such by their public consumers. And although there were
dissimilarities in the trademark due to the type of letters used as well as the size,
color and design employed on their individual packages/bottles, still the close
relationship of the competing products name in sounds as they were
pronounced, clearly indicates that purchasers could be misled into believing that
they are the same and/or originates from a common source and manufacturer.[29]

We find no cogent reason to depart from such conclusion.

This is not the first time that the Court takes into account the aural effects of the
words and letters contained in the marks in determining the issue of confusing similarity.
In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,[30] cited in McDonalds
Corporation v. L.C. Big Mak Burger, Inc.,[31] the Court held:
The following random list of confusingly similar sounds in the matter of
trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol.
1, will reinforce our view that SALONPAS and LIONPAS are confusingly
similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea;
Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and
Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe
and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in
his book Trade-Mark Law and Practice, pp. 419-421, cities, as
coming within the purview of the idem sonans rule, Yusea and U-C-A,
Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up.
In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura
and Cordura are confusingly similar in sound; this Court held in Sapolin Co.
vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the
trademark Sapolin, as the sound of the two names is almost the same. [32]

Finally, we reiterate that the issue of trademark infringement is factual, with both the
trial and appellate courts finding the allegations of infringement to be meritorious. As we
have consistently held, factual determinations of the trial court, concurred in by the CA,
are final and binding on this Court.[33] Hence, petitioner is liable for trademark
infringement.
We, likewise, sustain the award of attorneys fees in favor of respondent. Article
2208 of the Civil Code enumerates the instances when attorneys fees are awarded, viz.:
Art. 2208. In the absence of stipulation, attorneys fees and expenses of
litigation, other than judicial costs, cannot be recovered, except:
1. When exemplary damages are awarded;
2. When the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;

3. In criminal cases of malicious prosecution against the plaintiff;

4. In case of a clearly unfounded civil action or proceeding against the
plaintiff;
5. Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiffs plainly valid, just and demandable claim;
6. In actions for legal support;
7. In actions for the recovery of wages of household helpers, laborers
and skilled workers;
8. In actions for indemnity under workmens compensation and
employers liability laws;
9. In a separate civil action to recover civil liability arising from a crime;
10. When at least double judicial costs are awarded;
11. In any other case where the court deems it just and equitable that
attorneys fees and expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be
reasonable.

As a rule, an award of attorneys fees should be deleted where the award of moral
and exemplary damages is not granted. [34] Nonetheless, attorneys fees may be awarded
where the court deems it just and equitable even if moral and exemplary damages are
unavailing.[35] In the instant case, we find no reversible error in the grant of attorneys fees
by the CA.
WHEREFORE, premises considered, the petition is DENIED for lack of
merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated
October 15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED.
SO ORDERED.
.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
G.R. No. 190065

DERMALINE, INC.,
Petitioner,

Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

- versus -

MYRA PHARMACEUTICALS, INC.,

Respondent.

Promulgated:
August 16, 2010

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

This is a petition for review on certiorari[1] seeking to reverse and set aside the
Decision dated August 7, 2009[2] and the Resolution dated October 28, 2009[3] of the Court
of Appeals (CA) in CA-G.R. SP No. 108627.
The antecedent facts and proceedings
On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the
Intellectual Property Office (IPO) an application for registration of the trademark
DERMALINE DERMALINE, INC. (Application No. 4-2006011536). The application
was published for Opposition in the IPO E-Gazette on March 9, 2007.
On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a Verified
Opposition[4] alleging that the trademark sought to be registered by Dermaline so
resembles its trademark DERMALIN and will likely cause confusion, mistake and
deception to the purchasing public. Myra said that the registration of Dermalines
trademark will violate Section 123[5] of Republic Act (R.A.) No. 8293 (Intellectual

Property Code of the Philippines). It further alleged that Dermalines use and registration
of its applied trademark will diminish the distinctiveness and dilute the goodwill of Myras
DERMALIN, registered with the IPO way back July 8, 1986, renewed for ten (10) years
on July 8, 2006. Myra has been extensively using DERMALIN commercially since
October 31, 1977, and said mark is still valid and subsisting.
Myra claimed that, despite Dermalines attempt to differentiate its applied mark, the
dominant feature is the term DERMALINE, which is practically identical with its own
DERMALIN, more particularly that the first eight (8) letters of the marks are identical,
and that notwithstanding the additional letter E by Dermaline, the pronunciation for both
marks are identical. Further, both marks have three (3) syllables each, with each syllable
identical in sound and appearance, even if the last syllable of DERMALINE consisted of
four (4) letters while DERMALIN consisted only of three (3).
Myra also pointed out that Dermaline applied for the same mark DERMALINE on
June 3, 2003 and was already refused registration by the IPO. By filing this new
application for registration, Dermaline appears to have engaged in a fishing expedition for
the approval of its mark. Myra argued that its intellectual property right over its trademark
is protected under Section 147[6] of R.A. No. 8293.
Myra asserted that the mark DERMALINE DERMALINE, INC. is aurally similar
to its own mark such that the registration and use of Dermalines applied mark will enable
it to obtain benefit from Myras reputation, goodwill and advertising and will lead the
public into believing that Dermaline is, in any way, connected to Myra. Myra added that
even if the subject application was under Classification 44 [7] for various skin treatments, it
could still be connected to the DERMALIN mark under Classification 5 [8] for
pharmaceutical products, since ultimately these goods are very closely related.
In its Verified Answer,[9] Dermaline countered that a simple comparison of the
trademark DERMALINE DERMALINE, INC. vis--vis Myras DERMALIN
trademark would show that they have entirely different features and distinctive
presentation, thus it cannot result in confusion, mistake or deception on the part of the
purchasing public. Dermaline contended that, in determining if the subject trademarks are
confusingly similar, a comparison of the words is not the only determinant, but their
entirety must be considered in relation to the goods to which they are attached, including
the other features appearing in both labels. It claimed that there were glaring and striking
dissimilarities between the two trademarks, such that its trademark DERMALINE
DERMALINE, INC. speaks for itself (Res ipsa loquitur). Dermaline further argued that
there could not be any relation between its trademark for health and beauty services
from Myras trademark classified under medicinal goods against skin disorders.
The parties failed to settle amicably. Consequently, the preliminary conference was
terminated and they were directed to file their respective position papers.[10]

70

[11]

On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No. 2008sustaining Myras opposition pursuant to Section 123.1(d) of R.A. No. 8293. It

disposed
WHEREFORE, the Verified Opposition is, as it is, hereby
SUSTAINED. Consequently, Application Serial No. 4-2006-011536 for the
mark DERMALINE, DERMALINE, INC. Stylized Wordmark for Dermaline,
Inc. under class 44 covering the aforementioned goods filed on 21 October 2006,
is as it is hereby, REJECTED.
Let the file wrapper of DERMALINE, DERMALINE, INC. Stylized
Wordmark subject matter of this case be forwarded to the Bureau of Trademarks
(BOT) for appropriate action in accordance with this Decision.
SO ORDERED.[12]

Aggrieved, Dermaline filed a motion for reconsideration, but it was denied under
Resolution No. 2009-12(D)[13] dated January 16, 2009.
Expectedly, Dermaline appealed to the Office of the Director General of the
IPO. However, in an Order[14] dated April 17, 2009, the appeal was dismissed for being
filed out of time.
Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order
dated April 17, 2009 and the rejection of Dermalines application for registration of
trademark. The CA likewise denied Dermalines motion for reconsideration; hence, this
petition raising the issue of whether the CA erred in upholding the IPOs rejection of
Dermalines application for registration of trademark.
The petition is without merit.
A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant on his goods to
identify and distinguish them from those manufactured, sold, or dealt by others.
[15]
Inarguably, it is an intellectual property deserving protection by law. In trademark
controversies, each case must be scrutinized according to its peculiar circumstances, such
that jurisprudential precedents should only be made to apply if they are specifically in
point.[16]
As Myra correctly posits, as a registered trademark owner, it has the right under
Section 147 of R.A. No. 8293 to prevent third parties from using a trademark, or similar
signs or containers for goods or services, without its consent, identical or similar to its
registered trademark, where such use would result in a likelihood of confusion.
In determining likelihood of confusion, case law has developed two (2) tests, the
Dominancy Test and the Holistic or Totality Test.
The Dominancy Test focuses on the similarity of the prevalent features of the
competing trademarks that might cause confusion or deception. [17] It is applied when the

trademark sought to be registered contains the main, essential and dominant features of the
earlier registered trademark, and confusion or deception is likely to result. Duplication or
imitation is not even required; neither is it necessary that the label of the applied mark for
registration should suggest an effort to imitate. The important issue is whether the use of
the marks involved would likely cause confusion or mistake in the mind of or deceive the
ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar
with, the goods in question.[18] Given greater consideration are the aural and visual
impressions created by the marks in the public mind, giving little weight to factors like
prices, quality, sales outlets, and market segments.[19] The test of dominancy is now
explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides
155.1. Use in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark or the same container or a dominant
feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary
to carry out the sale of any goods or services on or in connection with which
such use is likely to cause confusion, or to cause mistake, or to deceive;
(emphasis supplied)

On the other hand, the Holistic Test entails a consideration of the entirety of the
marks as applied to the products, including labels and packaging, in determining confusing
similarity. The scrutinizing eye of the observer must focus not only on the predominant
words but also on the other features appearing in both labels so that a conclusion may be
drawn as to whether one is confusingly similar to the other.[20]
Relative to the question on confusion of marks and trade names, jurisprudence has
noted two (2) types of confusion, viz: (1) confusion of goods (product confusion), where
the ordinarily prudent purchaser would be induced to purchase one product in the belief
that he was purchasing the other; and (2) confusion of business (source or origin
confusion), where, although the goods of the parties are different, the product, the mark of
which registration is applied for by one party, is such as might reasonably be assumed to
originate with the registrant of an earlier product, and the public would then be deceived
either into that belief or into the belief that there is some connection between the two
parties, though inexistent.[21]
In rejecting the application of Dermaline for the registration of its mark
DERMALINE DERMALINE, INC., the IPO applied the Dominancy Test. It declared
that both confusion of goods and service and confusion of business or of origin were
apparent in both trademarks. It also noted that, per Bureau Decision No. 2007-179 dated
December 4, 2007, it already sustained the opposition of Myra involving the trademark
DERMALINE of Dermaline under Classification 5. The IPO also upheld Myras right
under Section 138 of R.A. No. 8293, which provides that a certification of registration of a
mark is prima facie evidence of the validity of the registration, the registrants ownership
of the mark, and of the registrants exclusive right to use the same in connection with the
goods and those that are related thereto specified in the certificate.

We agree with the findings of the IPO. As correctly applied by the IPO in this case,
while there are no set rules that can be deduced as what constitutes a dominant feature with
respect to trademarks applied for registration; usually, what are taken into account are
signs, color, design, peculiar shape or name, or some special, easily remembered earmarks
of the brand that readily attracts and catches the attention of the ordinary consumer.[22]
Dermalines insistence that its applied trademark DERMALINE DERMALINE,
INC. had differences too striking to be mistaken from Myras DERMALIN cannot,
therefore, be sustained. While it is true that the two marks are presented differently
Dermalines mark is written with the first DERMALINE in script going diagonally
upwards from left to right, with an upper case D followed by the rest of the letters in
lower case, and the portion DERMALINE, INC. is written in upper case letters, below
and smaller than the long-hand portion; while Myras mark DERMALIN is written in an
upright font, with a capital D and followed by lower case letters the likelihood of
confusion is still apparent. This is because they are almost spelled in the same way, except
for Dermalines mark which ends with the letter E, and they are pronounced practically
in the same manner in three (3) syllables, with the ending letter E in Dermalines mark
pronounced silently. Thus, when an ordinary purchaser, for example, hears an
advertisement of Dermalines applied trademark over the radio, chances are he will
associate it with Myras registered mark.
Further, Dermalines stance that its product belongs to a separate and different
classification from Myras products with the registered trademark does not eradicate the
possibility of mistake on the part of the purchasing public to associate the former with the
latter, especially considering that both classifications pertain to treatments for the skin.
Indeed, the registered trademark owner may use its mark on the same or similar
products, in different segments of the market, and at different price levels depending on
variations of the products for specific segments of the market. The Court is cognizant that
the registered trademark owner enjoys protection in product and market areas that are
the normal potential expansion of his business. Thus, we have held
Modern law recognizes that the protection to which the owner of a
trademark 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 confusion 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; 53 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).[23] (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or associated
with Myra, such that, considering the current proliferation of health and beauty products in
the market, the purchasers would likely be misled that Myra has already expanded its

business through Dermaline from merely carrying pharmaceutical topical applications for
the skin to health and beauty services.
Verily, when one applies for the registration of a trademark or label which is almost
the same or that very closely resembles one already used and registered by another, the
application should be rejected and dismissed outright, even without any opposition on the
part of the owner and user of a previously registered label or trademark. This is intended
not only to avoid confusion on the part of the public, but also to protect an already used
and registered trademark and an established goodwill.[24]
Besides, the issue on protection of intellectual property, such as trademarks, is
factual in nature. The findings of the IPO, upheld on appeal by the same office, and
further sustained by the CA, bear great weight and deserves respect from this
Court. Moreover, the decision of the IPO had already attained finality when Dermaline
failed to timely file its appeal with the IPO Office of the Director General.
WHEREFORE, the petition is DENIED. The Decision dated August 7, 2009 and
the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 108627
are AFFIRMED. Costs against petitioner.
SO ORDERED.

SECOND DIVISION

SOCIETE DES PRODUITS

NESTLE, S.A.,
Petitioner,

G.R. No. 172276

Present:

- versus -

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

MARTIN T. DY, JR.,

Promulgated:
Respondent.
August 8, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court. The
petition challenges the 1 September 2005 Decision and 4 April 2006 Resolution of the
Court of Appeals in CA-G.R. CV No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.)
not liable for trademark infringement. The Court of Appeals reversed the 18 September
1998 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City,
in Civil Case No. CEB-19345.
The Facts
Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation
organized under the laws of Switzerland. It manufactures food products and
beverages. As evidenced by Certificate of Registration No. R-14621 issued on 7 April
1969 by the then Bureau of Patents, Trademarks and Technology Transfer, Nestle owns the
NAN trademark for its line of infant powdered milk products, consisting of PRE-NAN,
NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6
diatetic preparations for infant feeding.
Nestle distributes and sells its NAN milk products all over the Philippines. It has
been investing tremendous amounts of resources to train its sales force and to promote the
NAN milk products through advertisements and press releases.
Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia
and repacks the powdered milk into three sizes of plastic packs bearing the name
NANNY. The packs weigh 80, 180 and 450 grams and are sold for P8.90, P17.50
and P39.90, respectively. NANNY is is also classified under Class 6 full cream milk
for adults in [sic] all ages. Dy, Jr. distributes and sells the powdered milk in Dumaguete,
Negros Oriental, Cagayan de Oro, and parts of Mindanao.

In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using
NANNY and to undertake that he would stop infringing the NAN trademark. Dy, Jr.
did not act on Nestles request. On 1 March 1990, Nestle filed before the RTC, Judicial
Region 7, Branch 31, Dumaguete City, a complaint against Dy, Jr. for infringement. Dy,
Jr. filed a motion to dismiss alleging that the complaint did not state a cause of action. In
its 4 June 1990 order, the trial court dismissed the complaint. Nestle appealed the 4 June
1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of
Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further
proceedings.
Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the
trial court a motion to transfer the case to the RTC, Judicial Region 7, Branch 9, CebuCity,
which was designated as a special court for intellectual property rights.
The RTCs Ruling
In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for
infringement. The trial court held:
If determination of infringement shall only be limited on whether or not the mark
used would likely cause confusion or mistake in the minds of the buying public or deceive
customers, such in [sic] the most considered view of this forum would be highly
unlikely to happen in the instant case. This is because upon comparison of the plaintiffs
NAN and defendants NANNY, the following features would reveal the absence of any
deceptive tendency in defendants NANNY: (1) all NAN products are contained tin cans
[sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the
labels of NAN products are blue and white, while the predominant colors in the
plastic packings of NANNY are blue and green; (3) the labels of NAN products have at the
bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds,
which is overlapped by the trade-name Nestle, while the plastic packs of NANNY have a
drawing of milking cows lazing on a vast green field, back-dropped with snow covered
mountains; (4) the word NAN are [sic] all in large, formal and conservative-like block
letters, while the word NANNY are [sic] all in small and irregular style of letters with
curved ends; and (5) all NAN products are milk formulas intended for use of [sic] infants,
while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be
proven with the use of the test of dominancy because the deceptive tendency of the
unregistered trademark NANNY is not apparent from the essential features of the
registered trademark NAN.
However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug.
31, 1982, the Supreme Court took the occasion of discussing what is implied in the
definition of infringement when it stated: Implicit in this definition is the concept that
the goods must be so related that there is likelihood either of confusion of goods or
business. x x x But as to whether trademark infringement exists depends for the most
part upon whether or not the goods are so related that the public may be, or is actually,
deceived and misled that they came from the same maker or manufacturer. For noncompeting goods may be those which, though they are not in actual competition, are so
related to each other that it might reasonably be assumed that they originate from one
manufacturer. Non-competing goods may also be those which, being entirely unrelated,
could not reasonably be assumed to have a common source. In the former case of related
goods, confusion of business could arise out of the use of similar marks; in the latter case
of non-related goods, it could not.

Furthermore, in said case the Supreme Court as well discussed on when goods may
become so related for purposes of infringement when it stated: Goods are related when
they belong to the same class or have same descriptive properties; when they possess the
same physical attributes or essential characteristics with reference to their form,
composition, texture or quality. They may also be related because they serve the same
purpose or are sold in grocery stores. x x x
Considering that defendants NANNY belongs to the same class as that of
plaintiffs NAN because both are food products, the defendants unregistered trade mark
NANNY should be held an infringement to plaintiffs registered trademark NAN because
defendants use of NANNY would imply that it came from the manufacturer of
NAN. Furthermore, since the word nanny means a childs nurse, there might result the
not so remote probability that defendants NANNY may be confused with infant formula
NAN despite the aparent [sic] disparity between the features of the two products.

Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals.
The Court of Appeals Ruling
In its 1 September 2005 Decision, the Court of Appeals reversed the trial courts 18
September 1998 Decision and found Dy, Jr. not liable for infringement. The Court of
Appeals held:
[T]he trial court appeared to have made a finding that there is no colorable imitation of the
registered mark NAN in Dys use of NANNY for his own milk packs. Yet it did not
stop there. It continued on applying the concept of related goods.
The Supreme Court utlilized the concept of related goods in the said case
of Esso Standard Easter, Inc. versus Court of Appeals, et al. wherein two contending
parties used the same trademark ESSO for two different goods, i.e. petroleum products
and cigarettes. It rules that there is infringement of trademark involving two goods bearing
the same mark or label, even if the said goods are non-competing, if and only if they are so
related that the public may be, or is actually, deceived that they originate from the one
maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow
through different trade channels, and since the possibility of confusion is unlikely in the
general appearances of each mark as a whole, the Court held in this case that they cannot
be so related in the context of infringement.
In applying the concept of related goods in the present case, the trial court
haphazardly concluded that since plaintiff-appellees NAN and defendant-appellants
NANNY belong to the same class being food products, the unregistered NANNY should
be held an infringement of Nestles NAN because the use of NANNY would imply that it
came from the manufacturer of NAN. Said court went on to elaborate further: since the
word NANNY means a childs nurse, there might result the not so remote probability
that defendants NANNY may be confused with infant formula NAN despite
the aparent (sic) disparity between the features of the two products as discussed above.
The trial courts application of the doctrine laid down by the Supreme Court in
the Esso Standard case aforementioned and the cases cited therein is quite misplaced. The
goods of the two contending parties in those cases bear similar marks or labels: Esso for
petroleum products and cigarettes, Selecta for biscuits and milk, X-7 for soap and
perfume, lipstick and nail polish. In the instant case, two dissimilar marks are involved
plaintiff-appellees NAN and defendant-appellants NANNY. Obviously, the concept
of related goods cannot be utilized in the instant case in the same way that it was used in
the Esso Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in
resolving infringement or trademark cases in the Philippines, particularly in ascertaining
whether one trademark is confusingly similar to or is a colorable imitation of another,
precedent must be studied in the light of the facts of the particular case. Each case must be
decided on its own merits. In the more recent case of Societe Des Produits Nestle S.A.
Versus Court of Appeals, the High Court further stressed that due to the peculiarity of the
facts of each infringement case, a judicial forum should not readily apply a certain test or
standard just because of seeming similarities. The entire panoply of elements constituting
the relevant factual landscape should be comprehensively examined.
While it is true that both NAN and NANNY are milk products and that the word
NAN is contained in the word NANNY, there are more glaring dissimilarities in the
entirety of their trademarks as they appear in their respective labels and also 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. Even the trial court found these glaring dissimilarities as above-quoted. We need
not add more of these factual dissimilarities.
NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all
infant preparations, while NANNY is a full cream milk for adults in [sic] all ages. NAN
milk products are sold in tin cans and hence, far expensive than the full cream milk
NANNY sold in three (3) plastic packs containing 80, 180 and 450 grams and
worth P8.90, P17.50 and P39.90 per milk pack. The labels of NAN products are of the
colors blue and white and have at the bottom portion an elliptical shaped figure containing
inside it a drawing of nestling birds, which is overlapped by the trade-name Nestle. On
the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast
green field, back-dropped with snow-capped mountains and using the predominant colors
of blue and green. The word NAN are [sic] all in large, formal and conservative-like block
letters, while the word NANNY are [sic] all in small and irregular style of letters with
curved ends. With these material differences apparent in the packaging of both milk
products, NANNY full cream milk cannot possibly be an infringement of NAN infant
milk.
Moreover, NAN infant milk preparation is more expensive than NANNY instant
full cream milk. The cheaper price of NANNY would give, at the very first instance, a
considerable warning to the ordinary purchaser on whether he is buying an infant milk or a
full cream milk for adults. A cursory examination of the packaging would confirm the
striking differences between the products in question.
In view of the foregoing, we find that the mark NANNY is not confusingly similar
to NAN. Dy therefore cannot be held liable for infringement.

Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court
of Appeals denied the motion for lack of merit. Hence, the present petition.
Issue
The issue is whether Dy, Jr. is liable for infringement.
The Courts Ruling
The petition is meritorious.
Section 22 of Republic Act (R.A.) No. 166, as amended, states:

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 trade-name 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 trade-name 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.

Section 155 of R.A. No. 8293 states:

Remedies; Infringement. Any person who shall, without the consent of the
owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation
of a registered mark or the same container or a dominant feature thereof in connection with
the sale, offering for sale, distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to
deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a
dominant feature thereof and apply such reproduction, counterfeit, copy or colorable
imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used in commerce upon or in connection with the sale, offering for sale,
distribution, or advertising of goods or services on or in connection with which such use is
likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action
for infringement by the registrant for the remedies hereinafter set forth: Provided, That the
infringement takes place at the moment any of the acts stated in Subsection 155.1 or this
subsection are committed regardless of whether there is actual sale of goods or services
using the infringing material.

In Prosource International, Inc. v. Horphag Research Management SA, the Court

laid down the elements of infringement under R.A. Nos. 166 and 8293:
In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and
20 thereof, 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) [It] 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) [T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant
or assignee.
On the other hand, the elements of infringement under R.A. No. 8293 are as
follows:
The trademark being infringed is registered in the Intellectual
Property Office; however, in infringement of trade name, the same need not
be registered;
The trademark or trade name is reproduced, counterfeited, copied,
or colorably imitated by the infringer;
The infringing mark or trade name is used in connection with the
sale, offering for sale, or advertising of any goods, business or services; or
the infringing mark or trade name 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;
The use or application of the infringing mark or trade name is
likely to cause confusion or mistake or to deceive purchasers or others as to
the goods or services themselves or as to the source or origin of such goods
or services or the idenity of such business; and
It is without the consent of the trademark or trade name owner or
the assignee thereof.

Among the elements, the element of likelihood of confusion is the gravamen of

trademark infringement. There are two types of confusion in trademark infringement:
confusion of goods and confusion of business. In Sterling Products International, Inc.
v. Farbenfabriken Bayer Aktiengesellschaft, the Court distinguished the two types of
confusion:
Callman 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, defendants goods are then bought as
the plaintiffs, and the poorer quality of the former reflects adversely on the plaintiffs
reputation. The other is theconfusion of business: Here though the goods of the parties
are different, the defendants 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.

There are two tests to determine likelihood of confusion: the dominancy test and
holistic test. The dominancy test focuses on the similarity of the main, prevalent or
essential features of the competing trademarks that might cause confusion. Infringement

takes place when the competing trademark contains the essential features of
another. Imitation or an effort to imitate is unnecessary. The question is whether the use of
the marks is likely to cause confusion or deceive purchasers.
The holistic test considers the entirety of the marks, including labels and packaging,
in determining confusing similarity. The focus is not only on the predominant words but
also on the other features appearing on the labels.
In cases involving trademark infringement, no set of rules can be deduced. Each
case must be decided on its own merits. Jurisprudential precedents must be studied in the
light of the facts of each particular case. In McDonalds Corporation
v. MacJoy Fastfood Corporation, the Court held:
In trademark cases, particularly in ascertaining whether one trademark is
confusingly similar to another, no set rules can be deduced because each case must be
decided on its merits. In such cases, even more than in any other litigation, precedent must
be studied in the light of the facts of the particular case. That is the reason why in
trademark cases, jurisprudential precedents should be applied only to a case if they are
specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is
applicable. In recent cases with similar factual milieus, the Court has consistently applied
the dominancy test. In Prosource International, Inc., the Court applied the dominancy test
in holding that PCO-GENOLS is confusingly similar to PYCNOGENOL. The Court
held:
The trial and appellate courts applied the Dominancy Test in determining whether
there was a confusing similarity between the marks PYCNOGENOL and PCOGENOL. Applying the test, the trial court found, and the CA affirmed, that:
Both the word[s] PYCNOGENOL and PCO-GENOLS have the same
suffix GENOL which on evidence, appears to be merely descriptive and
furnish no indication of the origin of the article and hence, open for
trademark registration by the plaintiff through combination with another
word or phrase such as PYCNOGENOL, Exhibits A to A3. Furthermore, although the letters Y between P and C, N between O
and C and S after L are missing in the [petitioners] mark PCO-GENOLS,
nevertheless, when the two words are pronounced, the sound effects are
confusingly similar not to mention that they are both described by their
manufacturers as a food supplement and thus, identified as such by their
public consumers. And although there were dissimilarities in the trademark
due to the type of letters used as well as the size, color and design employed
on their individual packages/bottles, still the close relationship of the
competing products name is sounds as they were pronounced, clearly
indicates that purchasers could be misled into believing that they are the
same and/or originates from a common source and manufacturer.
We find no cogent reason to depart from such conclusion.

This is not the first time the Court takes into account the aural effects of the words
and letters contained in the marks in determining the issue of confusing
similarity. In MarvexCommercial Co., Inc. v. Petra Hawpia & Co., et al., cited
in McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held:
The following random list of confusingly similar sounds in the
matter of trademarks, culled from Nims, Unfair Competition and Trade
Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and
LIONPAS are confusingly similar in sound: Gold Dust and Gold
Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash;
Cascarete and Celborite; Celluloid and Cellonite; Chartreuse
and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and
Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark
Law and Practice, pp. 419-421, cities [sic], as coming within the purview
of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and
Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs.
Director of Patents, this Court unequivocally said that Celdura and
Condura are confusingly similar in sound; this Court held in Sapolin Co.
vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of
the trademark Sapolin, as the sound of the two names is almost the
same.

In McDonalds Corporation v. MacJoy Fastfood Corporation, the Court applied the

dominancy
test
in
holding
that
MACJOY
is
confusingly
similar
to MCDONALDS. The Court held:
While we agree with the CAs detailed enumeration of differences between the two
(2) competing trademarks herein involved, we believe that the holistic test is not the one
applicable in this case, the dominancy test being the one more suitable. In recent cases
with a similar factual milieu as here, the Court has consistently used and applied the
dominancy test in determining confusing similarity or likelihood of confusion between
competing trademarks.
xxxx
Applying the dominancy test to the instant case, the Court finds that herein
petitioners MCDONALDS and respondents MACJOY marks are are confusingly
similar with each other that an ordinary purchaser can conclude an association or relation
between the marks.
To begin with, both marks use the corporate M design logo and the prefixes Mc
and/or Mac as dominant features. x x x
For sure, it is the prefix Mc, and abbreviation of Mac, which visually and
aurally catches the attention of the consuming public. Verily, the word MACJOY
attracts attention the same way as did McDonalds, MacFries, McSpaghetti, McDo,
Big Mac and the rest of the MCDONALDS marks which all use the prefixes Mc and/or
Mac.
Besides and most importantly, both trademarks are used in the sale
of fastfood products. Indisputably, the respondents trademark application for the
MACJOY & DEVICE trademark covers goods under Classes 29 and 30 of the
International Classification of Goods, namely, fried chicken, chicken barbeque, burgers,

fries, spaghetti, etc. Likewise, the petitioners trademark registration for the
MCDONALDS marks in the Philippines covers goods which are similar if not identical to
those covered by the respondents application.

In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court applied the
dominancy test in holding that BIG MAK is confusingly similar to BIG MAC. The
Court held:
This Court x x x has relied on the dominancy test rather than the holistic test. The
dominancy test considers the dominant features in the competing marks in determining
whether they are confusingly similar. Under the dominancy test, courts give greater weight
to the similarity of the appearance of the product arising from the adoption of the dominant
features of the registered mark, disregarding minor differences. Courts will consider more
the aural and visual impressions created by the marks in the public mind, giving little
weight to factors like prices, quality, sales outlets and market segments.
Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:
x x x It has been consistently held that the question of infringement
of a trademark is to be determined by the test of dominancy. Similarity in
size, form and color, while relevant, is not conclusive. If the competing
trademark contains the main or essential or dominant features of another,
and confusion and 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. (G. Heilman Brewing
Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead
Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of
infringement of trademarks is whether the use of the marks involved would
be likely to cause confusion or mistakes in the mind of the public or deceive
purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F.
2d 588; x x x)
xxxx
The test of dominancy is now explicitly incorporated into law in Section 155.1 of
the Intellectual Property Code which defines infringement as the colorable imitation of a
registered mark x x x or a dominant feature thereof.
Applying the dominancy test, the Court finds that respondents use of the
Big Mak mark results in likelihood of confusion. First, Big Mak sounds exactly the
same as Big Mac. Second, the first word in Big Mak is exactly the same as the first
word in Big Mac. Third, the first two letters in Mak are the same as the first two
letters in Mac. Fourth, the last letter Mak while a k sounds the same as c when the
word Mak is pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus
Caloocan is spelled Kalookan.

In Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the
dominancy test in holding that FLAVOR MASTER is confusingly similar to MASTER
ROAST and MASTER BLEND. The Court held:
While this Court agrees with the Court of Appeals detailed enumeration of
differences between the respective trademarks of the two coffee products, this Court cannot

agree that totality test is the one applicable in this case. Rather, this Court believes that the
dominancy test is more suitable to this case in light of its peculiar factual milieu.
Moreover, the totality or holistic test is contrary to the elementary postulate of the
law on trademarks and unfair competition that confusing similarity is to be determined on
the basis of visual, aural, connotative comparisons and overall impressions engendered by
the marks in controversy as they are encountered in the realities of the marketplace. The
totality or holistic test only relies on visual comparison between two trademarks whereas
the dominancy test relies not only on the visual but also on the aural and connotative
comparisons and overall impressions between the two trademarks.
For this reason, this Court agrees with the BPTTT when it applied the test of
dominancy and held that:

From the evidence at hand, it is sufficiently established that the word

MASTER is the dominant feature of opposers mark. The word MASTER
is printed across the middle portion of the label in bold letters almost twice
the size of the printed word ROAST. Further, the word MASTER has
always been given emphasis in the TV and radio commercials and other
advertisements made in promoting the product. x x x In due time, because
of these advertising schemes the mind of the buying public had come to
learn to associate the word MASTER with the opposers goods.
x x x. It is the observation of this Office that much of the
dominance
which
the
word
MASTER
has
acquired
through Opposers advertising schemes is carried over when the same is
incorporated
into
respondent-applicants
trademark
FLAVOR
MASTER. Thus, when one looks at the label bearing the trademark
FLAVOR MASTER (exh. 4) ones attention is easily attracted to the word
MASTER, rather than to the dissimilarities that exist. Therefore, the
possibility of confusion as to the goods which bear the competing marks or
as to the origins thereof is not farfetched.

Applying the dominancy test in the present case, the Court finds that NANNY is
confusingly similar to NAN. NAN is the prevalent feature of Nestles line of infant
powdered milk products. It is written in bold letters and used in all products. The line
consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly, NANNY contains the
prevalent feature NAN. The first three letters of NANNY are exactly the same as the
letters of NAN. When NAN and NANNY are pronounced, the aural effect is
confusingly similar.
In determining the issue of confusing similarity, the Court takes into account the
aural effect of the letters contained in the marks. In Marvex Commercial Company, Inc. v.
Petra Hawpia & Company, the Court held:
It is our considered view that the trademarks SALONPAS and LIONPAS are
confusingly similar in sound.
Both these words have the same suffix, PAS, which is used to denote a plaster
that adheres to the body with curative powers. PAS, being merely descriptive, furnishes

no indication of the origin of the article and therefore is open for appropriation by anyone
(Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the
subject of a trademark by combination with another word or phrase.
xxxx
The following random list of confusingly similar sounds in the matter of
trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will
reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound:
Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper
Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse
and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex;
Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp.
419-421, cities [sic], as coming within the purview of the idem sonans rule, Yusea and
U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and LemonUp. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and
Condura are confusingly similar in sound; this Court held in Sapolin Co. vs.Balmaceda,
67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the
sound of the two names is almost the same.

The
protection
protection
expansion
states:

scope of protection afforded to registered trademark owners is not limited to

from infringers with identical goods. The scope of protection extends to
from infringers with related goods, and to market areas that are the normal
of business of the registered trademark owners. Section 138 of R.A. No. 8293

Certificates of Registration. A certificate of registration of a mark shall be prima

facie evidence of validity of the registration, the registrants ownership of the mark, and of
the registrants exclusive right to use the same in connection with the goods or
services and those that are related thereto specified in the certificate. (Emphasis
supplied)

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, 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. In that
case,
the Court enumerated factors in determining whether goods are related: (1)
classification of the goods; (2) nature of the goods; (3) descriptive properties, physical
attributes or essential characteristics of the goods, with reference to their form,
composition, texture or quality; and (4) style of distribution and marketing of the goods,
including how the goods are displayed and sold.
NANNY and NAN have the same classification, descriptive properties and physical
attributes. Both are classified under Class 6, both are milk products, and both are in
powder form. Also, NANNY and NAN are displayed in the same section of stores the
milk section.
The Court agrees with the lower courts that there are differences between NAN and
NANNY: (1) NAN is intended for infants while NANNY is intended for children past their
infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the

registered owner of the NAN mark, Nestle should be free to use its mark on similar
products, in different segments of the market, and at different price levels. In McDonalds
Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection
afforded to registered trademark owners extends to market areas that are the normal
expansion of business:
xxx
Even respondents use of the Big Mak mark on non-hamburger food products cannot
excuse their infringement of petitioners registered mark, otherwise registered marks will
lose their protection under the law.
The registered trademark owner may use his mark on the same or similar
products, in different segments of the market, and at different price levels depending
on variations of the products for specific segments of the market. The Court has
recognized that the registered trademark owner enjoys protection in product and
market areas that are thenormal potential expansion of his business. Thus, the Court
has declared:
Modern law recognizes that the protection to which the owner of a
trademark 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 trademark or trade-name is likely to lead to a confusion 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 sq; 53
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). (Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the

1 September
2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No.
62730 and REINSTATE the 18 September 1998 Decision of the Regional Trial Court,
Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.
SO ORDERED.

Republic of the Philippines

SUPREME COURTBaguio City

SECOND DIVISION

G.R. No. 164321

March 23, 2011

SKECHERS, U.S.A., INC., Petitioner,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP. and/or
STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION
SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R.
MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its
premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Paraaque
City, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or STRONG
SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES
TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R. MORALES
and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises
located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Paraaque City, Respondents.

RESOLUTION

PERALTA, J.:

For resolution are the twin Motions for Reconsideration1 filed by petitioner and petitioner-intervenor from the
Decision rendered in favor of respondents, dated November 30, 2006.

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to the filing of
the motions is in order.

The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court (RTC) of
Manila an application for the issuance of search warrants against an outlet and warehouse operated by
respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic Act No.
8293, otherwise known as the Intellectual Property Code of the Philippines. 2 In the course of its business,
petitioner has registered the trademark "SKECHERS" 3 and the trademark "S" (within an oval design)4 with the
Intellectual Property Office (IPO).

Two search warrants5 were issued by the RTC and were served on the premises of respondents. As a result
of the raid, more than 6,000 pairs of shoes bearing the "S" logo were seized.

Later, respondents moved to quash the search warrants, arguing that there was no confusing similarity
between petitioners "Skechers" rubber shoes and its "Strong" rubber shoes.

On November 7, 2002, the RTC issued an Order6 quashing the search warrants and directing the NBI to
return the seized goods. The RTC agreed with respondents view that Skechers rubber shoes and Strong
rubber shoes have glaring differences such that an ordinary prudent purchaser would not likely be misled or
confused in purchasing the wrong article.

Aggrieved, petitioner filed a petition for certiorari7 with the Court of Appeals (CA) assailing the RTC Order. On
November 17, 2003, the CA issued a Decision8 affirming the ruling of the RTC.

Subsequently, petitioner filed the present petition9 before this Court which puts forth the following assignment
of errors:

A. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK
INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN IT
SHOULD HAVE LIMITED ITSELF TO A DETERMINATION OF WHETHER THE TRIAL COURT
COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH WARRANTS.

B. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

FINDING THAT RESPONDENTS ARE NOT GUILTY OF TRADEMARK INFRINGEMENT IN THE
CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE CAUSE TO ISSUE
A SEARCH WARRANT.10

In the meantime, petitioner-intervenor filed a Petition-in-Intervention 11 with this Court claiming to be the sole
licensed distributor of Skechers products here in the Philippines.

On November 30, 2006, this Court rendered a Decision12 dismissing the petition.

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

In petitioners motion for reconsideration, petitioner moved for a reconsideration of the earlier decision on the
following grounds:

(a) THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO THE
SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b) COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED

REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY PETITIONER WERE INTENDED FOR
DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF PETITIONER
RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY AFFECT THE GOODWILL AND
REPUTATION OF PETITIONER.

(c) THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED WITH GRAVE
ABUSE OF DISCRETION.

(d) THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE EVIDENCE
PRESENTED DURING THE SEARCH WARRANT APPLICATION PROCEEDINGS.

(e) THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED ON A
DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE THEREOF)
MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS WAS IMPROPER.

(f) THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS CLEAR. THE
DOMINANCY TEST SHOULD BE USED.

(g) THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION.13

On the other hand, petitioner-intervenors motion for reconsideration raises the following errors for this Courts
consideration, to wit:

(a) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO
LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED HOLISTIC TEST IN
DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO
LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR TRADEMARK INFRINGEMENT;
AND

(c) THE COURT OF APPEALS SANCTIONED THE TRIAL COURTS DEPARTURE FROM THE
USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT UPHELD THE
QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A FINDING THAT THERE IS
NO CONFUSING SIMILARITY.14

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary issue
posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement.

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically,
Section 155 of R.A. No. 8293 states:

Remedies; Infringement. Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the
same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and
apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering
for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to
cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the
registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment
any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is
actual sale of goods or services using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause
confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests the
Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent
or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the
mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark
sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual
impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality,
sales outlets, and market segments.16

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to
the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the
observer must focus not only on the predominant words, but also on the other features appearing on both

labels so that the observer may draw conclusion on whether one is confusingly similar to the other.17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of
confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business
(source or origin confusion), where, although the goods of the parties are different, the product, the mark of
which registration is applied for by one party, is such as might reasonably be assumed to originate with the
registrant of an earlier product, and the public would then be deceived either into that belief or into the belief
that there is some connection between the two parties, though inexistent. 18

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by respondent
in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO. While it is
undisputed that petitioners stylized "S" is within an oval design, to this Courts mind, the dominant feature of
the trademark is the stylized "S," as it is precisely the stylized "S" which catches the eye of the purchaser.
Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized "S", the
same being the dominant feature of petitioners trademark, already constitutes infringement under the
Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be
considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by
stating that the letter "S" has been used in so many existing trademarks, the most popular of which is the
trademark "S" enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such
reasoning, however, misses the entire point, which is that respondent had used a stylized "S," which is the
same stylized "S" which petitioner has a registered trademark for. The letter "S" used in the Superman logo,
on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion.
Accordingly, the comparison made by the CA of the letter "S" used in the Superman trademark with
petitioners stylized "S" is not appropriate to the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on the font
and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized "S" used by
petitioner; a stylized "S" which is unique and distinguishes petitioners trademark. Indubitably, the likelihood of
confusion is present as purchasers will associate the respondents use of the stylized "S" as having been
authorized by petitioner or that respondents product is connected with petitioners business.

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed petitioners
trademark. For its part, the RTC noted the following supposed dissimilarities between the shoes, to wit:

1. The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2. The word "Strong" is conspicuously placed at the backside and insoles.

3. The hang tags and labels attached to the shoes bears the word "Strong" for respondent and
"Skechers U.S.A." for private complainant;

4. Strong shoes are modestly priced compared to the costs of Skechers Shoes. 19

While there may be dissimilarities between the appearances of the shoes, to this Courts mind such
dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily
observed by simply comparing petitioners Energy20 model and respondents Strong21 rubber shoes,
respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and
"wavelike" pattern of the midsole and outer sole of respondents shoes are very similar to petitioners shoes, if
not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated designs in
practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the
back and six in front. On the side of respondents shoes, near the upper part, appears the stylized "S," placed
in the exact location as that of the stylized "S" on petitioners shoes. On top of the "tongue" of both shoes

appears the stylized "S" in practically the same location and size. Moreover, at the back of petitioners shoes,
near the heel counter, appears "Skechers Sport Trail" written in white lettering. However, on respondents
shoes appears "Strong Sport Trail" noticeably written in the same white lettering, font size, direction and
orientation as that of petitioners shoes. On top of the heel collar of petitioners shoes are two grayish-white
semi-transparent circles. Not surprisingly, respondents shoes also have two grayish-white semi-transparent
circles in the exact same location.
lihpwa1

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test,
ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court that
there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it is
indubitable that respondents products will cause confusion and mistake in the eyes of the public.
Respondents shoes may not be an exact replica of petitioners shoes, but the features and overall design are
so similar and alike that confusion is highly likely.
1avvphi1

In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc., 22 this Court, in a case for unfair
competition, had opined that even if not all the details are identical, as long as the general appearance of the
two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit:

From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court,
practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or
marketed by plaintiff Edwardson Manufacturing Corporation, except for their respective brands, of course. We
fully agree with the trial court that "the respective designs, shapes, the colors of the ankle patches, the bands,
the toe patch and the soles of the two products are exactly the same ... (such that) at a distance of a few
meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor." These elements are more than
sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were
identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not
too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily be
passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator
must be held liable. x x x23

Neither can the difference in price be a complete defense in trademark infringement. In McDonalds
Corporation v. L.C. Big Mak Burger. Inc.,24 this Court held:

Modern law recognizes that the protection to which the owner of a trademark 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 confusion 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; 53 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). x x x25

Indeed, the registered trademark owner may use its mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the products for specific
segments of the market.26 The purchasing public might be mistaken in thinking that petitioner had ventured
into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport
Trail might be associated or connected with petitioners brand, which scenario is plausible especially since
both petitioner and respondent manufacture rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and
reputation of the business established on the goods bearing the mark through actual use over a period of
time, but also to safeguard the public as consumers against confusion on these goods. 27 While respondents
shoes contain some dissimilarities with petitioners shoes, this Court cannot close its eye to the fact that for all
intents and purpose, respondent had deliberately attempted to copy petitioners mark and overall design and
features of the shoes. Let it be remembered, that defendants in cases of infringement do not normally copy
but only make colorable changes.28The most successful form of copying is to employ enough points of
similarity to confuse the public, with enough points of difference to confuse the courts. 29

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision dated
November 30, 2006 is RECONSIDERED and SET ASIDE.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

G.R. No. 158589

June 27, 2006

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES,
S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), Petitioners,
vs.
FORTUNE TOBACCO CORPORATION, Respondent.

DECISION

GARCIA, J.:

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson &
Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the
reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619,
to wit:

1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court of Pasig
City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark
infringement and damages thereat commenced by the petitioners against respondent Fortune
Tobacco Corporation; and

2. Resolution dated May 30, 20032 denying petitioners motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of
America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office
(PPO), the registered owner of the trademark "MARK VII" for cigarettes. Similarly, petitioner Benson &
Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of the trademark "MARK
TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as can be seen in
Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company
Fabriques de Tabac Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered
in 1964 by Ligget and Myers Tobacco Company. On the other hand, respondent Fortune Tobacco
Corporation, a company organized in the Philippines, manufactures and sells cigarettes using the trademark
"MARK."

The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of
their respective trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of
Trademark and Damages against respondent Fortune Tobacco Corporation, docketed as Civil Case No.
47374 of the Regional Trial Court of Pasig, Branch 166.

The decision under review summarized what happened next, as follows:

In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that they are
foreign corporations not doing business in the Philippines and are suing on an isolated transaction. xxx they
averred that the countries in which they are domiciled grant xxx to corporate or juristic persons of the
Philippines the privilege to bring action for infringement, xxx without need of a license to do business in those
countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK
TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the
registration of the trademark "LARK MILDS"]. xxx. [Petitioners] claimed that they have registered the
aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive
usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad
faith on the part of the [respondent], petitioners claimed that the [respondent], without any previous consent
from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar
trademark "MARK" xxx Accordingly, they argued that [respondents] use of the trademark "MARK" in its
cigarette products have caused and is likely to cause confusion or mistake, or would deceive purchasers and
the public in general into buying these products under the impression and mistaken belief that they are buying

[petitioners] products.

Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris
Convention, for brevity), to which the Philippines is a signatory xxx, [petitioners] pointed out that upon the
request of an interested party, a country of the Union may 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
said Convention. They likewise argued that, in accordance with Section 21-A in relation to Section 23 of
Republic Act 166, as amended, they are entitled to relief in the form of damages xxx [and] the issuance of a
writ of preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from
violating [petitioners] right to the exclusive use of their aforementioned trademarks.

[Respondent] filed its Answer xxx denying [petitioners] material allegations and xxx averred [among other
things] xxx that "MARK" is a common word, which cannot particularly identify a product to be the product of
the [petitioners] xxx
xxx

xxx

xxx.

lawphil.net

Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the [petitioners]
prayer for the issuance of a writ of preliminary injunction was negatively resolved by the court in an Order xxx
dated March 28, 1973. [The incidental issue of the propriety of an injunction would eventually be elevated to
the CA and would finally be resolved by the Supreme Court in its Decision dated July 16, 1993 in G.R. No.
91332]. xxx.
xxx

xxx

xxx

After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated November 3, 1999
dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit
trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have
capacity to institute the instant action, the trial court opined that [petitioners] failure to present evidence to
support their allegation that their respective countries indeed grant Philippine corporations reciprocal or similar
privileges by law xxx justifies the dismissal of the complaint xxx. It added that the testimonies of [petitioners]
witnesses xxx essentially declared that [petitioners] are in fact doing business in the Philippines, but
[petitioners] failed to establish that they are doing so in accordance with the legal requirement of first securing
a license. Hence, the court declared that [petitioners] are barred from maintaining any action in Philippine
courts pursuant to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners] trademarks by the [respondent] was
likewise answered xxx in the negative. It expounded that "in order for a name, symbol or device to constitute a
trademark, it must, either by itself or by association, point distinctly to the origin or ownership of the article to
which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying
such principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK"
and the Roman Numerals "VII", either alone or in combination of each other do not by themselves or by
association point distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying
public could not be deceived into believing that [respondents] "MARK" cigarettes originated either from the
USA, Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial court
stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is
likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the
goods of one manufacturer in the belief that they are those of another. xxx. The trial court ruled that the
[petitioners] failed to pass these tests as it neither presented witnesses or purchasers attesting that they have
bought [respondents] product believing that they bought [petitioners] "MARK VII", "MARK TEN" or "LARK",
and have also failed to introduce in evidence a specific magazine or periodical circulated locally, which
promotes and popularizes their products in the Philippines. It, moreover, elucidated that the words consisting
of the trademarks allegedly infringed by [respondent] failed to show that they have acquired a secondary
meaning as to identify them as [petitioners] products. Hence, the court ruled that the [petitioners] cannot avail
themselves of the doctrine of secondary meaning.

As to the issue of damages, the trial court deemed it just not to award any to either party stating that, since
the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an
infringement of their trademark, no wrongful act or omission can be attributed to them. xxx. 3 (Words in

brackets supplied)

Maintaining to have the standing to sue in the local forum and that respondent has committed trademark
infringement, petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R.
CV No. 66619.

Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their
legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial courts decision
on the underlying issue of respondents liability for infringement as it found that:

xxx the appellants [petitioners] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as
well-known marks entitled to protection even without the benefit of actual use in the local market and that the
similarities in the trademarks in question are insufficient as to cause deception or confusion tantamount to
infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages
prayed for by the appellants herein.4 (Word in bracket supplied)

With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of
May 30, 2003, petitioners are now with this Court via this petition for review essentially raising the following
issues: (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce
trademark rights in this country; and (2) whether or not respondent has committed trademark infringement
against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages.

In its Comment,5 respondent, aside from asserting the correctness of the CAs finding on its liability for
trademark infringement and damages, also puts in issue the propriety of the petition as it allegedly raises
questions of fact.

The petition is bereft of merit.

Dealing first with the procedural matter interposed by respondent, we find that the petition raises both
questions of fact and law contrary to the prescription against raising factual questions in a petition for review
on certiorari filed before the Court. A question of law exists when the doubt or difference arises as to what the
law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth
or falsity of alleged facts.6

Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts. 7 Unless the
factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse
of discretion, or contrary to the findings culled by the court of origin, 8 we will not disturb them.

It is petitioners posture, however, that their contentions should

be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed
facts.

Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by
the CA is correct is one of law.9 But, even if we consider and accept as pure questions of law the issues raised
in this petition, still, the Court is not inclined to disturb the conclusions reached by the appellate court, the
established rule being that all doubts shall be resolved in favor of the correctness of such conclusions. 10

Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance
with law and established jurisprudence in arriving at its assailed decision.

A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof
adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those
manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves protection. For, as Mr. Justice
Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12

The protection of trademarks is the laws recognition of the psychological function of symbols. If it is true that
we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising shortcut which induces a purchaser to select what he wants, or what he has been led to believe what he wants.
The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of
the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the
same - to convey through the mark, in the minds of potential customers, the desirability of the commodity
upon which it appears. Once this is attained, the trade-mark owner has something of value. If another
poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark rights
in this country, specifically, the right to sue for trademark infringement in Philippine courts and be accorded
protection against unauthorized use of their Philippine-registered trademarks.

In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of
member-countries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or
for unfair competition, without need of obtaining registration or a license to do business in the Philippines, and
without necessity of actually doing business in the Philippines. To petitioners, these grievance right and
mechanism are accorded not only by Section 21-A of Republic Act (R.A.) No. 166, as amended, or the
Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property,
otherwise known as the Paris Convention.

In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced
by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on
the basis of actual use in accordance with Sections 2-A13 and 5(a)14 of R.A. No. 166, as amended, providing
for a 2-month pre-registration use in local commerce and trade while the registration of "MARK VII" was on
the basis of registration in the foreign country of origin pursuant to Section 37 of the same law wherein it is
explicitly provided that prior use in commerce need not be alleged. 15

Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean
that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber
Corporation v. Universal Rubber Products, Inc.,16 petitioners state that such availability and sale may be
effected through the acts of importers and distributors.

Finally, petitioners would press on their entitlement to protection even in the absence of actual use of
trademarks in the country in view of the Philippines adherence to the Trade Related Aspects of Intellectual
Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the Intellectual Property
Code (hereinafter the "IP Code"), both of which provide that the fame of a trademark may be acquired through
promotion or advertising with no explicit requirement of actual use in local trade or commerce.

Before discussing petitioners claimed entitlement to enforce trademark rights in the Philippines, it must be
emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It
ought to be pointed out, however, that the appellate court qualified its holding with a statement, following G.R.
No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation, 17 that
such right to sue does not necessarily mean protection of their registered marks in the absence of actual use
in the Philippines.

Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of registration
of their trademarks in the Philippines.

As we ruled in G.R. No. 91332,18 supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied nonregistrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising
from such registration,19 i.e., as to the validity of the registration, ownership and the exclusive right to use the
registered marks, they may not successfully sue on the basis alone of their respective certificates of
registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to
availment of the rights and privileges vis--vis their trademarks in this country, to show proof that, on top of
Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens
pursuant to Section 21-A20 of R.A. No. 166.

In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity requirement is a
condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would
justify dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166
not being sufficient. In a subsequent case,22 however, the Court held that where the complainant is a national
of a Paris Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice,
because the reciprocal agreement between the two countries is embodied and supplied by the Paris
Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in
infringement suits.23

As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada,
are, together with the Philippines, members of the Paris Union does not automatically entitle petitioners to the
protection of their trademarks in this country absent actual use of the marks in local commerce and trade.

True, the Philippines adherence to the Paris Convention 24 effectively obligates the country to honor and
enforce its provisions25 as regards the protection of industrial property of foreign nationals in this country.
However, any protection accorded has to be made subject to the limitations of Philippine laws. 26 Hence,
despite Article 2 of the Paris Convention which substantially provides that (1) nationals of member-countries
shall have in this country rights specially provided by the Convention as are consistent with Philippine laws,
and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no
domicile requirement in the country where protection is claimed shall be required of persons entitled to the
benefits of the Union for the enjoyment of any industrial property rights, 27 foreign nationals must still observe
and comply with the conditions imposed by Philippine law on its nationals.

Considering that R.A. No. 166, as amended, specifically Sections 2 28 and 2-A29 thereof, mandates actual use
of the marks and/or emblems in local commerce and trade before they may be registered and ownership
thereof acquired, the petitioners cannot, therefore, dispense with the element of actual use. Their being
nationals of member-countries of the Paris Union does not alter the legal situation.

In Emerald Garment Mfg. Corporation v. Court of Appeals,30 the Court reiterated its rulings in Sterling Products
International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,31 Kabushi Kaisha Isetan v. Intermediate
Appellate Court,32 and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation 33 on the importance
of actual commercial use of a trademark in the Philippines notwithstanding the Paris Convention:

The provisions of the 1965 Paris Convention relied upon by private respondent and Sec. 21-A of the
Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et. al.
vs. Court of Appeals:
xxx

xxx

xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirements of
actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is
being decided by a municipal tribunal. Xxx. 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 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 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.

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the
actual use of such trademark in local commerce. As it were, registration does not confer upon the registrant
an absolute right to the registered mark. The certificate of registration merely constitutes prima facie evidence
that the registrant is the owner of the registered mark. Evidence of non-usage of the mark rebuts the
presumption of trademark ownership,34 as what happened here when petitioners no less admitted not doing
business in this country.35

Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an
absolute right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management,
Ltd. v. Development Group of Companies, Inc.36 trademark is a creation of use and, therefore, actual use is a
pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the
right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient. 37

Petitioners reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a different
factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and
not so engaged in, business in the Philippines, may actually earn reputation or goodwill for its goods in the
country. But unlike in the instant case, evidence of actual sales of Converse rubber shoes, such as sales
invoices, receipts and the testimony of a legitimate trader, was presented in Converse.

This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint
herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code,
however, took effect only on January 1, 1998 without a provision as to its retroactivity.39 In the same vein, the
TRIPS Agreement was inexistent when the suit for infringement was filed, the Philippines having adhered
thereto only on December 16, 1994.

With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied
by actual use thereof in the country accords the registrant only the standing to sue for infringement in
Philippine courts. Entitlement to protection of such trademark in the country is entirely a different matter.

This brings us to the principal issue of infringement.

Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows:

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 of color ably 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.

Petitioners would insist on their thesis of infringement since respondents mark "MARK" for cigarettes is
confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks
likewise for cigarettes. To them, the word "MARK" would likely cause confusion in the trade, or deceive
purchasers, particularly as to the source or origin of respondents cigarettes.

The "likelihood of confusion" is the gravamen of trademark infringement. 40 But likelihood of confusion is a

relative concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its
existence. Thus, in trademark infringement cases, more than in other kinds of litigation, precedents must be
evaluated in the light of each particular case.41

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy
test and the holistic test.42 The dominancy test43 sets sight on the similarity of the prevalent features of the
competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this
norm, the question at issue turns on whether the use of the marks involved would be likely to cause confusion
or mistake in the mind of the public or deceive purchasers.44

In contrast, the holistic test45 entails a consideration of the entirety of the marks as applied to the products,
including the labels and packaging, in determining confusing similarity.

Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of
confusion resulting in infringement arising from the respondents use of the trademark "MARK" for its
particular cigarette product.

For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as they
appear on the products,46 the striking dissimilarities are significant enough to warn any purchaser that one is
different from the other. Indeed, although the perceived offending word "MARK" is itself prominent in
petitioners trademarks "MARK VII" and "MARK TEN," the entire marking system should be considered as a
whole and not dissected, because a discerning eye would focus not only on the predominant word but also on
the other features appearing in the labels. Only then would such discerning observer draw his conclusion
whether one mark would be confusingly similar to the other and whether or not sufficient differences existed
between the marks.47

This said, the CA then, in finding that respondents goods cannot be mistaken as any of the three cigarette
brands of the petitioners, correctly relied on the holistic test.

But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a
trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is
affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason for the
origin and/or ownership angle is that unless the words or devices do so point out the origin or ownership, the
person who first adopted them cannot be injured by any appropriation or imitation of them by others, nor can
the public be deceived.49

Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does
not point to the origin or ownership of the cigarettes to which they apply, the local buying public could not
possibly be confused or deceived that respondents "MARK" is the product of petitioners and/or originated
from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual commercial use of petitioners
marks in local commerce was proven. There can thus be no occasion for the public in this country, unfamiliar
in the first place with petitioners marks, to be confused.

For another, a comparison of the trademarks as they appear on the goods is just one of the appreciable
circumstances in determining likelihood of confusion. Del Monte Corp. v. CA 50 dealt with another, where we
instructed to give due regard to the "ordinary purchaser," thus:

The question is not whether the two articles are distinguishable by their label when set side by side but
whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious
and off his guard, is such as to likely result in his confounding it with the original. As observed in several
cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in
trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone.

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to
the "ordinarily intelligent buyer" considering the type of product involved. 51

It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those
who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too
familiar with his brand and discriminating as well. We, thus, concur with the CA when it held, citing a definition
found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in this case means "one accustomed to
buy, and therefore to some extent familiar with, the goods in question."

Pressing on with their contention respecting the commission of trademark infringement, petitioners finally
point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is,
under said section, not a requisite before an aggrieved trademark owner can restrain the use of his trademark
upon goods manufactured or dealt in by another, it being sufficient that he had registered the trademark or
trade-name with the IP Office. In fine, petitioners submit that respondent is liable for infringement, having
manufactured and sold cigarettes with the trademark "MARK" which, as it were, are identical and/or
confusingly similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK".

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,53 the Court held that the following constitute the elements of
trademark infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also
Sections 2, 2-A, 9-A54and 20 thereof:

(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.

lawphil.net

As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and
"LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact,
petitioners judicial admission of not doing business in this country effectively belies any pretension to the
contrary.

Likewise, we note that petitioners even failed to support their claim that their respective marks are well-known
and/or have acquired goodwill in the Philippines so as to be entitled to protection even without actual use in
this country in accordance with Article 6bis55 of the Paris Convention. As correctly found by the CA, affirming
that of the trial court:

xxx the records are bereft of evidence to establish that the appellants [petitioners] products are indeed wellknown in the Philippines, either through actual sale of the product or through different forms of advertising.
This finding is supported by the fact that appellants admit in their Complaint that they are not doing business
in the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see
no cogent reason to disturb the trial courts finding that the appellants failed to establish that their products are
widely known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or in
other countries but circulated locally" have been presented by the appellants during trial. The appellants also
were not able to show the length of time or the extent of the promotion or advertisement made to popularize
their products in the Philippines.56

Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial and
appellate courts having peremptorily found allegations of infringement on the part of respondent to be without
basis. As we said time and time again, factual determinations of the trial court, concurred in by the CA, are
final and binding on this Court.57

For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to
respondents use of its mark and for petitioners failure to demonstrate confusing similarity between said
trademarks, the dismissal of their basic complaint for infringement and the concomitant plea for damages
must be affirmed. The law, the surrounding circumstances and the equities of the situation call for this
disposition.

WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court
of Appeals are AFFIRMED.

Costs against the petitioners.

SO ORDERED.

G .R. No. 180677 , Feb.

18, 2013

PDF

FIRST DIVISION

TANDUAY DISTILLERS, INC.,

Petitioner,

G.R. NO. 164324

PRESENT:
PUNO, C.J., CHAIRPERSON,
CARPIO,
CORONA,
LEONARDO-DE CASTRO,
AND
BERSAMIN, JJ.

- versus -

GINEBRA SAN MIGUEL, INC.,

RESPONDENT.

PROMULGATED:
AUGUST 14, 2009

X--------------------------------------------------X
DECISION
CARPIO, J.:
The Case
TANDUAY DISTILLERS, INC. (TANDUAY) FILED THIS PETITION FOR
REVIEW ON CERTIORARI[1] ASSAILING THE COURT OF APPEALS DECISION
DATED 9 JANUARY 2004[2] AS WELL AS THE RESOLUTION DATED 2 JULY
2004[3] IN CA-G.R. SP NO. 79655 DENYING THE MOTION FOR
RECONSIDERATION. IN THE ASSAILED DECISION, THE COURT OF APPEALS
(CA) AFFIRMED THE REGIONAL TRIAL COURTS ORDERS[4] DATED
23
SEPTEMBER 2003 AND 17 OCTOBER 2003 WHICH RESPECTIVELY GRANTED
GINEBRA SAN MIGUEL, INC.S (SAN MIGUEL) PRAYER FOR THE ISSUANCE OF
A TEMPORARY RESTRAINING ORDER (TRO) AND WRIT OF PRELIMINARY
INJUNCTION. THE REGIONAL TRIAL COURT OF MANDALUYONG CITY,
BRANCH 214 (TRIAL COURT), ENJOINED TANDUAY FROM COMMITTING THE
ACTS COMPLAINED OF, AND, SPECIFICALLY, TO CEASE AND DESIST FROM
MANUFACTURING, DISTRIBUTING, SELLING, OFFERING FOR SALE,
ADVERTISING, OR OTHERWISE USING IN COMMERCE THE MARK GINEBRA,
AND MANUFACTURING, PRODUCING, DISTRIBUTING, OR OTHERWISE
DEALING IN GIN PRODUCTS WHICH HAVE THE GENERAL APPEARANCE OF,
AND WHICH ARE CONFUSINGLY SIMILAR WITH, SAN MIGUELS MARKS,
BOTTLE DESIGN, AND LABEL FOR ITS GIN PRODUCTS.[5]
THE FACTS

Tanduay, a corporation organized and existing under Philippine laws, has been
engaged in the liquor business since 1854. In 2002, Tanduay developed a new gin product
distinguished by its sweet smell, smooth taste, and affordable price. Tanduay claims that it
engaged the services of an advertising firm to develop a brand name and a label for its new
gin product. The brand name eventually chosen was Ginebra Kapitan with the
representation of a revolutionary Kapitan on horseback as the dominant feature of its label.
Tanduay points out that the label design of Ginebra Kapitan in terms of color scheme,
size and arrangement of text, and other label features were precisely selected to distinguish
it from the leading gin brand in the Philippine market, Ginebra San Miguel. Tanduay
also states that the Ginebra Kapitan bottle uses a resealable twist cap to distinguish it
from Ginebra San Miguel and other local gin products with bottles which use the crown
cap or tansan.[6]
AFTER FILING THE TRADEMARK APPLICATION FOR GINEBRA
KAPITAN WITH THE INTELLECTUAL PROPERTY OFFICE (IPO) AND AFTER
SECURING THE APPROVAL OF THE PERMIT TO MANUFACTURE AND SELL
GINEBRA KAPITAN FROM THE BUREAU OF INTERNAL REVENUE, TANDUAY
BEGAN SELLING GINEBRA KAPITAN IN NORTHERN AND SOUTHERN LUZON
AREAS IN MAY 2003. IN JUNE 2003, GINEBRA KAPITAN WAS ALSO
LAUNCHED IN METRO MANILA.[7]
ON 13 AUGUST 2003, TANDUAY RECEIVED A LETTER FROM SAN
MIGUELS COUNSEL. THE LETTER INFORMED TANDUAY TO IMMEDIATELY
CEASE AND DESIST FROM USING THE MARK GINEBRA AND FROM
COMMITTING ACTS THAT VIOLATE SAN MIGUELS INTELLECTUAL
PROPERTY RIGHTS.[8]
ON 15 AUGUST 2003, SAN MIGUEL FILED A COMPLAINT FOR
TRADEMARK INFRINGEMENT, UNFAIR COMPETITION AND DAMAGES, WITH
APPLICATIONS FOR ISSUANCE OF TRO AND WRIT OF PRELIMINARY
INJUNCTION AGAINST TANDUAY BEFORE THE REGIONAL TRIAL COURT OF
MANDALUYONG. THE CASE WAS RAFFLED TO BRANCH 214 AND DOCKETED
AS IP CASE NO. MC-03-01 AND CIVIL CASE NO. MC-03-073.[9]
ON 25 AND 29 AUGUST AND 4 SEPTEMBER 2003, THE TRIAL COURT
CONDUCTED HEARINGS ON THE TRO. SAN MIGUEL SUBMITTED FIVE
AFFIDAVITS, BUT ONLY ONE AFFIANT, MERCEDES ABAD, WAS PRESENTED
FOR CROSS-EXAMINATION BECAUSE THE TRIAL COURT RULED THAT SUCH
EXAMINATION WOULD BE INCONSISTENT WITH THE SUMMARY NATURE OF
A TRO HEARING.[10] SAN MIGUEL SUBMITTED THE FOLLOWING PIECES OF
EVIDENCE:[11]
1. Affidavit of Mercedes Abad, President and Managing Director of the
research firm NFO Trends, Inc. (NFO Trends), to present, among others,
market survey results which prove that gin drinkers associate the term
Ginebra with San Miguel, and that the consuming public is being misled
that Ginebra Kapitan is a product of San Miguel;
2. MARKET SURVEY RESULTS CONDUCTED BY NFO TRENDS TO
DETERMINE THE BRAND ASSOCIATIONS OF THE MARK GINEBRA AND TO

PROVE THAT THE CONSUMING PUBLIC IS CONFUSED AS TO THE

MANUFACTURER OF GINEBRA KAPITAN;
3. AFFIDAVIT OF RAMON CRUZ, SAN MIGUELS GROUP PRODUCT
MANAGER, TO PROVE, AMONG OTHERS, THE PRIOR RIGHT OF SAN MIGUEL
TO THE MARK GINEBRA AS SHOWN IN VARIOUS APPLICATIONS FOR, AND
REGISTRATIONS OF, TRADEMARKS THAT CONTAIN THE MARK GINEBRA.
HIS AFFIDAVIT INCLUDED DOCUMENTS SHOWING THAT THE MARK
GINEBRA HAS BEEN USED ON SAN MIGUELS GIN PRODUCTS SINCE 1834;
4. AFFIDAVITS OF LEOPOLDO GUANZON, JR., SAN MIGUELS TRADE AND
PROMO MERCHANDISING HEAD FOR NORTH LUZON AREA, AND JUDERICK
CRESCINI, SAN MIGUELS DISTRICT SALES SUPERVISOR FOR SOUTH LUZONEAST AREA, TO PROVE, AMONG OTHERS, THAT TANDUAYS SALESMEN OR
DISTRIBUTORS MISREPRESENT GINEBRA KAPITAN AS SAN MIGUELS
PRODUCT AND THAT NUMEROUS RETAILERS OF SAN MIGUELS GIN
PRODUCTS ARE CONFUSED AS TO THE MANUFACTURER OF GINEBRA
KAPITAN; AND
5. AFFIDAVIT OF JOSE REGINALD PASCUAL, SAN MIGUELS DISTRICT
SALES SUPERVISOR FOR THE NORTH-GREATER MANILA AREA, TO PROVE,
AMONG OTHERS, THAT GIN DRINKERS CONFUSE SAN MIGUEL TO BE THE
MANUFACTURER OF GINEBRA KAPITAN DUE TO THE USE OF THE
DOMINANT FEATURE GINEBRA.
Tanduay filed a Motion to Strike Out Hearsay Affidavits and Evidence, which
motion was denied by the trial court. Tanduay presented witnesses who affirmed their
affidavits in open court, as follows:[12]
1. RAMONCITO BUGIA, GENERAL SERVICES MANAGER OF
TANDUAY. ATTACHED TO HIS AFFIDAVIT WERE VARIOUS
CERTIFICATES OF REGISTRATION OF TRADEMARKS CONTAINING
THE WORD GINEBRA OBTAINED BY TANDUAY AND OTHER
LIQUOR COMPANIES, TO PROVE THAT THE WORD GINEBRA IS
REQUIRED TO BE DISCLAIMED BY THE IPO. THE AFFIDAVIT ALSO
ATTESTED THAT THERE ARE OTHER LIQUOR COMPANIES USING
THE WORD GINEBRA AS PART OF THEIR TRADEMARKS FOR GIN
PRODUCTS ASIDE FROM SAN MIGUEL AND TANDUAY.
2. HERBERT ROSALES, VICE PRESIDENT OF J. SALCEDO AND
ASSOCIATES, INC., THE ADVERTISING AND PROMOTIONS COMPANY HIRED
BY TANDUAY TO DESIGN THE LABEL OF GINEBRA KAPITAN. HIS AFFIDAVIT
ATTESTED THAT THE LABEL WAS DESIGNED TO MAKE IT LOOK
ABSOLUTELY DIFFERENT FROM THE GINEBRA SAN MIGUEL LABEL.
ON 23 SEPTEMBER 2003, THE TRIAL COURT ISSUED A TRO PROHIBITING
TANDUAY FROM MANUFACTURING, SELLING AND ADVERTISING GINEBRA
KAPITAN.[13] THE DISPOSITIVE PORTION READS IN PART:
WHEREFORE, the application for temporary restraining order is hereby
GRANTED and made effective immediately. Plaintiff is directed to post a bond
of ONE MILLION PESOS (Php 1,000,000.00) within five (5) days from
issuance hereof, otherwise, this restraining order shall lose its efficacy.
Accordingly, defendant Tanduay Distillers, Inc., and all persons and agents
acting for and in behalf are enjoined to cease and desist from manufacturing,

distributing, selling, offering for sale and/or advertising or otherwise using in

commerce the mark GINEBRA KAPITAN which employs, thereon, or in the
wrappings, sundry items, cartons and packages thereof, the mark GINEBRA as
well as from using the bottle design and labels for its gin products during the
effectivity of this temporary restraining order unless a contrary order is issued by
this Court.[14]

On 3 October 2003, Tanduay filed a petition for certiorari with the CA. [15] Despite
Tanduays Urgent Motion to Defer Injunction Hearing, the trial court continued to conduct
hearings on 8, 9, 13 and 14 October 2003 for Tanduay to show cause why no writ of
preliminary injunction should be issued.[16] On 17 October 2003, the trial court granted San
Miguels application for the issuance of a writ of preliminary injunction. [17] The dispositive
portion of the Order reads:
WHEREFORE, the plaintiffs application for a writ of preliminary
injunction is GRANTED. Upon plaintiffs filing of an injunctive bond
executed to the defendant in the amount of P20,000,000.00 (TWENTY
MILLION) PESOS, let a Writ of Preliminary Injunction issue enjoining the
defendant, its employees, agents, representatives, dealers, retailers or assigns,
and any all persons acting on its behalf, from committing the acts complained
of, and, specifically, to cease and desist from manufacturing, distributing,
selling, offering for sale, advertising, or otherwise using in commerce the
mark GINEBRA, and manufacturing, producing, distributing or otherwise
dealing in gin products which have the general appearance of, and which are
confusingly similar with, plaintiffs marks, bottle design and label for its gin
products.
SO ORDERED.[18]

On 22 October 2003, Tanduay filed a supplemental petition in the CA assailing the

injunction order. On 10 November 2003, the CA issued a TRO enjoining the trial court
from implementing its injunction order and from further proceeding with the case. [19] On 23
December 2003, the CA issued a resolution directing the parties to appear for a hearing on
6 January 2004 to determine the need for the issuance of a writ of preliminary injunction.
[20]

ON 9 JANUARY 2004, THE CA RENDERED A DECISION DISMISSING

TANDUAYS PETITION AND SUPPLEMENTAL PETITION. ON 28 JANUARY 2004,
TANDUAY MOVED FOR RECONSIDERATION WHICH WAS DENIED IN A
RESOLUTION DATED 2 JULY 2004.[21]
AGGRIEVED BY THE DECISION DISMISSING THE PETITION AND
SUPPLEMENTAL PETITION AND BY THE RESOLUTION DENYING THE MOTION
FOR RECONSIDERATION, TANDUAY ELEVATED THE CASE BEFORE THIS
COURT.

THE TRIAL COURTS ORDERS

In the Order dated 23 September 2003, the trial court stated that during the hearings
conducted on 25 and 29 August and on 4 and 11 September 2003, the following facts have
been established:
1.
San Miguel has registered the trademark Ginebra San Miguel;
2. THERE IS A CLOSE RESEMBLANCE BETWEEN GINEBRA
SAN MIGUEL AND GINEBRA KAPITAN;
3. THE CLOSE SIMILARITY BETWEEN GINEBRA SAN MIGUEL
AND GINEBRA KAPITAN MAY GIVE RISE TO CONFUSION OF
GOODS SINCE SAN MIGUEL AND TANDUAY ARE COMPETITORS
IN THE BUSINESS OF MANUFACTURING AND SELLING
LIQUORS; AND
GINEBRA, WHICH IS A WELL-KNOWN TRADEMARK, WAS ADOPTED BY
TANDUAY TO BENEFIT FROM THE REPUTATION AND ADVERTISEMENT OF
THE ORIGINATOR OF THE MARK GINEBRA SAN MIGUEL, AND TO CONVEY
TO THE PUBLIC THE IMPRESSION OF SOME SUPPOSED CONNECTION
BETWEEN THE MANUFACTURER OF THE GIN PRODUCT SOLD UNDER THE
NAME GINEBRA SAN MIGUEL AND THE NEW GIN PRODUCT GINEBRA
KAPITAN.[22]
Based on these facts, the trial court concluded that San Miguel had demonstrated a
clear, positive, and existing right to be protected by a TRO. Otherwise, San Miguel would
suffer irreparable injury if infringement would not be enjoined. Hence, the trial court
granted the application for a TRO and set the hearing for preliminary injunction.[23]
IN THE ORDER DATED 17 OCTOBER 2003, THE TRIAL COURT GRANTED
THE APPLICATION FOR A WRIT OF PRELIMINARY INJUNCTION. THE TRIAL
COURT RULED THAT WHILE A CORPORATION ACQUIRES A TRADE NAME FOR
ITS PRODUCT BY CHOICE, IT SHOULD NOT SELECT A NAME THAT IS
CONFUSINGLY SIMILAR TO ANY OTHER NAME ALREADY PROTECTED BY
LAW OR IS PATENTLY DECEPTIVE, CONFUSING, OR CONTRARY TO EXISTING
LAW.[24]
THE TRIAL COURT POINTED OUT THAT SAN MIGUEL AND ITS
PREDECESSORS HAVE CONTINUOUSLY USED GINEBRA AS THE DOMINANT
FEATURE OF ITS GIN PRODUCTS SINCE 1834. ON THE OTHER HAND,
TANDUAY FILED ITS TRADEMARK APPLICATION FOR GINEBRA KAPITAN
ONLY ON 7 JANUARY 2003. THE TRIAL COURT DECLARED THAT SAN MIGUEL
IS THE PRIOR USER AND REGISTRANT OF GINEBRA WHICH HAS BECOME
CLOSELY ASSOCIATED TO ALL OF SAN MIGUELS GIN PRODUCTS, THEREBY
GAINING POPULARITY AND GOODWILL FROM SUCH NAME.[25]
THE TRIAL COURT NOTED THAT WHILE THE SUBJECT TRADEMARKS
ARE NOT IDENTICAL, IT IS OBVIOUSLY CLEAR THAT THE WORD GINEBRA
IS THE DOMINANT FEATURE IN THE TRADEMARKS. THE TRIAL COURT
STATED THAT THERE IS A STRONG INDICATION THAT CONFUSION IS LIKELY
TO OCCUR SINCE ONE WOULD INEVITABLY BE LED TO CONCLUDE THAT

BOTH PRODUCTS ARE AFFILIATED WITH SAN MIGUEL DUE TO THE

DISTINCTIVE MARK GINEBRA WHICH IS READILY IDENTIFIED WITH SAN
MIGUEL. THE TRIAL COURT CONCLUDED THAT ORDINARY PURCHASERS
WOULD NOT EXAMINE THE LETTERINGS OR FEATURES PRINTED ON THE
LABEL BUT WOULD SIMPLY BE GUIDED BY THE PRESENCE OF THE
DOMINANT MARK GINEBRA. ANY DIFFERENCE WOULD PALE IN
SIGNIFICANCE IN THE FACE OF EVIDENT SIMILARITIES IN THE DOMINANT
FEATURES AND OVERALL APPEARANCE OF THE PRODUCTS. THE TRIAL
COURT EMPHASIZED THAT THE DETERMINATIVE FACTOR WAS WHETHER
THE USE OF SUCH MARK WOULD LIKELY CAUSE CONFUSION ON THE PART
OF THE BUYING PUBLIC, AND NOT WHETHER IT WOULD ACTUALLY CAUSE
CONFUSION ON THE PART OF THE PURCHASERS. THUS, TANDUAYS CHOICE
OF GINEBRA AS PART OF THE TRADEMARK OF GINEBRA KAPITAN
TENDED TO SHOW TANDUAYS INTENTION TO RIDE ON THE POPULARITY
AND ESTABLISHED GOODWILL OF GINEBRA SAN MIGUEL.[26]
THE TRIAL COURT HELD THAT TO CONSTITUTE TRADEMARK
INFRINGEMENT, IT WAS NOT NECESSARY THAT EVERY WORD SHOULD BE
APPROPRIATED; IT WAS SUFFICIENT THAT ENOUGH BE TAKEN TO DECEIVE
THE PUBLIC IN THE PURCHASE OF A PROTECTED ARTICLE.[27]
THE TRIAL COURT CONCEDED TO TANDUAYS ASSERTION THAT THE
TERM GINEBRA IS A GENERIC WORD; HENCE, IT IS NON-REGISTRABLE
BECAUSE GENERIC WORDS ARE BY LAW FREE FOR ALL TO USE. HOWEVER,
THE TRIAL COURT RELIED ON THE PRINCIPLE THAT EVEN IF A WORD IS
INCAPABLE OF APPROPRIATION AS A TRADEMARK, THE WORD MAY STILL
ACQUIRE A PROPRIETARY CONNOTATION THROUGH LONG AND EXCLUSIVE
USE BY A BUSINESS ENTITY WITH REFERENCE TO ITS PRODUCTS. THE
PURCHASING PUBLIC WOULD ASSOCIATE THE WORD TO THE PRODUCTS OF
A BUSINESS ENTITY. THE WORD THUS ASSOCIATED WOULD BE ENTITLED TO
PROTECTION AGAINST INFRINGEMENT AND UNFAIR COMPETITION. THE
TRIAL COURT HELD THAT THIS PRINCIPLE COULD BE MADE TO APPLY TO
THIS CASE BECAUSE SAN MIGUEL HAS SHOWN THAT IT HAS ESTABLISHED
GOODWILL OF CONSIDERABLE VALUE, SUCH THAT ITS GIN PRODUCTS HAVE
ACQUIRED A WELL-KNOWN REPUTATION AS JUST GINEBRA. IN ESSENCE,
THE WORD GINEBRA HAS BECOME A POPULAR BY-WORD AMONG THE
CONSUMERS AND THEY HAD CLOSELY ASSOCIATED IT WITH SAN MIGUEL.[28]
ON THE OTHER HAND, THE TRIAL COURT HELD THAT TANDUAY FAILED
TO SUBSTANTIATE ITS CLAIM AGAINST THE ISSUANCE OF THE INJUNCTIVE
RELIEF.[29]
THE RULING OF THE COURT OF APPEALS
In resolving the petition and supplemental petition, the CA stated that it is
constrained to limit itself to the determination of whether the TRO and the writ of
preliminary injunction were issued by the trial court with grave abuse of discretion
amounting to lack of jurisdiction.[30]
TO WARRANT THE ISSUANCE OF A TRO, THE CA RULED THAT THE
AFFIDAVITS OF SAN MIGUELS WITNESSES AND THE FACT THAT THE

REGISTERED TRADEMARK GINEBRA SAN MIGUEL EXISTS ARE ENOUGH TO

MAKE A FINDING THAT SAN MIGUEL HAS A CLEAR AND UNMISTAKABLE
RIGHT TO PREVENT IRREPARABLE INJURY BECAUSE GIN DRINKERS
CONFUSE SAN MIGUEL TO BE THE MANUFACTURER OF GINEBRA
KAPITAN.[31]
THE CA ENUMERATED THE REQUISITES FOR AN INJUNCTION: (1) THERE
MUST BE A RIGHT IN ESSE OR THE EXISTENCE OF A RIGHT TO BE PROTECTED
AND (2) THE ACT AGAINST WHICH THE INJUNCTION IS TO BE DIRECTED IS A
VIOLATION OF SUCH RIGHT. THE CA STATED THAT THE TRADEMARKS
GINEBRA SAN MIGUEL AND GINEBRA KAPITAN ARE NOT IDENTICAL,
BUT IT IS CLEAR THAT THE WORD GINEBRA IS THE DOMINANT FEATURE
IN BOTH TRADEMARKS. THERE WAS A STRONG INDICATION THAT
CONFUSION WAS LIKELY TO OCCUR. ONE WOULD BE LED TO CONCLUDE
THAT BOTH PRODUCTS ARE AFFILIATED WITH SAN MIGUEL BECAUSE THE
DISTINCTIVE MARK GINEBRA IS IDENTIFIED WITH SAN MIGUEL. IT IS THE
MARK WHICH DRAWS THE ATTENTION OF THE BUYER AND LEADS HIM TO
CONCLUDE THAT THE GOODS ORIGINATED FROM THE SAME
MANUFACTURER.[32]
THE CA OBSERVED THAT THE GIN PRODUCTS OF GINEBRA SAN
MIGUEL AND GINEBRA KAPITAN POSSESS THE SAME PHYSICAL
ATTRIBUTES WITH REFERENCE TO THEIR FORM, COMPOSITION, TEXTURE,
OR QUALITY. THE CA UPHELD THE TRIAL COURTS RULING THAT SAN
MIGUEL HAS SUFFICIENTLY ESTABLISHED ITS RIGHT TO PRIOR USE AND
REGISTRATION OF THE MARK GINEBRA AS A DOMINANT FEATURE OF ITS
TRADEMARK. GINEBRA HAS BEEN IDENTIFIED WITH SAN MIGUELS
GOODS, THEREBY, IT ACQUIRED A RIGHT IN SUCH MARK, AND IF ANOTHER
INFRINGED THE TRADEMARK, SAN MIGUEL COULD INVOKE ITS PROPERTY
RIGHT.[33]
The Issue
The central question for resolution is whether San Miguel is entitled to the writ of
preliminary injunction granted by the trial court as affirmed by the CA. For this reason, we
shall deal only with the questioned writ and not with the merits of the case pending before
the trial court.

The Ruling of the Court

Clear and Unmistakable Right

SECTION 1, RULE 58 OF THE RULES OF COURT DEFINES A PRELIMINARY

INJUNCTION AS AN ORDER GRANTED AT ANY STAGE OF A PROCEEDING
PRIOR TO THE JUDGMENT OR FINAL ORDER, REQUIRING A PARTY OR A
COURT, AGENCY, OR A PERSON TO REFRAIN FROM A PARTICULAR ACT OR

ACTS.
A PRELIMINARY INJUNCTION IS A PROVISIONAL REMEDY FOR THE
PROTECTION OF SUBSTANTIVE RIGHTS AND INTERESTS. IT IS NOT A CAUSE
OF ACTION IN ITSELF BUT MERELY AN ADJUNCT TO THE MAIN CASE. ITS
OBJECTIVE IS TO PREVENT A THREATENED OR CONTINUOUS IRREPARABLE
INJURY TO SOME OF THE PARTIES BEFORE THEIR CLAIMS CAN BE
THOROUGHLY INVESTIGATED AND ADVISEDLY ADJUDICATED. IT IS
RESORTED TO ONLY WHEN THERE IS A PRESSING NEED TO AVOID INJURIOUS
CONSEQUENCES WHICH CANNOT BE REMEDIED UNDER ANY STANDARD
COMPENSATION.[34]
Section 3, Rule 58 of the Rules of Court provides:
SECTION 3. GROUNDS FOR ISSUANCE OF A WRIT OF
PRELIMINARY INJUNCTION.A PRELIMINARY INJUNCTION MAY BE
GRANTED WHEN IT IS ESTABLISHED:
(a) That the applicant is entitled to the relief demanded, and
the whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained of, or in
requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do,
or is procuring or suffering to be done, some act or acts probably in violation of the rights of
the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

Before an injunctive writ is issued, it is essential that the following requisites are
present: (1) the existence of a right to be protected and (2) the acts against which the
injunction is directed are violative of the right. The onus probandi is on the movant to
show that the invasion of the right sought to be protected is material and substantial, that
the right of the movant is clear and unmistakable, and that there is an urgent and
paramount necessity for the writ to prevent serious damage.[35]
San Miguel claims that the requisites for the valid issuance of a writ of preliminary
injunction were clearly established. The clear and unmistakable right to the exclusive use
of the mark Ginebra was proven through the continuous use of Ginebra in the
manufacture, distribution, marketing and sale of gin products throughout the Philippines
since 1834. To the gin-drinking public, the word Ginebra does not simply indicate a kind
of beverage; it is now synonymous with San Miguels gin products.[36]
San Miguel contends that Ginebra can be appropriated as a trademark, and there
was no error in the trial courts provisional ruling based on the evidence on record.

Assuming that Ginebra is a generic word which is proscribed to be registered as a

trademark under Section 123.1(h)[37] of Republic Act No. 8293 or the Intellectual Property
Code (IP Code),[38] it can still be appropriated and registered as a trademark under Section
123.1(j)[39] in relation to Section 123.2[40] of the IP Code, considering that Ginebra is also
a mark which designates the kind of goods produced by San Miguel. [41] San Miguel alleges
that although Ginebra, the Spanish word for gin, may be a term originally incapable of
exclusive appropriation, jurisprudence dictates that the mark has become distinctive of San
Miguels products due to its substantially exclusive and continuous use as the dominant
feature of San Miguels trademarks since 1834. Hence, San Miguel is entitled to a finding
that the mark is deemed to have acquired a secondary meaning. [42] San Miguel states that
Tanduay failed to present any evidence to disprove its claims; thus, there is no basis to set
aside the grant of the TRO and writ of preliminary injunction.[43]
San Miguel states that its disclaimer of the word Ginebra in some of its registered
marks is without prejudice to, and did not affect, its existing or future rights over
Ginebra, especially since Ginebra has demonstrably become distinctive of San
Miguels products.[44] San Miguel adds that it did not disclaim Ginebra in all of its
trademark registrations and applications like its registration for Ginebra Cruz de Oro,
Ginebra Ka Miguel, Ginebra San Miguel bottle, Ginebra San Miguel, and
Barangay Ginebra.[45]
Tanduay asserts that not one of the requisites for the valid issuance of a preliminary
injunction is present in this case. Tanduay argues that San Miguel cannot claim the
exclusive right to use the generic word Ginebra for its gin products based on its
registration of the composite marks Ginebra San Miguel, Ginebra S. Miguel 65, and
La Tondea Cliq! Ginebra Mix, because in all of these registrations, San Miguel
disclaimed any exclusive right to use the non-registrable word Ginebra for gin products.
[46]
Tanduay explains that the word Ginebra, which is disclaimed by San Miguel in all of
its registered trademarks, is an unregistrable component of the composite mark Ginebra
San Miguel. Tanduay argues that this disclaimer further means that San Miguel does not
have an exclusive right to the generic word Ginebra.[47] Tanduay states that the word
Ginebra does not indicate the source of the product, but it is merely descriptive of the
name of the product itself and not the manufacturer thereof.[48]
Tanduay submits that it has been producing gin products under the brand names
Ginebra 65, Ginebra Matador, and Ginebra Toro without any complaint from San Miguel.
Tanduay alleges that San Miguel has not filed any complaint against other liquor
companies which use Ginebra as part of their brand names such as Ginebra Pinoy, a
registered trademark of Webengton Distillery; Ginebra Presidente and Ginebra Luzon as
registered trademarks of Washington Distillery, Inc.; and Ginebra Lucky Nine and Ginebra
Santiago as registered trademarks of Distileria Limtuaco & Co., Inc.[49] Tanduay claims
that the existence of these products, the use and registration of the word Ginebra by
other companies as part of their trademarks belie San Miguels claim that it has been the
exclusive user of the trademark containing the word Ginebra since 1834.
Tanduay argues that before a court can issue a writ of preliminary injunction, it is
imperative that San Miguel must establish a clear and unmistakable right that is entitled to
protection. San Miguels alleged exclusive right to use the generic word Ginebra is far
from clear and unmistakable. Tanduay claims that the injunction issued by the trial
court was based on its premature conclusion that Ginebra Kapitan infringes Ginebra

San Miguel.[50]
In Levi Strauss & Co. v. Clinton Apparelle, Inc.,[51] we held:
While the matter of the issuance of a writ of preliminary injunction is
addressed to the sound discretion of the trial court, this discretion must be
exercised based upon the grounds and in the manner provided by law. The
exercise of discretion by the trial court in injunctive matters is generally not
interfered with save in cases of manifest abuse. And to determine whether
there was grave abuse of discretion, a scrutiny must be made of the bases, if
any, considered by the trial court in granting injunctive relief. Be it stressed
that injunction is the strong arm of equity which must be issued with great
caution and deliberation, and only in cases of great injury where there is no
commensurate remedy in damages.[52]

The CA upheld the trial courts ruling that San Miguel has sufficiently established its
right to prior use and registration of the word Ginebra as a dominant feature of its
trademark. The CA ruled that based on San Miguels extensive, continuous, and
substantially exclusive use of the word Ginebra, it has become distinctive of San
Miguels gin products; thus, a clear and unmistakable right was shown.
We hold that the CA committed a reversible error. The issue in the main case is San
Miguels right to the exclusive use of the mark Ginebra. The two trademarks Ginebra
San Miguel and Ginebra Kapitan apparently differ when taken as a whole, but
according to San Miguel, Tanduay appropriates the word Ginebra which is a dominant
feature of San Miguels mark.
It is not evident whether San Miguel has the right to prevent other business entities
from using the word Ginebra. It is not settled (1) whether Ginebra is indeed the
dominant feature of the trademarks, (2) whether it is a generic word that as a matter of law
cannot be appropriated, or (3) whether it is merely a descriptive word that may be
appropriated based on the fact that it has acquired a secondary meaning.
The issue that must be resolved by the trial court is whether a word like Ginebra
can acquire a secondary meaning for gin products so as to prohibit the use of the word
Ginebra by other gin manufacturers or sellers. This boils down to whether the word
Ginebra is a generic mark that is incapable of appropriation by gin manufacturers.
In Asia Brewery, Inc. v. Court of Appeals,[53] the Court ruled that pale pilsen are
generic words, pale being the actual name of the color and pilsen being the type of
beer, a light bohemian beer with a strong hops flavor that originated in Pilsen City in
Czechoslovakia and became famous in the Middle Ages, and hence incapable of
appropriation by any beer manufacturer.[54] Moreover, Section 123.1(h) of the IP Code
states that a mark cannot be registered if it consists exclusively of signs that are generic
for the goods or services that they seek to identify.

In this case, a cloud of doubt exists over San Miguels exclusive right relating to the
word Ginebra. San Miguels claim to the exclusive use of the word Ginebra is clearly
still in dispute because of Tanduays claim that it has, as others have, also registered the
word Ginebra for its gin products. This issue can be resolved only after a full-blown
trial.
In Ong Ching Kian Chuan v. Court of Appeals,[55] we held that in the absence of proof
of a legal right and the injury sustained by the movant, the trial courts order granting the
issuance of an injunctive writ will be set aside, for having been issued with grave abuse of
discretion.
We find that San Miguels right to injunctive relief has not been clearly and
unmistakably demonstrated. The right to the exclusive use of the word Ginebra has yet
to be determined in the main case. The trial courts grant of the writ of preliminary
injunction in favor of San Miguel, despite the lack of a clear and unmistakable right on its
part, constitutes grave abuse of discretion amounting to lack of jurisdiction.
Prejudging the Merits of the Case

Tanduay alleges that the CA, in upholding the issuance of the writ of preliminary
injunction, has prejudged the merits of the case since nothing is left to be decided by the
trial court except the amount of damages to be awarded to San Miguel.[56]
San Miguel claims that neither the CA nor the trial court prejudged the merits of the
case. San Miguel states that the CA did not rule on the ultimate correctness of the trial
courts evaluation and appreciation of the evidence before it, but merely found that the
assailed Orders of the trial court are supported by the evidence on record and that Tanduay
was not denied due process.[57] San Miguel argues that the CA only upheld the trial courts
issuance of the TRO and writ of preliminary injunction upon a finding that there was
sufficient evidence on record, as well as legal authorities, to warrant the trial courts
preliminary findings of fact.[58]
The instructive ruling in Manila International Airport Authority v. Court of
Appeals[59] states:
Considering the far-reaching effects of a writ of preliminary injunction,
the trial court should have exercised more prudence and judiciousness in its
issuance of the injunction order. We remind trial courts that while generally the
grant of a writ of preliminary injunction rests on the sound discretion of the court
taking cognizance of the case, extreme caution must be observed in the exercise
of such discretion. The discretion of the court a quo to grant an injunctive writ
must be exercised based on the grounds and in the manner provided by law.
Thus, the Court declared in Garcia v. Burgos:
It has been consistently held that there is no power the
exercise of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a doubtful

case, than the issuance of an injunction. It is the strong arm of

equity that should never be extended unless to cases of great injury,
where courts of law cannot afford an adequate or commensurate
remedy in damages.
Every court should remember that an injunction is a
limitation upon the freedom of action of the defendant and should
not be granted lightly or precipitately. It should be granted only
when the court is fully satisfied that the law permits it and the
emergency demands it. (Emphasis in the original)

WE BELIEVE THAT THE ISSUED WRIT OF PRELIMINARY INJUNCTION, IF

ALLOWED, DISPOSES OF THE CASE ON THE MERITS AS IT EFFECTIVELY
ENJOINS THE USE OF THE WORD GINEBRA WITHOUT THE BENEFIT OF A
FULL-BLOWN TRIAL. IN RIVAS V. SECURITIES AND EXCHANGE COMMISSION,
[60]
WE RULED THAT COURTS SHOULD AVOID ISSUING A WRIT OF
PRELIMINARY INJUNCTION WHICH WOULD IN EFFECT DISPOSE OF THE
MAIN CASE WITHOUT TRIAL. THE ISSUANCE OF THE WRIT OF PRELIMINARY
INJUNCTION HAD THE EFFECT OF GRANTING THE MAIN PRAYER OF THE
COMPLAINT SUCH THAT THERE IS PRACTICALLY NOTHING LEFT FOR THE
TRIAL COURT TO TRY EXCEPT THE PLAINTIFFS CLAIM FOR DAMAGES.
Irreparable Injury
TANDUAY POINTS OUT THAT THE SUPPOSED DAMAGES THAT SAN
MIGUEL WILL SUFFER AS A RESULT OF TANDUAYS INFRINGEMENT OR
UNFAIR COMPETITION CANNOT BE CONSIDERED IRREPARABLE BECAUSE
THE DAMAGES ARE SUSCEPTIBLE OF MATHEMATICAL COMPUTATION.
TANDUAY INVOKES SECTION 156.1 OF THE IP CODE[61] AS THE BASIS FOR THE
COMPUTATION OF DAMAGES.[62]
SAN MIGUEL AVERS THAT IT STANDS TO SUFFER IRREPARABLE INJURY
IF THE MANUFACTURE AND SALE OF TANDUAYS GINEBRA KAPITAN ARE
NOT ENJOINED. SAN MIGUEL CLAIMS THAT THE ROUGH ESTIMATE OF THE
DAMAGES[63] IT WOULD INCUR IS SIMPLY A GUIDE FOR THE TRIAL COURT IN
COMPUTING THE APPROPRIATE DOCKET FEES. SAN MIGUEL ASSERTS THAT
THE FULL EXTENT OF THE DAMAGE IT WOULD SUFFER IS DIFFICULT TO
MEASURE WITH ANY REASONABLE ACCURACY BECAUSE IT HAS INVESTED
HUNDREDS OF MILLIONS OVER A PERIOD OF 170 YEARS TO ESTABLISH
GOODWILL AND REPUTATION NOW BEING ENJOYED BY THE GINEBRA SAN
MIGUEL MARK.[64] SAN MIGUEL REFUTES TANDUAYS CLAIM THAT THE
INJURY WHICH SAN MIGUEL STANDS TO SUFFER CAN BE MEASURED WITH
REASONABLE ACCURACY AS THE LEGAL FORMULA TO DETERMINE SUCH
INJURY IS PROVIDED IN SECTION 156.1 OF THE IP CODE. SAN MIGUEL
REASONS THAT IF TANDUAYS CLAIM IS UPHELD, THEN THERE WOULD
NEVER BE A PROPER OCCASION TO ISSUE A WRIT OF PRELIMINARY
INJUNCTION IN RELATION TO COMPLAINTS FOR INFRINGEMENT AND
UNFAIR COMPETITION, AS THE INJURY WHICH THE OWNER OF THE MARK

SUFFERS, OR STANDS TO SUFFER, WILL ALWAYS BE SUSCEPTIBLE OF

MATHEMATICAL COMPUTATION.[65]
IN LEVI STRAUSS & CO. V. CLINTON APPARELLE, INC.,[66] THIS COURT
UPHELD THE APPELLATE COURTS RULING THAT THE DAMAGES LEVI
STRAUSS & CO. HAD SUFFERED OR CONTINUES TO SUFFER MAY BE
COMPENSATED IN TERMS OF MONETARY CONSIDERATION. THIS COURT,
QUOTING GOVERNMENT SERVICE INSURANCE SYSTEM V. FLORENDO,[67] HELD:
x x x a writ of injunction should never issue when an action for damages would
adequately compensate the injuries caused. The very foundation of the jurisdiction to issue
the writ of injunction rests in the probability of irreparable injury, inadequacy of pecuniary
compensation and the prevention of the multiplicity of suits, and where facts are not
shown to bring the case within these conditions, the relief of injunction should be refused.

Based on the affidavits and market survey report submitted during the injunction
hearings, San Miguel has failed to prove the probability of irreparable injury which it will
stand to suffer if the sale of Ginebra Kapitan is not enjoined. San Miguel has not
presented proof of damages incapable of pecuniary estimation. At most, San Miguel only
claims that it has invested hundreds of millions over a period of 170 years to establish
goodwill and reputation now being enjoyed by the Ginebra San Miguel mark such that
the full extent of the damage cannot be measured with reasonable accuracy. Without the
submission of proof that the damage is irreparable and incapable of pecuniary estimation,
San Miguels claim cannot be the basis for a valid writ of preliminary injunction.
WHEREFORE, WE GRANT THE PETITION. WE SET ASIDE THE DECISION
OF THE COURT OF APPEALS DATED 9 JANUARY 2004 AND THE RESOLUTION
DATED 2 JULY 2004 IN CA-G.R. SP NO. 79655. WE DECLARE VOID THE ORDER
DATED 17 OCTOBER 2003 AND THE CORRESPONDING WRIT OF PRELIMINARY
INJUNCTION ISSUED BY BRANCH 214 OF THE REGIONAL TRIAL COURT OF
MANDALUYONG CITY IN IP CASE NO. MC-03-01 AND CIVIL CASE NO. MC-03073.

THE REGIONAL TRIAL COURT OF MANDALUYONG CITY, BRANCH 214, IS

DIRECTED TO CONTINUE EXPEDITIOUSLY WITH THE TRIAL TO RESOLVE THE
MERITS OF THE CASE.
SO ORDERED.

THIRD DIVISION
WILLIAM C. YAO, SR.,
LUISA C. YAO, RICHARD
C. YAO, WILLIAM C. YAO
JR., and ROGER C. YAO,
Petitioners,
-versus

G.R. No. 168306

Present:
YNARES-SANTIAGO,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.

THE PEOPLE OF THE

PHILIPPINES,
PETRON
CORPORATION
and
PILIPINAS
SHELL
PETROLEUM CORP., and
Promulgated:
its Principal, SHELL INTL
PETROLEUM CO. LTD.,
June 19, 2007
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court,
petitioners William C. Yao, Sr., Luisa C. Yao, Richard C. Yao, William C. Yao, Jr., and
Roger C. Yao pray for the reversal of the Decision dated 30 September 2004, [2] and
Resolution dated 1 June 2005, of the Court of Appeals in CA G.R. SP No. 79256,
[3]
affirming the two Orders, both dated 5 June 2003, of the Regional Trial Court (RTC),
Branch 17, Cavite City, relative to Search Warrants No. 2-2003 and No. 3-2003. [4] In the
said Orders, the RTC denied the petitioners Motion to Quash Search Warrant [5] and
Motion for the Return of the Motor Compressor and Liquified Petroleum Gas (LPG)
Refilling Machine.[6]
The following are the facts:
Petitioners are incorporators and officers of MASAGANA GAS CORPORATION
(MASAGANA), an entity engaged in the refilling, sale and distribution of LPG products.
Private
respondents Petron Corporation
(Petron)
and Pilipinas Shell
Petroleum
Corporation (Pilipinas Shell) are two of the largest bulk suppliers and producers of LPG in
the Philippines. Their LPG products are sold under the marks GASUL and
SHELLANE, respectively. Petron is the registered owner in the Philippines of the

trademarks GASUL and GASUL cylinders used for its LPG products. It is the sole entity
in the Philippines authorized to allow refillers and distributors to refill, use, sell, and
distribute GASUL LPG containers, products and its trademarks. Pilipinas Shell, on the
other hand, is the authorized user in the Philippines of the tradename, trademarks,
symbols, or designs of its principal, Shell International Petroleum Company Limited (Shell
International), including the marks SHELLANE and SHELL device in connection with the
production, sale and distribution of SHELLANE LPGs. It is the only corporation in
the Philippines authorized to allow refillers and distributors to refill, use, sell and distribute
SHELLANE LPG containers and products.[7]
On
3
April
2003,
National
Bureau
of
Investigation
(NBI)
agent Ritche N. Oblanca (Oblanca) filed two applications for search warrant with the RTC,
Branch 17, CaviteCity, against petitioners and other occupants of the MASAGANA
compound located at Governors Drive, Barangay Lapidario, Trece Martires, Cavite City,
for alleged violation of Section 155, in relation to Section 170 of Republic Act No. 8293,
otherwise known as The Intellectual Property Code of the Philippines.[8] The two
applications for search warrant uniformly alleged that per information, belief, and personal
verification of Oblanca, the petitioners are actually producing, selling, offering for sale
and/or distributing LPG products using steel cylinders owned by, and bearing
the tradenames, trademarks, and devices of Petron and Pilipinas Shell, without authority
and in violation of the rights of the said entities.
In his two separate affidavits[9] attached to the two applications for search
warrant, Oblanca alleged:
1.
[That] on 11 February 2003, the National Bureau of Investigation
(NBI) received a letter-complaint from Atty. Bienvenido I. Somera Jr.
of Villaraza and Angangco, on behalf of among others, [Petron Corporation
(PETRON)] and Pilipinas Shell Petroleum Corporation (PSPC), the authorized
representative of Shell International Petroleum Company Limited (Shell
International), requesting assistance in the investigation and, if warranted,
apprehension and prosecution of certain persons and/or establishments suspected
of violating the intellectual property rights [of PETRON] and of PSPC and Shell
International.
2.
[That] on the basis of the letter-complaint, I, together with Agent
Angelo Zarzoso, was assigned as the NBI agent on the case.
3.
[That] prior to conducting the investigation on the reported
illegal activities, he reviewed the certificates of trademark registrations issued
in favor of [PETRON], PSPC and Shell International as well as other
documents and other evidence obtained by the investigative agency authorized
by [PETRON], PSPC and Shell International to investigate and cause the
investigation of persons and establishments violating the rights of [PETRON],
PSPC and Shell International, represented by Mr. Bernabe C. Alajar. Certified
copies of the foregoing trademark registrations are attached hereto as Annexes
A to :E.
4.

[That] among the establishments alleged to be unlawfully

refilling
and
unlawfully
selling
and
distributing
[Gasul LPG
and] Shellane products
is Masagana Gas
Corporation
(MASAGANA). Based on Securities and Exchange Commission Records,
MASAGANA has its principal office address at 9775 Kamagong Street, San
Antonio Village, Makati, MetroManila. The incorporators and directors of
MASAGANA are William C. Yao, Sr., Luisa C. Yao, Richard C. Yao, William
C. Yao, Jr., and Roger C. Yao. x x x.
5.
I confirmed that MASAGANA is not authorized to use
[PETRON and] Shellane LPG cylinders and its trademarks and tradenames or
to be refillers or distributors of [PETRON and] Shellane LPGs.
6.
I went to MASAGANAs refilling station located at Governors
Drive, Barangay Lapidario, Trece Martires City (sic), Cavite to investigate its
activities. I confirmed that MASAGANA is indeed engaged in the
unauthorized refilling, sale and/or distribution of [Gasul and] Shellane LPG
cylinders. I found out that MASAGANA delivery trucks with Plate Nos.
UMN-971, PEZ-612, WTE-527, XAM-970 and WFC-603 coming in and out
of the refilling plant located at the aforementioned address contained multibrand LPG cylinders including [Gasul and] Shellane. x x x.
7.
[That] on 13 February 2003, I conducted a test-buy accompanied
by
Mr. Bernabe C. Alajar. After
asking
the
purpose
of
our
visit, MASAGANAs guard allowed us to enter the MASAGANA refilling
plant to purchase GASUL and SHELLANE LPGs. x x x. We were issued an
order slip which we presented to the cashiers office located near the refilling
station. After paying the amount x x x covering the cost of the cylinders and
their contents, they were issued Cash Invoice No. 56210 dated February 13,
2003. We were, thereafter, assisted by the plant attendant in choosing empty
GASUL and SHELLANE 11 kg. cylinders, x x x were brought to the refilling
station [and filled in their presence.] I noticed that no valve seals were placed
on the cylinders.
[That] while inside the refilling plant doing the test-buy, I noticed that
stockpiles of multi-branded cylinders including GASUL and SHELLANE
cylinders were stored near the refilling station. I also noticed that the total land
area of the refilling plant is about 7,000 to 10,000 square meters. At the corner
right side of the compound immediately upon entering the gate is a covered
area where the maintenance of the cylinders is taking place. Located at the
back right corner of the compound are two storage tanks while at the left side
also at the corner portion is another storage tank. Several meters and fronting
the said storage tank is where the refilling station and the office are located. It
is also in this storage tank where the elevated blue water tank depicting
MASAGANA CORP. is located. About eleven (11) refilling pumps and stock
piles of multi-branded cylinders including Shellane and GASUL are stored in
the refilling station. At the left side of the entrance gate is the guard house
with small door for the pedestrians and at the right is a blue steel gate used for
incoming and outgoing vehicles.
8.
[That] on 27 February 2003, I conducted another test-buy
accompanied by Mr. Bernabe C. Alajar. x x x After choosing the cylinders, we
were issued an order slip which we presented to the cashier. Upon payment,
Cash Invoice No. 56398 was issued covering the cost of both GASUL

and SHELLANE LPG cylinders and their contents. x x x Both cylinders were
refilled in our presence and no valve seals were placed on the cylinders.

Copies of the photographs of the delivery trucks, LPG cylinders and registration
papers were also attached to the aforementioned affidavits.[10]
Bernabe C. Alajar (Alajar), owner of Able Research and Consulting Services Inc.,
was hired by Petron and Pilipinas Shell to assist them in carrying out their Brand
Protection Program. Alajar accompanied Oblanca during the surveillance of and test-buys
at the refilling plant of MASAGANA. He also executed two separate affidavits
corroborating the statements of Oblanca. These were annexed to the two applications for
search warrant.[11]
After conducting the preliminary examination on Oblanca and Alajar, and upon
reviewing
their
sworn
affidavits
and
other
attached
documents,
Judge Melchor Q.C.Sadang (Judge Sadang), Presiding Judge of the RTC, Branch
17, Cavite City, found probable cause and correspondingly issued Search Warrants No. 22003 and No. 3-2003.[12] The search warrants commanded any peace officer to make an
immediate search of the MASAGANA compound and to seize the following items:
Under Search Warrant No. 2-2003:
a.

Empty/filled
LPG
cylinder
tanks/containers,
bearing
the tradename SHELLANE, SHELL (Device) of Pilipinas Shell
Petroleum Corporation and the trademarks and other devices owned by
Shell International Petroleum Company, Ltd.;

b.

Machinery and/or equipment being used or intended to be used for the

purpose of illegally refilling LPG cylinders belonging to Pilipinas Shell
Petroleum Corporation bearing the latters tradename as well as the marks
belonging to Shell International Petroleum Company, Ltd., enumerated
hereunder:
1.
2.
3.
4.
5.
6.
7.

Bulk/Bullet LPG storage tanks;

Compressor/s (for pneumatic refilling system);
LPG hydraulic pump/s;
LPG refilling heads/hoses and appurtenances or LPG filling
assembly;
LPG pipeline gate valve or ball valve and handles and levers;
LPG weighing scales; and
Seals simulating the shell trademark.

c.

Sales invoices, ledgers, journals, official receipts, purchase orders, and

all other books of accounts, inventories and documents pertaining to the
production, sale and/or distribution of the aforesaid goods/products.

d.

Delivery truck bearing Plate Nos. WTE-527, XAM-970 and WFC-603,

hauling trucks, and/or other delivery trucks or vehicles or conveyances
being used or intended to be used for the purpose of selling and/or

distributing the above-mentioned counterfeit products.

Under Search Warrant No. 3-2003:

a.

Empty/filled
LPG
cylinder
tanks/containers,
bearing Petron Corporations
(Petron) tradename and
its tradename GASUL and other devices owned and/or used exclusively
by Petron;

b.

Machinery and/or equipment being used or intended to be used for the

purpose
of
illegally
refilling
LPG
cylinders
belonging
to Petron enumerated hereunder;
1.
2.
3.
4.
5.
6.
7.

Bulk/Bullet LPG storage tanks;

Compressor/s (for pneumatic filling system);
LPG hydraulic pump/s;
LPG filling heads/hoses and appurtenances or LPG filling
assembly;
LPG pipeline gate valve or ball valve and handles levers;
LPG weighing scales; and
Seals bearing the Petron mark;

c.

Sales invoices, ledgers, journals, official receipts, purchase orders, and

all other books of accounts, inventories and documents pertaining to the
production, sale and/or distribution of the aforesaid goods/products; and

d.

Delivery trucks bearing Plate Nos. UMN-971, PEZ-612 and WFC-603,

hauling trucks, and/or other delivery trucks or vehicles or conveyances
being used for the purpose of selling and/or distributing the abovementioned counterfeit products.

Upon the issuance of the said search warrants, Oblanca and several NBI operatives
immediately proceeded to the MASAGANA compound and served the search warrants
on petitioners.[13] After searching the premises of MASAGANA, the following articles
described in Search Warrant No. 2-2003 were seized:
a.

Thirty-eight (38) filled 11 kg. LPG cylinders, bearing

the tradename of Pilipinas Shell Petroleum Corporation and the
trademarks and other devices owned by Shell International Petroleum
Company, Ltd.;

b.

Thirty-nine (39) empty 11 kg. LPG cylinders, bearing

the tradename of Pilipinas Shell Petroleum Corporation and the
trademarks and other devices owned by Shell International Petroleum
Company, Ltd.;

c.

Eight
(8)
filled
50
kg.
LPG
cylinders,
bearing
the tradename of Pilipinas Shell Petroleum Corporation and the
trademarks and other devices owned by Shell International Petroleum
Company, Ltd.;

d.

e.

Three
(3)
empty
50
kg.
LPG
cylinders,
bearing
the tradename of Pilipinas Shell Petroleum Corporation and the
trademarks and other devices owned by Shell International Petroleum
Company, Ltd.;
One (1) set of motor compressor for filling system.

Pursuant to Search Warrant No. 3-2003, the following articles were also seized:
a.

Six
(6)
filled
11 kg.
LPG
cylinders
without
seal,
bearing Petrons tradename and its trademark GASUL and other devices
owned and/or used exclusively by Petron;

b.

Sixty-three
(63)
empty
11
kg.
LPG
bearing Petrons tradename and its trademark GASUL
devices owned and/or used exclusively by Petron;

c.

Seven
(7)
tampered
11
kg.
LPG
cylinders,
bearing Petrons tradename and its trademark GASUL and other devices
owned and/or used exclusively by Petron;

d.

Five (5) tampered 50 kg. LPG cylinders, bearing Petrons tradename and
its trademark GASUL and other devices owned and/or used exclusively
by Petron with tampered GASUL logo;

e.

One (1) set of motor compressor for filling system; and

f.

One (1) set of LPG refilling machine.

cylinders,
and other

On 22 April 2003, petitioners filed with the RTC a Motion to Quash Search
Warrants No. 2-2003 and No. 3-2003[14] on the following grounds:
1.

There is no probable cause for the issuance of the search warrant

and the conditions for the issuance of a search warrant were not
complied with;

2.

Applicant
NBI
Agent
Ritchie
N. Oblanca and
his
witness Bernabe C. Alajar do not have any authority to apply for
a search warrant. Furthermore, they committed perjury when they
alleged in their sworn statements that they conducted a test-buy
on two occasions;

3.

The place to be searched was not specified in the Search Warrant

as the place has an area of 10,000 square meters (one hectare)
more or less, for which reason the place to be searched must be
indicated with particularity;

4.

The search warrant is characterized as a general warrant as the

items to be seized as mentioned in the search warrant are being

used in the conduct of the lawful business of respondents and the

same are not being used in refilling Shellane and Gasul LPGs.

On 30 April 2003, MASAGANA, as third party claimant, filed with the RTC a
Motion for the Return of Motor Compressor and LPG Refilling Machine. [15] It claimed
that it is the owner of the said motor compressor and LPG refilling machine; that these
items were used in the operation of its legitimate business; and that their seizure will
jeopardize its business interests.
On 5 June 2003, the RTC issued two Orders, one of which denied the petitioners
Motion to Quash Search Warrants No. 2-2003 and No. 3-2003, and the other one also
denied the Motion for the Return of Motor Compressor and LPG Refilling Machine of
MASAGANA, for lack of merit.[16]
With respect to the Order denying the petitioners motion to quash Search
Warrants No. 2-2003 and No. 3-2003, the RTC held that based on the testimonies
of Oblancaand Alajar, as well as the documentary evidence consisting of receipts,
photographs, intellectual property and corporate registration papers, there is probable
cause to believe that petitioners are engaged in the business of refilling or using cylinders
which bear the trademarks or devices of Petron and Pilipinas Shell in the place sought to
be searched and that such activity is probably in violation of Section 155 in relation to
Section 170 of Republic Act No. 8293.
It also ruled that Oblanca and Alajar had personal knowledge of the acts
complained of since they were the ones who monitored the activities of and conducted
test-buys on MASAGANA; that the search warrants in question are not general warrants
because the compound searched are solely used and occupied by MASAGANA, and as
such, there was no need to particularize the areas within the compound that would be
searched; and that the items to be seized in the subject search warrants were sufficiently
described with particularity as the same was limited to cylinder tanks bearing the
trademarks GASUL and SHELLANE.
As regards the Order denying the motion of MASAGANA for the return of its
motor compressor and LPG refilling machine, the RTC resolved that MASAGANA
cannot be considered a third party claimant whose rights were violated as a result of the
seizure since the evidence disclosed that petitioners are stockholders of MASAGANA
and that they conduct their business through the same juridical entity. It maintained that
to rule otherwise would result in the misapplication and debasement of the veil of
corporate fiction. It also stated that the veil of corporate fiction cannot be used as a
refuge from liability.
Further, the RTC ratiocinated that ownership by another person or entity of the
seized items is not a ground to order its return; that in seizures pursuant to a search
warrant, what is important is that the seized items were used or intended to be used as
means of committing the offense complained of; that by its very nature, the properties

sought to be returned in the instant case appear to be related to and intended for the
illegal activity for which the search warrants were applied for; and that the items seized
are instruments of an offense.
Petitioners filed Motions for Reconsideration of the assailed Orders, [17] but these
were denied by the RTC in its Order dated 21 July 2003 for lack of compelling reasons.
[18]

Subsequently, petitioners appealed the two Orders of the RTC to the Court of
Appeals via a special civil action for certiorari under Rule 65 of the Rules of Court.
[19]
On30 September 2004, the Court of Appeals promulgated its Decision affirming the
Orders of the RTC.[20] It adopted in essence the bases and reasons of the RTC in its two
Orders. The decretal portion thereof reads:
Based on the foregoing, this Court finds no reason to disturb the assailed
Orders of the respondent judge. Grave abuse of discretion has not been proven to
exist in this case.
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The
assailed orders both dated June 5, 2003 are hereby AFFIRMED.

Petitioners filed a Motion for Reconsideration [21] of the Decision of the Court of
Appeals, but this was denied in its Resolution dated 1 June 2005 for lack of merit.[22]
Petitioners filed the instant petition on the following grounds:

I.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
PRESIDING JUDGE OF RTC CAVITE CITY HAD SUFFICIENT BASIS IN
DECLARING THE EXISTENCE OF PROBABLE CAUSE;
II.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NBI
AGENT (RITCHIE OBLANCA) CAN APPLY FOR THE SEARCH
WARRANTS NOTHWITHSTANDING HIS LACK OF AUTHORITY;
III.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
REQUIREMENT OF GIVING A PARTICULAR DESCRIPTION OF THE
PLACE TO BE SEARCHED WAS COMPLIED WITH;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE

APPLICATIONS AND THE SEARCH WARRANTS THEMSELVES SHOW

NO AMBIGUITY OF THE ITEMS TO BE SEIZED;
V.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
COMPLAINT IS DIRECTED AGAINST MASAGANA GAS CORPORATION,
ACTING THROUGH ITS OFFICERS AND DIRECTORS, HENCE
MASAGANA GAS CORPORATION MAY NOT BE CONSIDERED AS
THIRD PARTY CLAIMANT WHOSE RIGHTS WERE VIOLATED AS A
RESULT OF THE SEIZURE.[23]

Apropos the first issue, petitioners allege that Oblanca and Alajar had no personal
knowledge of the matters on which they testified; that Oblanca and Alajar lied to
JudgeSadang when they stated under oath that they were the ones who conducted the testbuys on two different occasions; that the truth of the matter is
that Oblanca and Alajar never made the purchases personally; that the transactions were
undertaken by other persons namely, Nikko Javier and G. Villanueva as shown in the
Entry/Exit Slips of MASAGANA; and that even if it were true
that Oblanca and Alajar asked Nikko Javier and G. Villanueva to conduct the test-buys, the
information relayed by the latter two to the former was mere hearsay.[24]
Petitioners also contend that if Oblanca and Alajar had indeed used different names
in purchasing the LPG cylinders, they should have mentioned it in their applications for
search warrants and in their testimonies during the preliminary examination; that it was
only after the petitioners had submitted to the RTC the entry/exit slips showing different
personalities who made the purchases that Oblanca and Alajar explained that they had to
use different names in order to avoid detection; that Alajar is not connected with either of
the private respondents; that Alajar was not in a position to inform the RTC as to the
distinguishing trademarks of SHELLANE and GASUL; that Oblanca was not also
competent to testify on the marks allegedly infringed by petitioners; that
Judge Sadang failed to ask probing questions on the distinguishing marks of SHELLANE
and GASUL; that the findings of the Brand Protection Committee of Pilipinas Shell were
not
submitted
nor
presented
to
the
RTC;
that
although
Judge Sadang examined Oblanca and Alajar, the former did not ask exhaustive questions;
and that the questions Judge Sadang asked were merely rehash of the contents of the
affidavits of Oblanca and Alajar.[25]
These contentions are devoid of merit.
Article III, Section 2, of the present Constitution states the requirements before a
search warrant may be validly issued, to wit:
Section 2. The right of the people to be secure in their persons, houses,
papers, and effects against unreasonable searches and seizures of whatever
nature and for any purpose shall be inviolable, and no search warrant or

warrant of arrest shall issue except upon probable cause to be determined

personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing
the place to be searched and the persons or things to be seized.
(emphasis supplied).

Section 4 of Rule 126 of the Revised Rules on Criminal Procedure, provides with
more particularity the requisites in issuing a search warrant, viz:
SEC. 4. Requisites for issuing search warrant. A search warrant shall
not issue except upon probable cause in connection with one specific offense to
be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the things to be seized which
may be anywhere in the Philippines.

According to the foregoing provisions, a search warrant can be issued only upon a
finding of probable cause. Probable cause for search warrant means such facts and
circumstances which would lead a reasonably discreet and prudent man to believe that an
offense has been committed and that the objects sought in connection with the offense are
in the place to be searched.[26]
The facts and circumstances being referred thereto pertain to facts, data or
information personally known to the applicant and the witnesses he may present. [27] The
applicant or his witnesses must have personal knowledge of the circumstances surrounding
the commission of the offense being complained of. Reliable information is insufficient.
Mere affidavits are not enough, and the judge must depose in writing the complainant and
his witnesses.[28]
Section 155 of Republic Act No. 8293 identifies the acts constituting trademark
infringement, thus:
SEC. 155. Remedies; Infringement. Any person who shall, without the
consent of the owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark or the same container or a dominant feature
thereof in connection with the sale, offering for sale, distribution, advertising of
any goods or services including other preparatory steps necessary to carry out
the sale of any goods or services on or in connection with which such use is
likely to cause confusion, or to cause mistake, or to deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark
or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake,

or to deceive, shall be liable in a civil action for infringement by the registrant

for the remedies hereinafter set forth: Provided, That the infringement takes
place at the moment any of the acts stated in Subsection 155.1 or this subsection
are committed regardless of whether there is actual sale of goods or services
using the infringing material.

As can be gleaned in Section 155.1, mere unauthorized use of a container bearing a

registered trademark in connection with the sale, distribution or advertising of goods or
services which is likely to cause confusion, mistake or deception among the
buyers/consumers can be considered as trademark infringement.
In his sworn affidavits,[29] Oblanca stated that before conducting an investigation on
the alleged illegal activities of MASAGANA, he reviewed the certificates of trademark
registrations issued by the Philippine Intellectual Property Office in favor
of Petron and Pilipinas Shell; that he confirmed from Petron and Pilipinas Shell that
MASAGANA is not authorized to sell, use, refill or distribute GASUL and SHELLANE
LPG cylinder containers; that he and Alajar monitored the activities of MASAGANA in its
refilling
plant
station
located
within
its
compound
at
Governors
Drive, Barangay Lapidario, Trece Martires, Cavite City; that, using different names, they
conducted two test-buys therein where they purchased LPG cylinders bearing the
trademarks GASUL and SHELLANE; that the said GASUL and SHELLANE LPG
cylinders were refilled in their presence by the MASAGANA employees; that while they
were inside the MASAGANA compound, he noticed stock piles of multi-branded
cylinders including GASUL and SHELLANE LPG cylinders; and that they observed
delivery trucks loaded with GASUL and SHELLANE LPG cylinders coming in and out of
the MASAGANA compound and making deliveries to various retail outlets. These
allegations were corroborated by Alajar in his separate affidavits.
In support of the foregoing statements, Oblanca also submitted the following
documentary and object evidence:
1.

Certified true copy of the Certificate of Registration No. 44046 for

SHELL (DEVICE) in the name of Shell International;

2.

Certified true copy of the Certificate of Registration No. 41789 for

SHELL (DEVICE) in the name of Shell International;

3.

Certified true copy of the Certificate of Registration No. 37525 for

SHELL (DEVICE) in the name of Shell International;

4.

Certified true copy of the Certificate of Registration No. R-2813 for

SHELL in the name of Shell International;

5.

Certified true copy of the Certificate of Registration No. 31443 for

SHELLANE in the name of Shell International;

6.

Certified true copy of the Certificate of Registration No. 57945 for the
mark GASUL in the name of Petron;

7.

Certified true copy of the Certificate of Registration No. C-147 for

GASUL CYLINDER CONTAINING LIQUEFIED PETROLEUM
GAS in the name of Petron;

8.

Certified true copy of the Certificate of Registration No. 61920 for the
mark GASUL AND DEVICE in the name of Petron;

9.

Certified true copy of the Articles of Incorporation of Masagana;

10.

Certified true copy of the By-laws of Masagana;

11.

Certified true copy of the latest General Information Sheet

of Masagana on file with the Securities and Exchange Commission;

12.

Pictures of delivery trucks coming in and out of Masagana while it

delivered Gasul and Shellane LPG;

13.

Cash Invoice No. 56210 dated 13 February 2003 issued by Masagana for
the Gasul and Shellane LPG
purchased
by
Agent Oblanca and
witness Alajar;

14.

Pictures of the Shellane and Gasul LPGs covered by Cash Invoice No.
56210 purchased from Masagana by Agent Oblanca and witness Alajar;

15.

Cash Invoice No. 56398 dated 27 February 2003 issued by Masagana for
the Gasul and Shellane LPG
purchased
by
Agent Oblanca and
witness Alajar; and

16.

Pictures of the Shellane and Gasul LPGs covered by Cash Invoice No.
56398 purchased from Masagana by Agent Oblanca and witness Alajar.
[30]

Extant from the foregoing testimonial, documentary and object evidence is

that Oblanca and Alajar have personal knowledge of the fact that petitioners, through
MASAGANA, have been using the LPG cylinders bearing the marks GASUL and
SHELLANE without permission from Petron and Pilipinas Shell, a probable cause for
trademark infringement. Both Oblanca and Alajar were clear and insistent that they were
the very same persons who monitored the activities of MASAGANA; that they conducted
test-buys thereon; and that in order to avoid suspicion, they used different names during
the test-buys. They also personally witnessed the refilling of LPG cylinders bearing the
marks GASUL and SHELLANE inside the MASAGANA refilling plant station and the
deliveries of these refilled containers to some outlets using mini-trucks.
Indeed, the aforesaid facts and circumstances are sufficient to establish probable
cause. It should be borne in mind that the determination of probable cause does not call for
the application of the rules and standards of proof that a judgment of conviction requires
after trial on the merits. As the term implies, probable cause is concerned with
probability, not absolute or even moral certainty. The standards of judgment are those of a

reasonably prudent man, not the exacting calibrations of a judge after a full blown trial.[31]
The fact that Oblanca and Alajar used different names in the purchase receipts
do not negate personal knowledge on their part. It is a common practice of the law
enforcers such as NBI agents during covert investigations to use different names in order
to conceal their true identities. This is reasonable and understandable so as not to endanger
the life of the undercover agents and to facilitate the lawful arrest or apprehension of
suspected violators of the law.
Petitioners contention that Oblanca and Alajar should have mentioned the fact that
they used different names in their respective affidavits and during the preliminary
examination is puerile. The argument is too vacuous to merit serious consideration. There
is nothing in the provisions of law concerning the issuance of a search warrant which
directly or indirectly mandates that the applicant of the search warrant or his witnesses
should state in their affidavits the fact that they used different names while conducting
undercover investigations, or to divulge such fact during the preliminary examination. In
the light of other more material facts which needed to be established for a finding of
probable cause, it is not difficult to believe that Oblanca and Alajar failed to mention that
they used aliases in entering the MASAGANA compound due to mere oversight.
It cannot be gainfully said that Oblanca and Alajar are not competent to testify on
the trademarks infringed by the petitioners. As earlier discussed, Oblanca declared under
oath that before conducting an investigation on the alleged illegal activities of
MASAGANA, he reviewed the certificates of trademark registrations issued by the
Philippine Intellectual Property Office in favor of Petron and Pilipinas Shell. These
certifications of trademark registrations were attached by Oblanca in his applications for
the search warrants. Alajar, on the other hand, works as a private investigator and, in fact,
owns a private investigation and research/consultation firm. His firm was hired and
authorized, pursuant to the Brand Protection Program of Petron and Pilipinas Shell, to
verify reports that MASAGANA is involved in the illegal sale and refill of GASUL and
SHELLANE LPG cylinders.[32] As part of the job, he studied and familiarized himself with
the registered trademarks of GASUL and SHELLANE, and the distinct features of the
LPG cylinders bearing the same trademarks before conducting surveillance and test-buys
on MASAGANA.[33] He also submitted to Oblanca several copies of the same registered
trademark registrations and accompanied Oblanca during the surveillance and test-buys.
As to whether the form and manner of questioning made by Judge Sadang complies
with the requirements of law, Section 5 of Rule 126 of the Revised Rules on
CriminalProcedure, prescribes the rules in the examination of the complainant and his
witnesses when applying for search warrant, to wit:
SEC. 5. Examination of complainant; record.- The judge must, before
issuing the warrant, personally examine in the form of searching questions and
answers, in writing under oath, the complainant and the witnesses he may
produce on facts personally known to them and attach to the record their sworn
statements, together with the affidavits submitted.

The searching questions propounded to the applicant and the witnesses depend
largely on the discretion of the judge. Although there is no hard-andfast rule governing
how a judge should conduct his investigation, it is axiomatic that the examination must be
probing and exhaustive, not merely routinary, general, peripheral, perfunctory or pro
forma. The judge must not simply rehash the contents of the affidavit but must make his
own inquiry on the intent and justification of the application.[34]
After perusing the Transcript of Stenographic Notes of the preliminary examination,
we found the questions of Judge Sadang to be sufficiently probing, not at all superficial
and perfunctory.[35] The testimonies of Oblanca and Alajar were consistent with each other
and their narration of facts was credible. As correctly found by the Court of Appeals:
This Court is likewise not convinced that respondent Judge failed to ask
probing questions in his determination of the existence of probable cause. This
Court has thoroughly examined the Transcript of Stenographic Notes taken
during the investigation conducted by the respondent Judge and found that
respondent Judge lengthily inquired into the circumstances of the case. For
instance, he required the NBI agent to confirm the contents of his affidavit,
inquired as to where the test-buys were conducted and by whom, verified
whether PSPC and PETRON have registered trademarks or tradenames, required
the NBI witness to explain how the test-buys were conducted and to describe
the LPG cylinders purchased from Masagana Gas Corporation, inquired why the
applications for Search Warrant were filed in Cavite City considering
that Masagana Gas Corporation was located in Trece Martires, Cavite, inquired
whether the NBI Agent has a sketch of the place and if there was any
distinguishing sign to identify the place to be searched, and inquired about their
alleged tailing and monitoring of the delivery trucks. x x x.[36]

Since probable cause is dependent largely on the opinion and findings of the judge
who conducted the examination and who had the opportunity to question the applicant and
his witnesses, the findings of the judge deserves great weight. The reviewing court can
overturn such findings only upon proof that the judge disregarded the facts before him or
ignored the clear dictates of reason. [37] We find no compelling reason to disturb
Judge Sadangs findings herein.
Anent the second issue, petitioners argue that Judge Sadang failed to
require Oblanca to show his authority to apply for search warrants; that Oblanca is a
member of the Anti-Organized Crime and not that of the Intellectual Property Division of
the NBI; that all complaints for infringement should be investigated by the Intellectual
Property Division of the NBI; that it is highly irregular that an agent not assigned to the
Intellectual Property Division would apply for a search warrant and without authority from
the NBI Director; that the alleged letter-complaint of Atty. Bienvenido Somera, Jr.
of Villaraza and Angangco Law Office was not produced in court; that Judge Sadang did
not requireOblanca to produce the alleged letter-complaint which is material and relevant
to the determination of the existence of probable cause; and that Petron and Pilipinas Shell,
being two different corporations, should have issued a board resolution authorizing

the Villaraza and Angangco Law Office to apply for search warrant in their behalf.[38]
We reject these protestations.
The authority of Oblanca to apply for the search warrants in question is clearly
discussed and explained in his affidavit, viz:
[That] on 11 February 2003, the National Bureau of Investigation (NBI)
received
a
letter-complaint
from
Atty. Bienvenido I. Somera,
Jr.
of Villaraza and Angangco, on behalf of among others, Petron Corporation
(PETRON) [and Pilipinas Shell Petroleum Corporation (PSPC), the authorized
representative of Shell International Petroleum Company Limited (SHELL
INTERNATIONAL)] requesting assistance in the investigation and, if
warranted, apprehension and prosecution of certain persons and/or
establishments suspected of violating the intellectual property rights of PETRON
[and of PSPC and Shell International.]
11.
[That] on the basis of the letter-complaint, I, together with Agent
Angelo Zarzoso, was assigned as the NBI agent on the case. [39]

The fact that Oblanca is a member of the Anti-Organized Crime Division and not
that of the Intellectual Property Division does not abrogate his authority to apply for search
warrant. As aptly stated by the RTC and the Court of Appeals, there is nothing in the
provisions on search warrant under Rule 126 of the Revised Rules on Criminal Procedure,
which specifically commands that the applicant law enforcer must be a member of a
division that is assigned or related to the subject crime or offense before the application for
search warrant may be acted upon. The petitioners did not also cite any law, rule or
regulation mandating such requirement. At most, petitioners may only be referring to the
administrative organization and/or internal rule or practice of the NBI. However, not only
did petitioners failed to establish the existence thereof, but they also did not prove that
such administrative organization and/or internal rule or practice are inviolable.
Neither is the presentation of the letter-complaint of Atty. Somera and board
resolutions from Petron and Pilipinas Shell required or necessary in determining probable
cause. As heretofore discussed, the affidavits of Oblanca and Alajar, coupled with the
object and documentary evidence they presented, are sufficient to establish probable cause.
It can also be presumed that Oblanca, as an NBI agent, is a public officer who had
regularly performed his official duty.[40] He would not have initiated an investigation on
MASAGANA without a proper complaint. Furthermore, Atty. Somera did not step up to
deny his letter-complaint.
Regarding the third issue, petitioners posit that the applications for search warrants
of Oblanca did not specify the particular area to be searched, hence, giving the raiding
team wide latitude in determining what areas they can search. They aver that the search
warrants were general warrants, and are therefore violative of the Constitution. Petitioners
also assert that since the MASAGANA compound is about 10,000.00 square meters with

several structures erected on the lot, the search warrants should have defined the areas to
be searched.
The long standing rule is that a description of the place to be searched is sufficient if
the officer with the warrant can, with reasonable effort, ascertain and identify the place
intended and distinguish it from other places in the community. Any designation or
description known to the locality that points out the place to the exclusion of all others,
and on inquiry leads the officers unerringly to it, satisfies the constitutional requirement.[41]
Moreover, in the determination of whether a search warrant describes the premises
to be searched with sufficient particularity, it has been held that the executing officers
prior knowledge as to the place intended in the warrant is relevant. This would seem to be
especially true where the executing officer is the affiant on whose affidavit the warrant had
been issued, and when he knows that the judge who issued the warrant intended the
compound described in the affidavit.[42]
The search warrants in question commanded any peace officer to make an
immediate
search
on
MASAGANA compound
located
at
Governors
Drive, BarangayLapidario, Trece Martires, Cavite City. It appears that the raiding team
had ascertained and reached MASAGANA compound without difficulty since
MASAGANA
does
not
have
any
other
offices/plants
in Trece Martires, Cavite City. Moreover, Oblanca, who was with the raiding team, was
already familiar with the MASAGANA compound as he and Alajar had monitored and
conducted test-buys thereat.
Even if there are several structures inside the MASAGANA compound, there was
no need to particularize the areas to be searched because, as correctly stated
by Petronand Pilipinas Shell, these structures constitute the essential and necessary
components of the petitioners business and cannot be treated separately as they form part
of one entire compound. The compound is owned and used solely by MASAGANA. What
the case law merely requires is that, the place to be searched can be distinguished in
relation to the other places in the community. Indubitably, this requisite was complied with
in the instant case.
As to the fourth issue, petitioners asseverate that the search warrants did not indicate
with particularity the items to be seized since the search warrants merely described the
items to be seized as LPG cylinders bearing the trademarks GASUL and SHELLANE
without specifying their sizes.
A search warrant may be said to particularly describe the things to be seized when
the description therein is as specific as the circumstances will ordinarily allow; or when the
description expresses a conclusion of fact not of law by which the warrant officer may be
guided in making the search and seizure; or when the things described are limited to those
which bear direct relation to the offense for which the warrant is being issued.[43]
While it is true that the property to be seized under a warrant must be particularly

described therein and no other property can be taken thereunder, yet the description is
required to be specific only in so far as the circumstances will ordinarily allow. The law
does not require that the things to be seized must be described in precise and minute details
as to leave no room for doubt on the part of the searching authorities; otherwise it would
be virtually impossible for the applicants to obtain a search warrant as they would not
know exactly what kind of things they are looking for. Once described, however, the
articles subject of the search and seizure need not be so invariant as to require absolute
concordance, in our view, between those seized and those described in the warrant.
Substantial similarity of those articles described as a class or specie would suffice.[44]
Measured against this standard, we find that the items to be seized under the search
warrants in question were sufficiently described with particularity. The articles to be
confiscated were restricted to the following: (1) LPG cylinders bearing the trademarks
GASUL and SHELLANE; (2) Machines and equipments used or intended to be used in the
illegal refilling of GASUL and SHELLANE cylinders. These machines were also
specifically enumerated and listed in the search warrants; (3) Documents which pertain
only to the production, sale and distribution of the GASUL and SHELLANE LPG
cylinders; and (4) Delivery trucks bearing Plate Nos. WTE-527, XAM-970 and WFC-603,
hauling trucks, and/or other delivery trucks or vehicles or conveyances being used or
intended to be used for the purpose of selling and/or distributing GASUL and SHELLANE
LPG cylinders.[45]
Additionally, since the described items are clearly limited only to those which bear
direct relation to the offense, i.e., violation of section 155 of Republic Act No. 8293, for
which the warrant was issued, the requirement of particularity of description is satisfied.
Given the foregoing, the indication of the accurate sizes of the GASUL and
SHELLANE LPG cylinders or tanks would be unnecessary.
Finally, petitioners claim that MASAGANA has the right to intervene and to move
for the return of the seized items; that the items seized by the raiding team were being used
in the legitimate business of MASAGANA; that the raiding team had no right to seize
them under the guise that the same were being used in refilling GASUL and SHELLANE
LPG cylinders; and that there being no action for infringement filed against them and/or
MASAGANA from the seizure of the items up to the present, it is only fair that the seized
articles be returned to the lawful owner in accordance with Section 20 of A.M. No. 02-106-SC.
It is an elementary and fundamental principle of corporation law that a corporation
is an entity separate and distinct from its stockholders, directors or officers. However,
when the notion of legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, the law will regard the corporation as an association of persons,or
in the case of two corporations merge them into one. [46] In other words, the law will not
recognize the separate corporate existence if the corporation is being used pursuant to the
foregoing unlawful objectives. This non-recognition is sometimes referred to as the
doctrine of piercing the veil of corporate entity or disregarding the fiction of corporate

entity. Where the separate corporate entity is disregarded, the corporation will be treated
merely as an association of persons and the stockholders or members will be considered as
the corporation, that is, liability will attach personally or directly to the officers and
stockholders.[47]
As we now find, the petitioners, as directors/officers of MASAGANA, are utilizing
the latter in violating the intellectual property rights of Petron and Pilipinas Shell. Thus,
petitioners collectively and MASAGANA should be considered as one and the same
person for liability purposes. Consequently, MASAGANAs third party claim serves no
refuge for petitioners.
Even if we were to sustain the separate personality of MASAGANA from that of the
petitioners, the effect will be the same. The law does not require that the property to be
seized should be owned by the person against whom the search warrants is directed.
Ownership, therefore, is of no consequence, and it is sufficient that the person against
whom the warrant is directed has control or possession of the property sought to be seized.
[48]
Hence, even if, as petitioners claimed, the properties seized belong to MASAGANA as
a separate entity, their seizure pursuant to the search warrants is still valid.
Further, it is apparent that the motor compressor, LPG refilling machine and the
GASUL and SHELL LPG cylinders seized were the corpus delicti, the body or substance
of the crime, or the evidence of the commission of trademark infringement. These were the
very instruments used or intended to be used by the petitioners in trademark infringement.
It is possible that, if returned to MASAGANA, these items will be used again in violating
the intellectual property rights of Petron and Pilipinas Shell.[49] Thus, the RTC was justified
in denying the petitioners motion for their return so as to prevent the petitioners and/or
MASAGANA from using them again in trademark infringement.
Petitioners reliance on Section 20 of A.M. No. 02-1-06-SC,[50] is not tenable. As
correctly observed by the Solicitor General, A.M. 02-1-06-SC is not applicable in the
present case because it governs only searches and seizures in civil actions for infringement
of intellectual property rights.[51] The offense complained of herein is for criminal violation
of Section 155 in relation to Section 170[52] of Republic Act No. 8293.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 79256, dated 30 September 2004 and 1 June 2005,
respectively, are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
GEMMA
ONG a.k.a. MARIA
TERESA GEMMA CATACUTAN,
Petitioner,

G.R. No. 169440

Present:
CORONA, C.J.,
Chairperson,
CARPIO,*
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PERLAS-BERNABE,** JJ.

- versus -

PEOPLE OF THE PHILIPPINES,

Respondent.

Promulgated:

November 23, 2011

x---------------------------------------------------- x
DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari, filed under Rule 45 of the Rules of
Court, to set aside and reverse the June 16, 2005 Decision[1] of the Court of Appeals inCAG.R. CR No. 28308, which affirmed the September 23, 2003 Decision[2] of the Regional
Trial Court (RTC) of Manila, Branch 24 in Criminal Case No. 00-184454.
On July 28, 2000, petitioner Gemma Ong a.k.a. Maria Teresa Gemma Catacutan
(Gemma) was charged before the RTC for Infringement under Section 155 in relation to
Section 170 of Republic Act No. 8293 or the Intellectual Property Code. The accusatory
portion of the Information reads:
That sometime in September 25, 1998 and prior thereto at Sta. Cruz,
Manila and within the jurisdiction of this Honorable Court, the above-named
accused did then and there, knowingly, maliciously, unlawfully and feloniously
engage in the distribution, sale, [and] offering for sale of counterfeit Marlboro
cigarettes which had caused confusion, deceiving the public that such cigarettes
[were] Marlboro cigarettes and those of the Telengtan Brothers and Sons, Inc.,
doing business under the style of La Suerte Cigar and Cigarettes Factory, the
exclusive manufacturer of Marlboro Cigarette in the Philippines and that of

Philip Morris Products, Inc. (PMP7) the registered owner and proprietor of the
MARLBORO trademark together with the devices, including the famous-Root
Device, to their damage and prejudice, without the accused seeking their permit
or authority to manufacture and distribute the same. [3]

On August 1, 2000, Judge Rebecca G. Salvador of RTC Manila, Branch 1, issued a

warrant of arrest against Gemma, but lifted[4] and set aside[5] the same
after Gemmavoluntarily surrendered on August 4, 2000, and filed a cash bond
for 12,000.00.

[6]

Gemma pleaded not guilty to the charge upon arraignment on October 17, 2000.
After the pre-trial conference on February 13, 2001,[7] trial on the merits ensued.

The prosecution called to the witness stand the following: Roger Sherman Slagle,
the Director of Operations of Philip Morris Malaysia, and Philip Morris Philippines, Inc.s
(PMPI) product/brand security expert, to testify that according to his examination, the
products they seized at the subject premises were counterfeit cigarettes; [8] as well as Jesse
Lara, who, as then Senior Investigator III at the Intellectual Property Rights (IPR) Unit of
the Economic Intelligence and Investigation Bureau (EIIB), Department of Finance, led
the investigating team, to testify on the events that led to the arrest of Gemma.[9] The
prosecution also presented the billing accountant of Quasha Ancheta Pea & Nolasco Law
Office (Quasha Law Office), Juliet Flores, to show that PMPI, being one of Quasha Law
Offices clients, paid the amount of $4,069.12 for legal services rendered.[10] The last
witness for the prosecution was Atty. Alonzo Q. Ancheta, a senior law partner at Quasha
Law Office, who testified that as the duly appointed Attorney-in-Fact of PMPI, he was in
charge of the EIIB search operation in the subject premises. Atty. Ancheta said that while
he was not personally present during the implementation of the search warrant, he sent
Atty. Leonardo Salvador, who constantly reported the developments to him.[11]
The facts, as succinctly summarized by the Court of Appeals, are as follows:
On September 10, 1998, Jesse S. Lara, then Senior Investigator III at the
Intellectual Property Rights (IPR) Unit of the Economic Intelligence and
Investigation Bureau (EIIB), Department of Finance, received reliable
information that counterfeit Marlboro cigarettes were being distributed and
sold by two (2) Chinese nationals, Johnny Sia and Jessie Concepcion, in the
areas of Tondo, Binondo, Sta. Cruz and Quiapo, Manila. A mission team formed
by EIIB, including Lara, conducted surveillance operation to verify the
report. EIIB agents Leonardo Villanueva and Jigo Madrigal did a test-buy on
the different sari-sari stores of Manila located in Quiapo, Tondo, Sta. Cruz and
Blumentritt areas and took samples of Marlboro cigarettes sold
therein. During the surveillance, the container van delivering the Marlboro
packed in black plastic bags was seen parked at 1677 Bulacan corner Hizon
Streets, Sta. Cruz, Manila [(the subject premises)]. Upon inquiry from the
Barangay Chairman, they also learned that the place is owned by a certain Mr.
Jackson Ong.
The EIIB team coordinated with officers of Philip Morris, Inc., owner of

the trademark Marlboro Label in the Philippines duly registered with the
Philippine Patents Office and subsequently with the Intellectual Property Office
(IPO) since 1956. Initial examination made by Philip Morris, Inc. on those
random sample purchases revealed that the cigarettes were indeed fake products
unauthorized by the company. With official indorsement by the EIIB, Senior
Investigator Lara filed an application for search warrant before the Regional
Trial Court of Dasmarias, Cavite, Branch 90.
On September 24, 1998, Executive Judge Dolores L. Espaol issued a
search warrant after finding probable cause to believe that Mr. Jackson Ong has
in his possession/control in the premises located at 1675-1677 Bulacan St. cor.
M. Hizon St., Sta. Cruz, Manila, the following properties:
Substantial number of fake locally made and imported fake
cigarettes bearing the Marlboro brand, together with the
corresponding labels, cartons, boxes and other packaging as well as
receipts, invoices and other documents relative to the purchase,
sale, and distribution of the aforesaid fake Marlboro cigarettes.
On September 25, 1998, the EIIB team led by Senior Investigator Lara
implemented the search warrant, together with SPO2 Rommel P. Sese of the
Western Police District (WPD) as representative of the Philippine National
Police (PNP), Barangay Chairman Ernesto Traje, Sr., Barangay Kagawad Vivian
V. Rallonza and Atty. Leonardo P. Salvador who was sent by [Quasha Pea &
Nolasco Law Office,] the law firm engaged by Philip Morris, Inc. They
proceeded to the subject premises but Jackson Ong, the alleged owner, was not
there. It was accused, who is supposedly either the spouse or common-law wife
of Jackson Ong, who entertained them. At first, accused refused to allow them
entry into the premises but eventually the team was able to search the premises
and found Marlboro cigarettes stocked in several boxes containing fifty (50)
reams inside each box which were packed in black plastic sacks like in
balikbayan boxes. The Inventory and Certification In the Conduct of
Search were duly accomplished and signed by the members of the EIIB and the
other representatives present during the actual search (SPO2 Sese, Jess Lara,
Traje, Sr., Henry Mariano, Isidro Burgos and Atty. Salvador). Accused signed
her name in the said documents as Gemma Ong, as the Owner/Representative,
while a certain employee, Girlie Cantillo, also signed as witness.
On September 28, 1998, a Return of Search Warrant was submitted by
the EIIB to the issuing court stating that the articles seized pursuant to the
warrant were stored in the premises of the EIIB and requesting that EIIB be
granted temporary custody of the goods. Acting on the Urgent Motion To
Transfer Custody of Confiscated Articles filed by Philip Morris Products, Inc.
(PMPI) of Virginia, U.S.A., Executive Judge Dolores L. Espaol ordered the
custody of the seized goods transferred from EIIB to PMPI c/o Quasha Ancheta
Pea and Nolasco Law Office, the Attorney-in-Fact of PMPI. Judge Espaol
subsequently also issued an order dated October 15, 1998 authorizing PMPI to
secure and take out samples of the unauthorized products from the confiscated
cartons/boxes of Marlboro cigarettes which are stored at Four Winds Phils. Inc.
warehouse located at No. 2241 Pasong Tamo Extension, Makati City under the
direct and personal control and supervision of Sheriff IV Tomas C.
Azurin. PMPI had earlier sought such order from the court for the purpose of
laboratory analysis and scientific testing of the samples from the confiscated

cigarettes.
On the basis of the results of the examination conducted by PMPI on the
samples obtained from the confiscated boxes of cigarettes bearing the Marlboro
brand, which confirmed the same to be unauthorized products and not genuine
Marlboro cigarettes, the EIIB filed a case for Violation of Sections 155 and 168
in relation to Section 170 of Republic Act No. 8293 against Jackson Ong who is
not an authorized distributor of Marlboro products in the Philippines. [12]

After the prosecution rested its case, the defense filed a Demurrer to Evidence,
which the RTC denied on March 26, 2003.[14] The defense moved for a reconsideration
of this order but the same was denied on April 22, 2003.[15]
[13]

Gemma, as the lone witness for the defense, then took the witness stand. She said
that she is married to Co Yok Piao, a Chinese national, but she still uses her maiden name
Catacutan.[16] She denied that she is the Gemma Ong accused in this case. She testified
that she was arrested on August 4, 2000, without the arresting officers asking for her
name. She said that when she pleaded to be released, she was instructed to post a cash
bond, which she did in the amount of 12,000.00. Gemma averred that when she posted
her bond and signed her certificate of arraignment, she did so under her real name Maria
Teresa Gemma Catacutan, as opposed to the signatures in the Inventory and Certification
in the Conduct of Search (search documents), which she denied signing. She claimed that
she was not able to bring up her defense of mistaken identity early on as she did not know
when the proper time to raise it was. She avowed that she was not interrogated by the
police prior to her arrest, despite the two-year gap between it and the search of the subject
premises. She alleged that she did not know Jackson Ong and that the prosecution
witnesses, whom she first saw during her trial, couldnt even point to her as the person
present during the raid when they testified in court. Gemma further asseverated that while
she could not remember where she was on September 25, 1998, she was sure that she was
not at the subject premises on that date. Gemma presented her Identification Card issued
by the Professional Regulation Commission (PRC) to show that she is a dentist by
profession, although she claimed that she is a businessperson in practice. She said that she
used to buy and sell gear fabrics, t-shirts, truck materials, and real estate [17] under the
business name Fascinate Trading based in Bulacan Street, Sta. Cruz, Manila, but that it
had ceased operations in February 1998.[18] Gemma denied ever having engaged in the
manufacture and sale of any kind of cigarettes and claimed that she could not even
distinguish between a fake and a genuine Marlboro cigarette.[19]
On September 30, 2003, the RTC convicted Gemma of the crime as charged. The
dispositive portion of its Decision reads:
Accordingly, this Court finds accused Gemma Catacutan guilty beyond
reasonable doubt of violation of Section 155 in relation to Section 170 of
Republic Act No. 8293 and hereby sentences her to suffer the penalty of
imprisonment of two (2) years and to pay a fine of Fifty Thousand ( 50,000.00)
Pesos.

Accused is further directed to indemnify private complainant the sum of

US$4,069.12 or its peso equivalent, as actual damages.
The records of the case as against Jackson Ong is hereby ordered
archived pending his arrest.
With costs against accused Gemma Catacutan. [20]

In resolving the case, the RTC narrowed down the issue to whether Gemma
Catacutan was the same accused identified as Gemma Ong. The RTC answered this in the
affirmative as it found Gemmas defense of mistaken identity as untenable, especially
since she claimed to be a professional. The RTC explained:
Ranged against the positive and forthright declaration of the prosecution
witnesses, the mere uncorroborated and self-serving denials of the accused
cannot stand. (People vs. Hortaleza, 258 SCRA 201)
We note in disbelief that it was only in the hearing of November 26,
2001, that accused[s] former lawyer manifested that accused is known as
Gemma Catacutan never as Gemma Ong (tsn, November 26, 2001, p. 3) and as
admitted by her, she never revealed her true identity when arrested, when she
posted her bail bond and even during her arraignment.
She could have protested at the time of her arrest that they were arresting
the wrong person but this she did not do. She proceeded to post a bond for her
provisional liberty, hired a lawyer to defend her but failed to divulge the very
information that could have led to an early dismissal of the case, if true.
Her pretensions of ignorance as to the proper stage of when to explain
(tsn, May 26, 2003), p. 13 can hardly be given credit. A dentist by profession, it
is utterly incredible that she remained meek all through-out her arrest and the
posting of her bail bond.[21]

The RTC also unfurled the fact that while Gemma claimed to have never engaged in
the sale and manufacture of Marlboro cigarettes, the address of her business Fascinate
Trading is registered as 1677 Bulacan Street, Sta. Cruz, Manila, the same property raided
by the EIIB that contained the counterfeit cigarettes.[22]
Aggrieved, Gemma appealed the RTCs decision to the Court of Appeals based on
the following grounds:
I
THE LOWER COURT GRIEVOUSLY ERRED IN CONVICTING DR.
MARIA TERESA GEMMA CATACUTAN GUILTY OF THE CRIME OF
VIOLATION OF THE INTELLECTUAL PROPERTY RIGHTS LAW
DESPITE UTTER LACK OF EVIDENCE.

II
THE LOWER COURT IN CONVICTING DR. MARIA TERESA
GEMMA CATACUTAN ON THE BASIS OF SURMISE (sic), CONJECTURES
AND GUESSWORK COMMITTED GRAVE VIOLENCE AGAINST THE
CONSTITUTIONAL PRESUMPTION OF INNOCENCE.
III
THE LOWER COURT COMMITTED SERIOUS REVERSIBLE
ERROR IN CONVICTING THE ACCUSED-APPELLANT WHO HAD NOT
BEEN
POSITIVELY
IDENTIFIED
AND
PINPOINTED
AS
MANUFACTURER NOR (sic) DISTRIBUTOR OF FAKE MARLBORO
PRODUCT.
IV
THE LOWER COURT COMMITTED SERIOUS REVERSIBLE
ERROR IN NOT GIVING THE SLIGHTEST CREDENCE TO THE
UNCONTRADICTED, UNREFUTED AND CANDID TESTIMONY OF THE
ACCUSED-APPELLANT, BUT INSTEAD, CONVICTED HER ON [T]HE
BASIS OF EXTRAPOLATED EVIDENCE NOT BORNE BY THE RECORDS.
V
THE LOWER COURT COMMITTED A GRAVE REVERSIBLE
ERROR IN CONVICTING ACCUSED-APPELLANT DESPITE THE UTTER
AND PATHETIC LACK OF EVIDENCE TO SUSTAIN THE
PROSECUTIONS LAME, SHALLOW AND UNCONFOUNDED THEORY
OF GUILT.[23]

The Court of Appeals found Gemmas appeal to be unmeritorious. It said that

Gemma was positively identified by the prosecution witnesses as the woman who
entertained them during the search of the subject premises on September 25, 1998, and the
woman who signed the Certification in the Conduct of Search and Inventory. The Court of
Appeals agreed with the RTCs rejection of Gemmas defense of mistaken identity, as she
should have raised it at the earliest opportunity, which was at the time of her arrest, the
posting of her bail bond, or during her arraignment. The Court of Appeals held that the
amendment of the prosecution witnesses affidavits was explained during the hearing, and
although the original affidavits were the ones marked during the pre-trial, the amended
ones provided the basis for the filing of the Information against Gemma and her coaccused Jackson Ong. The Court of Appeals also noted that the March 20, 2000
Resolution of the State Prosecutor specifically mentioned that the search warrant was
served on Gemma Ong. The Court of Appeals then proclaimed that in the hierarchy of
evidence, the testimony of the witness in court commands greater weight than his written
affidavit.[24]
The Court of Appeals affirmed the conviction of Gemma for trademark infringement
under Section 155 of Republic Act No. 8293, as the counterfeit goods seized by the EIIB
were not only found in her possession and control, but also in the building registered under

her business, Fascinate Trading. The Court of Appeals said that the prosecution had
satisfactorily proven Gemmas commission of the offense since the unauthorized use of the
trademark Marlboro, owned by PMPI, was clearly intended to deceive the public as to the
origin of the cigarettes being distributed and sold, or intended to be distributed and
sold. The Court of Appeals further sustained the penalty and damages imposed by the
RTC for being in accord with the law and facts.[25]
Gemma is now before this Court with the following assignment of errors:
A.
THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE
TESTIMONIES OF PROSECUTION WITNESSES IDENTIFYING
PETITIONER AS PRESENT AT THE TIME AND PLACE WHEN THE
SEARCH AND SEIZURE TOOK PLACE.
B.
THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE
TESTIMONIES OF PROSECUTION WITNESSES THAT THEY SAW
PETITIONER SIGN HER NAME AS GEMMA ONG AS
OWNER/CLAIMANT/REPRESENTATIVE (OF THE ARTICLES SEIZED)
ON THE SEARCH WARRANT (EXH. A), CERTIFICATION IN THE
CONDUCT OF SEARCH (EXH. B) AND INVENTORY OF THE S[E]IZED
ARTICLES AT THE TIME OF THE SEARCH (EXH. D).
C.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT
PETITIONERS SIGNATURE IN EXHIBITS A, B AND C ARE NOT
HERS BUT WERE FORGED, BEING COMPLETELY AND PATENTLY
DISSIMILAR TO HER TRUE AND REAL SIGNATURE AS SHOWN IN HER
OFFICIAL I.D AS PROFESSIONAL DENTIST.
D.
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE
AFFIDAVITS OF THE PROSECUTION WITNESSES WHICH DID NOT
MENTION PETITIONERS PRESENCE AT THE TIME AND PLACE OF THE
SEARCH CANNOT TAKE PRECEDENCE OVER THEIR CONTRARY
TESTIMONIES IN COURT THAT SHE WAS PRESENT AND IN FACT THE
OCCUPANT AND OWNER OF THE PREMISES FROM WHICH SHE
INITIALLY BLOCKED THEIR ENTRY INTO.
E.
THE COURT OF APPEALS ERRED IN CONCLUDING THAT
[PETITIONER] WAS THE VERY SAME PERSON WHO WAS CAUGHT IN
POSSESSION AND CONTROL OF THE PREMISES WHERE THE
COUNTERFEIT ARTICLES WERE SEIZED BECAUSE SHE ALLEGEDLY
NEVER PROTESTED BEING WRONGFULLY ACCUSED AT THE TIME OF
HER ARREST ON 4 AUGUST 2000, WHEN SHE POSTED HER CASH

BOND AND WHEN SHE EVEN SIGNED HER NAME AS MA. TERESA
GEMMA CATACUTAN IN THE WAIVER, UNDERTAKING AND
CERTIFICATE OR ARRAIGNMENT, ALL IN THE NAME OF THE
ACCUSED AS GEMMA ONG, a.k.a. MA. THERESA CATACUTAN.
F.
THE COURT OF APPEALS ERRED IN NOT ACQUITTING [PETITIONER]
FOR FAILURE OF THE PROSECUTION TO PROVE THE GUILT OF THE
ACCUSED-APPELLANT BEYOND REASONABLE DOUBT.[26]

Gemma argues that if it were true that she was in the subject premises when it was
raided on September 25, 1998, then her name and presence would have been mentioned in
the respective affidavits of Slagle and Atty. Ancheta; and the EIIB agents who conducted
the search would have confronted, investigated, or arrested her. Gemma insists that the
fact that her name was only mentioned for the first time in the amended affidavits yields to
the conclusion that she was not in the subject premises when it was searched and that the
testimonies of the prosecution witnesses were perjured.[27]
Gemma further claims that the courts below were wrong in finding that she never
protested that she was mistakenly identified. She claims that she was arrested without the
benefit of a preliminary investigation and all she wanted to do at that point was to get out
[of] the clutches of overzealous and eager beaver policemen who were exuberant in
arresting an innocent party like[28] her. Gemma also explains that her non-protest during
her arraignment was upon the advice of her former lawyer, who said that he would correct
it in the proper time during the trial.
Respondent People of the Philippines, in its comment, [29] avers that there are only
two issues to be resolved in this case, to wit:
1. THE INSTANT PETITION IS FATALLY DEFECTIVE AS IT RAISES
QUESTIONS OF FACT WHICH ARE NOT PROPER FOR REVIEW
UNDER RULE 45 OF THE REVISED RULES OF COURT.
2. THE COURT OF APPEALS DID NOT ERR IN AFFIRMING
PETITIONERS CONVICTION FOR VIOLATION OF SECTION 155
IN RELATION TO SECTION 170 OF R.A. 8293 (INTELLECTUAL
PROPERTY CODE OF THE PHILIPPINES).[30]

Respondent claims that a perusal of the issues in Gemmas petition readily discloses
that only questions of fact have been raised, which are not reviewable in an appeal
bycertiorari.[31] Respondent asseverates that Gemmas conviction was warranted as the
prosecution had sufficiently established her presence during the search of the subject
premises where she signed the search documents as Gemma Ong. Moreover, the
respondent avers, Gemma failed to timely protest her arrest and raise her claim that she is
not Gemma Ong.[32]

Issues
A study of the pleadings filed before this Court shows that the only issues to be
resolved are the following:
1. Whether or not accused-appellants petition for review on certiorari under Rule
45 of the Rules of Court is fatally defective as it raises questions of fact; and
2. Whether or not Gemmas guilt was proven beyond reasonable doubt in light of
her alleged mistaken identity.
This Courts Ruling
Procedural Issue
As this case reached this Court via Rule 45 of the Rules of Court, the basic rule is
that factual questions are beyond the province of this Court, because only questions of law
may be raised in a petition for review.[33] However, in exceptional cases, this Court has
taken cognizance of questions of fact in order to resolve legal issues, such as when there
was palpable error or a grave misapprehension of facts by the lower court. [34] In Armed
Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals,[35]we said
that although submission of issues of fact in an appeal by certiorari taken to this Court is
ordinarily proscribed, this Court nonetheless retains the option in the exercise of its sound
discretion, taking into account the attendant circumstances, either to decide the case or
refer it to the proper court for determination. [36] Since the determination of the identity of
Gemma is the very issue affecting her guilt or innocence, this Court chooses to take
cognizance of this case in the interest of proper administration of justice.
Gemma is guilty of violating
Section 155 in relation to Section 170 of
Republic Act No. 8293
Gemma was charged and convicted of violating Section 155 in relation to Section
170 of Republic Act No. 8293, or the Intellectual Property Code of the Philippines.
Section 155. Remedies; Infringement. - Any person who shall, without the
consent of the owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark or the same container or a dominant feature
thereof in connection with the sale, offering for sale, distribution, advertising of
any goods or services including other preparatory steps necessary to carry
out the sale of any goods or services on or in connection with which such use
is likely to cause confusion, or to cause mistake, or to deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark
or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used in commerce upon or in connection with

the sale, offering for sale, distribution, or advertising of goods or services on or

in connection with which such use is likely to cause confusion, or to cause
mistake, or to deceive, shall be liable in a civil action for infringement by the
registrant for the remedies hereinafter set forth: Provided, That the
infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual
sale of goods or services using the infringing material. (Sec. 22, R.A. No
166a)
Section 170. Penalties. - Independent of the civil and administrative
sanctions imposed by law, a criminal penalty of imprisonment from two (2)
years to five (5) years and a fine ranging from Fifty thousand pesos ( 50,000) to
Two hundred thousand pesos (200,000), shall be imposed on any person who is
found guilty of committing any of the acts mentioned in Section 155, Section
168 and Subsection 169.1. (Arts. 188 and 189, Revised Penal Code.) (Emphases
supplied.)

A mark is any visible sign capable of distinguishing the goods (trademark) or

services (service mark) of an enterprise and shall include a stamped or marked container of
goods.[37]
In McDonalds Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak
Burger, Inc.,[38] this Court held:
To establish trademark infringement, the following elements must be
shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the
mark; and (3) the use of the mark or its colorable imitation by the alleged
infringer results in likelihood of confusion. Of these, it is the element of
likelihood of confusion that is the gravamen of trademark infringement.

A mark is valid if it is distinctive and not barred from registration. Once registered,
not only the marks validity, but also the registrants ownership of the mark is prima
facie presumed.[39]
The prosecution was able to establish that the trademark Marlboro was not only
valid for being neither generic nor descriptive, it was also exclusively owned by PMPI, as
evidenced by the certificates of registration issued by the Intellectual Property Office of
the Department of Trade and Industry.[40]
Anent the element of confusion, both the RTC and the Court of Appeals have
correctly held that the counterfeit cigarettes seized from Gemmas possession were
intended to confuse and deceive the public as to the origin of the cigarettes intended to be
sold, as they not only bore PMPIs mark, but they were also packaged almost exactly as
PMPIs products.[41]
Regarding the Claim of Mistaken
Identity

Despite all these findings, Gemma has posited only a single defense, from the RTC
all the way up to this Court: that she is not the Gemma Ong named and accused in this
case. She bases this claim on the alleged discrepancies in the prosecution witnesses
original affidavits vis--vis the amended ones, which discrepancies, according to her,
strongly suggest her innocence.
This Court has time and again held that between an affidavit executed outside the
court, and a testimony given in open court, the latter almost always prevails.
Discrepancies between a sworn statement and testimony in court do not
outrightly justify the acquittal of an accused. Such discrepancies do not
necessarily discredit the witness since ex parte affidavits are often
incomplete. They do not purport to contain a complete compendium of the
details of the event narrated by the affiant. Thus, our rulings generally consider
sworn statements taken out of court to be inferior to in court testimony. x x x. [42]

A reading of the original affidavits[43] executed by Slagle and Atty. Ancheta, readily
reveals that they concentrated on the facts and events leading up to the search and seizure
of the contraband materials from the subject premises. They not only failed to mention
Gemma Ongs presence there, but they also failed to mention the other witnesses names
and presence there as well. Although this might appear to be a mistake on the part of a
known and established law firm like the Quasha Law Office, the firm immediately sought
to rectify this by having the affidavits of Slagle, Atty. Ancheta, and Lara amended.
If it were true that Gemma was not at the subject premises at all on September 25,
1998, then she should have grabbed every chance to correct this notion and expose this
mistake before she was arrested. She could have brought up her defense of mistaken
identity or absence at the raid in the preliminary investigation conducted prior to the
issuance of her warrant of arrest; but instead, she chose to ignore her subpoena and
disregard the preliminary investigation. Even then, Gemma had the opportunity to raise
the fact that she was not Gemma Ong; not only during her arrest, but also during the
posting of the cash bond for her bail, and more importantly, during her arraignment, when
she was asked if she understood the charges against her. Gemma also knew that the
Information was filed against her on the basis of the amended affidavits, thus, she could
have filed a motion to quash the information before she entered her plea, or asked that a
reinvestigation be conducted. However, all these Gemma failed to do. We agree with the
RTC that it is highly unlikely that a person of her stature and educational attainment would
be so meek and timid that she failed to protest against her being wrongly identified,
accused, arrested, and potentially imprisoned. If what she says were true, she would not
have agreed to post bail or to be arraigned without at the very least, bringing up the fact
that she was not the Gemma Ong the police officers were looking for. In addition, her own
lawyer, Atty. Maglinao, brought up the fact that she was not Gemma Ong, only for the
purpose of correcting the Information, and not to contest it, to wit:
WITNESS ROGER SHERMAN SLAGLE UNDER THE SAME OATH FOR
CONTINUATION OF DIRECT EXAMINATION BY:

ATTY. ERESE:
With the kind permission of the hon. court.
COURT:

Proceed.

ATTY. MAGLINAO:
I would just want to be on record that my client,
Gemma Catacutan has never been known as Gemma Ong
because her real name is Gemma Catacutan.
COURT:

Do you have any objection to the amendment of the

information?

ATTY. MAGLINAO:
No, your Honor. May we request to correct the
information from Gemma Ong to Gemma Catacutan. [44]

Gemma further accuses the prosecution witnesses of falsely testifying and of

perjuring themselves just so they can satisfy a big client like PMPI by showing that
somebody had been arrested for counterfeiting its cigarettes. The crimes Gemma is
imputing on these witnesses are serious crimes, and in the absence of concrete and
convincing evidence, this Court could not believe her mere allegations that imply that
these people would destroy someones life just so they can please a client, more so over
mere cigarettes. InPrincipio v. Hon. Barrientos,[45] we said:
Bad faith is never presumed while good faith is always presumed and the chapter
on Human Relations of the Civil Code directs every person, inter alia, to observe
good faith, which springs from the fountain of good conscience. Therefore, he
who claims bad faith must prove it. For one to be in bad faith, the same must be
evident. x x x.[46]

The prosecution witnesses, contrary to Gemmas claim, had positively identified her
as the person who initially refused the search team entrance, then later acquiesced to the
search operations. Slagle explained that even though he mentioned Gemma only in his
amended affidavit, he was sure that she was at the subject premises on the day that they
searched it:
Testimony of Roger Sherman Slagle
ATTY. MAGLINAO:
Q

In this amended affidavit you mentioned the name,

Gemma Catacutan as one of the accused?

Yes sir.

Can you tell the court how you were able to include the

name of Gemma Catacutan in your amended affidavit,

when in fact it did not appear in the first affidavit?
A

When we arrived she was there and she was very

nervous and upset.
xxxx

It is very clear to me when I arrived there that she was

somehow involved.[47] (Emphases ours.)

Lara on the other hand, even pointed to her and thus positively identified her to be
the one who had signed the search documents,[48] as the owner of the subject premises, to
wit:
Testimony of Jesse Lara
ATTY. FREZ
Q

Mr. Witness, do you know this person who wrote the

name Gemma Ong?

Yes, sir, Gemma Ong is the owner of the premises when

we served the search warrant and also, she was the one who
refused us to gain entry during the service of the search
warrant.

Were you able to gain entry at the premises?

Yes, sir.

So, as regard to the person whom you identify as the

one who refused you to gain entry, would you be able to
identify this person?
Yes, sir, that lady in pink is Mrs. Gemma Ong.
(As witness is pointing to the accused Gemma Ong).
Mr. Witness, why do you say that the person whom you
pointed to us is the one who wrote the name Mrs. Gemma
Ong?

WITNESS
Because when we served the search warrant she signed it
in our presence and that is her own signature.
xxxx
ATTY. FREZ
Q
:

So, Mr. Witness, in this Inventory, we made some

markings during the pre-trial conference and I see here

above the signature (Owner/Representative), there exist a

handwritten name which reads GEMMA ONG and above it,
there exist a signature, are you familiar with this person
which appears to be Gemma Ong?
A

Yes, sir, Gemma Ong signed that in my presence.

Your Honor, during the pre-trial conference, it was
previously marked as Exhibit D-1. Mr. Witness, I also see
here a Verification but there also exist an entry below the
name and I quote Owner/Claimant/Representative, there
appears a handwritten name Gemma Ong and a signature
above it, are you familiar with this person which appears to
be Gemma Ong?
Yes, sir, Gemma Ong signed that in my presence.
xxxx

Mr. Witness, in this document which is the certification in

the Conduct of Search and I have here above the entry
(Owner/Representative), a handwritten name which reads
Gemma Ong and there exist a signature above the
handwritten name, can you identify the signature?
Yes, sir, this was signed by Gemma Ong in my presence.
(Emphases ours.)

[49]

Lara further attested to the fact that the search warrant was served on Gemma, who
later on entertained the search team:
ATTY. FREZ
Mr. Witness, the person to whom you served the search
warrant is identified as Mrs. Gemma Ong, do you know her
relationship with the accused Jackson Ong?
ATTY. FERNANDEZ
Objection, your honor, the witness would be incompetent .
..
COURT
May answer.
(The stenographer read back the question).
WITNESS
I am not familiar with the relationship of Mrs. Gemma
Ong with Jackson Ong because during the service of the
search warrant, Mrs. Gemma Ong was there together with
two employees and when I asked where was Jackson Ong,
she was the one who entertained us.

ATTY. FREZ
So, the search warrant was served against Gemma Ong?
WITNESS
Yes, Sir.[50]

Positive identification of a culprit is of great weight in determining whether an

accused is guilty or not.[51] Gemma, in claiming the defense of mistaken identity, is in
reality denying her involvement in the crime. This Court has held that the defense of
denial is insipid and weak as it is easy to fabricate and difficult to prove; thus, it cannot
take precedence over the positive testimony of the offended party.[52] The defense of
denial is unavailing when placed astride the undisputed fact that there was positive
identification of the accused.[53]
While Gemma claims she does not know Jackson Ong, the subject premises where
the counterfeit cigarettes were seized was registered under her admitted business
Fascinate Trading.[54] Aside from the bare allegation that she had stopped operations in
the subject premises as early as February 1998, she has neither proven nor shown any
evidence that she had relinquished control of the building after that date. Gemmas
allegation that she did not sign the search documents, and that the signatures therein did
not match the signature on her PRC identification card, must also be struck down as she
has not shown proof that her PRC signature is the only way she has ever signed her
name. She could have, at the very least, gotten a handwriting expert to testify on her behalf
that there is no way that the signatures in the search documents and the signature on her
PRC identification card could have been written by one and the same person; instead, she
relied on the flimsy contention that the two signatures were, on their face, different.
Gemmas defense consists of her claim of mistaken identity, her denial of her
involvement in the crime, and her accusation against the prosecution witnesses of
allegedly giving false testimonies and committing perjury. These are all weak, unproven,
and unfounded claims, and will not stand against the strong evidence against her.
WHEREFORE, this Court DENIES the Petition. The June 16, 2005 Decision of
the Court of Appeals in CA-G.R. CR No. 28308 is AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194062

June 17, 2013

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO REYES, FERRER
SUAZO and ALVIN U. TV, Petitioners,
vs.
PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL
INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioners
seeking the reversal of the Decision1 dated July 2, 2010, and Resolution2 dated October 11, 2010 of the Court
of Appeals (CA) in CA-G.R. SP No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as follows:

Petitioners Petron Corporation ("Petron" for brevity) and Pilipinas Shell Petroleum Corporation ("Shell" for
brevity) are two of the largest bulk suppliers and producers of LPG in the Philippines. Petron is the registered
owner in the Philippines of the trademarks GASUL and GASUL cylinders used for its LGP products. It is the
sole entity in the Philippines authorized to allow refillers and distributors to refill, use, sell, and distribute
GASUL LPG containers, products and its trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename, trademarks,
symbols or designs of its principal, Shell International Petroleum Company Limited, including the marks
SHELLANE and SHELL device in connection with the production, sale and distribution of SHELLANE LPGs. It
is the only corporation in the Philippines authorized to allow refillers and distributors to refill, use, sell and
distribute SHELLANE LGP containers and products. Private respondents, on the other hand, are the directors
and officers of Republic Gas Corporation ("REGASCO" for brevity), an entity duly licensed to engage in,
conduct and carry on, the business of refilling, buying, selling, distributing and marketing at wholesale and
retail of Liquefied Petroleum Gas ("LPG").

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron Gasul Dealers Association,
Inc. and Totalgaz Dealers Association, received reports that certain entities were engaged in the unauthorized
refilling, sale and distribution of LPG cylinders bearing the registered tradenames and trademarks of the
petitioners. As a consequence, on February 5, 2004, Genesis Adarlo (hereinafter referred to as Adarlo), on
behalf of the aforementioned dealers associations, filed a letter-complaint in the National Bureau of
Investigation ("NBI") regarding the alleged illegal trading of petroleum products and/or underdelivery or
underfilling in the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter referred to as "De
Jemil") was assigned to verify and confirm the allegations contained in the letter-complaint. An investigation
was thereafter conducted, particularly within the areas of Caloocan, Malabon, Novaliches and Valenzuela,
which showed that several persons and/or establishments, including REGASCO, were suspected of having
violated provisions of Batas Pambansa Blg. 33 (B.P. 33). The surveillance revealed that REGASCO LPG
Refilling Plant in Malabon was engaged in the refilling and sale of LPG cylinders bearing the registered marks
of the petitioners without authority from the latter. Based on its General Information Sheet filed in the

Securities and Exchange Commission, REGASCOs members of its Board of Directors are: (1) Arnel U. Ty
President, (2) Marie Antoinette Ty Treasurer, (3) Orlando Reyes Corporate Secretary, (4) Ferrer Suazo
and (5) Alvin Ty (hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on February 19, 2004 with the
former and a confidential asset going undercover. They brought with them four (4) empty LPG cylinders
bearing the trademarks of SHELLANE and GASUL and included the same with the purchase of J&S, a
REGASCOs regular customer. Inside REGASCOs refilling plant, they witnessed that REGASCOs
employees carried the empty LPG cylinders to a refilling station and refilled the LPG empty cylinders. Money
was then given as payment for the refilling of the J&Ss empty cylinders which included the four LPG cylinders
brought in by De Jemil and his companion. Cash Invoice No. 191391 dated February 19, 2004 was issued as
evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and the other NBI
operatives proceeded to the NBI headquarters for the proper marking of the LPG cylinders. The LPG
cylinders refilled by REGASCO were likewise found later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the Regional Trial Court,
Branch 24, in the City of Manila against the private respondents and/or occupants of REGASCO LPG Refilling
Plant located at Asucena Street, Longos, Malabon, Metro Manila for alleged violation of Section 2 (c), in
relation to Section 4, of B.P. 33, as amended by PD 1865. In his sworn affidavit attached to the applications
for search warrants, Agent De Jemil alleged as follows:

"x x x.

"4. Respondents REGASCO LPG Refilling Plant-Malabon is not one of those entities authorized to refill LPG
cylinders bearing the marks of PSPC, Petron and Total Philippines Corporation. A Certification dated February
6, 2004 confirming such fact, together with its supporting documents, are attached as Annex "E" hereof.

6. For several days in the month of February 2004, the other NBI operatives and I conducted surveillance and
investigation on respondents REGASCO LPG refilling Plant-Malabon. Our surveillance and investigation
revealed that respondents REGASCO LPG Refilling Plant-Malabon is engaged in the refilling and sale of LPG
cylinders bearing the marks of Shell International, PSPC and Petron.

x x x.

8. The confidential asset and I, together with the other operatives of the NBI, put together a test-buy
operation. On February 19, 2004, I, together with the confidential asset, went undercover and executed our
testbuy operation. Both the confidential assets and I brought with us four (4) empty LPG cylinders branded as
Shellane and Gasul. x x x in order to have a successful test buy, we decided to "ride-on" our purchases with
the purchase of Gasul and Shellane LPG by J & S, one of REGASCOs regular customers.

9. We proceeded to the location of respondents REGASCO LPG Refilling Plant-Malabon and asked from an
employee of REGASCO inside the refilling plant for refill of the empty LPG cylinders that we have brought
along, together with the LPG cylinders brought by J & S. The REGASCO employee, with some assistance
from other employees, carried the empty LPG cylinders to a refilling station and we witnessed the actual
refilling of our empty LPG cylinders.

10. Since the REGASCO employees were under the impression that we were together with J & S, they made
the necessary refilling of our empty LPG cylinders alongside the LPG cylinders brought by J & S. When we
requested for a receipt, the REGASCO employees naturally counted our LPG cylinders together with the LPG
cylinders brought by J & S for refilling. Hence, the amount stated in Cash Invoice No. 191391 dated February
19, 2004, equivalent to Sixteen Thousand Two Hundred Eighty-Six and 40/100 (Php16,286.40), necessarily
included the amount for the refilling of our four (4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from respondents REGASCO
LPG Refilling Plant-Malabon, we left its premises bringing with us the said LPG cylinders. Immediately, we
proceeded to our headquarters and made the proper markings of the illegally refilled LPG cylinders purchased
from respondents REGASCO LPG Refilling Plant-Malabon by indicating therein where and when they were
purchased. Since REGASCO is not an authorized refiller, the four (4) LPG cylinders illegally refilled by
respondents REGASCO LPG Refilling Plant-Malabon, were without any seals, and when weighed, were
underrefilled. Photographs of the LPG cylinders illegally refilled from respondents REGASCO LPG Refilling
Plant-Malabon are attached as Annex "G" hereof. x x x."

After conducting a personal examination under oath of Agent De Jemil and his witness, Joel Cruz, and upon
reviewing their sworn affidavits and other attached documents, Judge Antonio M. Eugenio, Presiding Judge of
the RTC, Branch 24, in the City of Manila found probable cause and correspondingly issued Search Warrants
Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C. Kawada and other NBI
operatives immediately proceeded to the REGASCO LPG Refilling Station in Malabon and served the search
warrants on the private respondents. After searching the premises of REGASCO, they were able to seize
several empty and filled Shellane and Gasul cylinders as well as other allied paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department of Justice against the
private respondents for alleged violations of Sections 155 and 168 of Republic Act (RA) No. 8293, otherwise
known as the Intellectual Property Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended the dismissal of the
complaint. The prosecutor found that there was no proof introduced by the petitioners that would show that
private respondent REGASCO was engaged in selling petitioners products or that it imitated and reproduced
the registered trademarks of the petitioners. He further held that he saw no deception on the part of
REGASCO in the conduct of its business of refilling and marketing LPG. The Resolution issued by Assistant
City Prosecutor Velasco reads as follows in its dispositive portion:

"WHEREFORE, foregoing considered, the undersigned finds the evidence against the respondents to be
insufficient to form a well-founded belief that they have probably committed violations of Republic Act No.
9293. The DISMISSAL of this case is hereby respectfully recommended for insufficiency of evidence."

On appeal, the Secretary of the Department of Justice affirmed the prosecutors dismissal of the complaint in
a Resolution dated September 18, 2008, reasoning therein that:

"x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent specifically for refilling.
Refilling the same empty cylinders is by no means an offense in itself it being the legitimate business of
Regasco to engage in the refilling and marketing of liquefied petroleum gas. In other words, the empty
cylinders were merely filled by the employees of Regasco because they were brought precisely for that
purpose. They did not pass off the goods as those of complainants as no other act was done other than to
refill them in the normal course of its business.

"In some instances, the empty cylinders were merely swapped by customers for those which are already
filled. In this case, the end-users know fully well that the contents of their cylinders are not those produced by
complainants. And the reason is quite simple it is an independent refilling station.

"At any rate, it is settled doctrine that a corporation has a personality separate and distinct from its
stockholders as in the case of herein respondents. To sustain the present allegations, the acts complained of
must be shown to have been committed by respondents in their individual capacity by clear and convincing
evidence. There being none, the complaint must necessarily fail. As it were, some of the respondents are
even gainfully employed in other business pursuits. x x x." 3

Dispensing with the filing of a motion for reconsideration, respondents sought recourse to the CA through a

petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents certiorari petition. The fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby GRANTED. The
assailed Resolution dated September 18, 2008 of the Department of Justice in I.S. No. 2005-055 is hereby
REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied by the CA in a Resolution
dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the following issues for our
resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied outright.

Whether sufficient evidence was presented to prove that the crimes of Trademark Infringement and Unfair
Competition as defined and penalized in Section 155 and Section 168 in relation to Section 170 of Republic
Act No. 8293 (The Intellectual Property Code of the Philippines) had been committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the offense charged. 5

Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a condition sine qua non before a
certiorari petition may lie, its purpose being to grant an opportunity for the court a quo to correct any error
attributed to it by re-examination of the legal and factual circumstances of the case. 6

However, this rule is not absolute as jurisprudence has laid down several recognized exceptions permitting a
resort to the special civil action for certiorari without first filing a motion for reconsideration, viz.:

(a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) Where the questions raised in the certiorari proceedings have been duly raised and passed upon
by the lower court, or are the same as those raised and passed upon in the lower court.

(c) Where there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of the petition is
perishable;

(d) Where, under the circumstances, a motion for reconsideration would be useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by
the trial court is improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;

(h) Where the proceeding was ex parte or in which the petitioner had no opportunity to object; and,

(i) Where the issue raised is one purely of law or public interest is involved. 7

In the present case, the filing of a motion for reconsideration may already be dispensed with considering that
the questions raised in this petition are the same as those that have already been squarely argued and
passed upon by the Secretary of Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue: whether probable cause
exists to hold petitioners liable for the crimes of trademark infringement and unfair competition as defined and
penalized under Sections 155 and 168, in relation to Section 170 of Republic Act (R.A.) No. 8293.

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement as follows:

Section 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the
registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark of the
same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive; or

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and
apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering
for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to
cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the
registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment
any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is
actual sale of goods or services using the infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically clear that the mere
unauthorized use of a container bearing a registered trademark in connection with the sale, distribution or
advertising of goods or services which is likely to cause confusion, mistake or deception among the buyers or
consumers can be considered as trademark infringement.9

Here, petitioners have actually committed trademark infringement when they refilled, without the respondents
consent, the LPG containers bearing the registered marks of the respondents. As noted by respondents,
petitioners acts will inevitably confuse the consuming public, since they have no way of knowing that the gas
contained in the LPG tanks bearing respondents marks is in reality not the latters LPG product after the
same had been illegally refilled. The public will then be led to believe that petitioners are authorized refillers
and distributors of respondents LPG products, considering that they are accepting empty containers of
respondents and refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of R.A. No. 8293 describes
the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

168.3 In particular, and without in any way limiting the scope of protection against unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives 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;

x x x xSection 170. Penalties. Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos
(P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of
committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to
pass off upon the public of the goods or business of one person as the goods or business of another with the
end and probable effect of deceiving the public.10

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance
of the goods, misleads prospective purchasers into buying his merchandise under the impression that they
are buying that of his competitors. Thus, the defendant gives his goods the general appearance of the goods
of his competitor with the intention of deceiving the public that the goods are those of his competitor.11

In the present case, respondents pertinently observed that by refilling and selling LPG cylinders bearing their
registered marks, petitioners are selling goods by giving them the general appearance of goods of another
manufacturer.

What's more, the CA correctly pointed out that there is a showing that the consumers may be misled into
believing that the LPGs contained in the cylinders bearing the marks "GASUL" and "SHELLANE" are those
goods or products of the petitioners when, in fact, they are not. Obviously, the mere use of those LPG
cylinders bearing the trademarks "GASUL" and "SHELLANE" will give the LPGs sold by REGASCO the
general appearance of the products of the petitioners.In sum, this Court finds that there is sufficient evidence
to warrant the prosecution of petitioners for trademark infringement and unfair competition, considering that
petitioner Republic Gas Corporation, being a corporation, possesses a personality separate and distinct from
the person of its officers, directors and stockholders. 12Petitioners, being corporate officers and/or directors,
through whose act, default or omission the corporation commits a crime, may themselves be individually held
answerable for the crime.13 Veritably, the CA appropriately pointed out that petitioners, being in direct control
and supervision in the management and conduct of the affairs of the corporation, must have known or are
aware that the corporation is engaged in the act of refilling LPG cylinders bearing the marks of the
respondents without authority or consent from the latter which, under the circumstances, could probably
constitute the crimes of trademark infringement and unfair competition. The existence of the corporate entity
does not shield from prosecution the corporate agent who knowingly and intentionally caused the corporation
to commit a crime. Thus, petitioners cannot hide behind the cloak of the separate corporate personality of the
corporation to escape criminal liability. A corporate officer cannot protect himself behind a corporation where
he is the actual, present and efficient actor.14

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision dated July 2, 2010 and
Resolution dated October 11, 2010 of the Court of Appeals in CA-G.R. SP No. 106385 are AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 188526

November 11, 2013

CENTURY CHINESE MEDICINE CO., MING SENG CHINESE DRUGSTORE, XIANG JIAN CHINESE DRUG
STORE, TEK SAN CHINESE DRUG STORE, SIM SIM CHINESE DRUG STORE, BAN SHIONG TAY
CHINESE DRUG STORE and/or WILCENDO TAN MENDEZ, SHUANG YING CHINESE DRUGSTORE, and
BACLARAN CHINESE DRUG STORE, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES and LING NA LAU, Respondents.

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari which seeks to reverse and set aside the Decision dated March
31, 2009 of the Court of Appeals in CA-G.R. CV No. 88952 and the Resolution dated July 2, 2009, which
denied reconsideration thereof. The CA reversed the Order dated September 25, 2006 of the Regional Trial
Court (RTC), Branch 143, Makati City, quashing Search Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05023, 05-025, 05-042 and 05-043, and the Order dated March 7, 2007 denying reconsideration thereof.
1

The antecedent facts are as follows:

Respondent Ling Na Lau, doing business under the name and style Worldwide Pharmacy, is the sole
distributor and registered trademark owner of TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap as
shown by Certificate of Registration 4-2000-009881 issued to her by the Intellectual Property Office (IPO) for
a period of ten years from August 24, 2003. On November 7, 2005, her representative, Ping Na Lau, (Ping)
wrote a letter addressed to National Bureau of Investigation (NBI) Director Reynaldo Wycoco, through Atty.
Jose Justo Yap and Agent Joseph G. Furing (Agent Furing), requesting assistance for an investigation on
several drugstores which were selling counterfeit whitening papaya soaps bearing the general appearance of
their products.
5

Agent Furing was assigned to the case and he executed an affidavit stating that: he conducted his own
investigation, and on November 9 and 10, 2005, he, together with Junayd Esmael (Esmael), were able to buy
whitening soaps bearing the trademark "TOP-GEL", "T.G." & "DEVICE OF A LEAF" with corresponding
receipts from a list of drugstores which included herein petitioners Century Chinese Medicine Co., Min Seng
Chinese Drugstore, Xiang Jiang Chinese Drug Store, Tek San Chinese Drug Store, Sim Sim Chinese Drug
Store, Ban Shiong Tay Drugstore, Shuang Ying Chinese Drugstore, and Baclaran Chinese Drug Store; while
conducting the investigation and test buys, he was able to confirm Ping's complaint to be true as he
personally saw commercial quantities of whitening soap bearing the said trademarks being displayed and
offered for sale at the said drugstores; he and Esmael took the purchased items to the NBI, and Ping, as the
authorized representative and expert of Worldwide Pharmacy in determining counterfeit and unauthorized
reproductions of its products, personally examined the purchased samples, and issued a Certification dated
November 18, 2005 wherein he confirmed that, indeed, the whitening soaps bearing the trademarks "TOPGEL", "T.G." & "DEVICE OF A LEAF" from the subject drugstores were counterfeit.
8

Esmael also executed an affidavit corroborating Agent Furing's statement. Ping's affidavit stated that upon
his personal examination of the whitening soaps purchased from petitioners bearing the subject trademark, he
found that the whitening soaps were different from the genuine quality of their original whitening soaps with
the trademarks "TOP-GEL", "T.G." & "DEVICE OF A LEAF" and certified that they were all counterfeit.
10

11

On November 21, 2005, Agent Furing applied for the issuance of search warrants before the Regional Trial
Court (RTC), Branch 143, Makati City, against petitioners and other establishments for violations of Sections
168 and 155, both in relation to Section 170 of Republic Act (RA) No. 8293, otherwise known as the
Intellectual Property Code of the Philippines. Section 168, in relation to Section 170, penalizes unfair
competition; while Section 155, in relation to Section 170, punishes trademark infringement.

On November 23, 2005, after conducting searching questions upon Agent Furing and his witnesses, the RTC
granted the applications and issued Search Warrants Nos. 05-030, 05-033, and 05-038 for unfair competition
and Search Warrants Nos. 05-022, 05-023, 05-025, 05-042 and 05-043 for trademark infringement against
petitioners.

On December 5, 2005, Agent Furing filed his Consolidated Return of Search Warrants.

12

On December 8, 2005, petitioners collectively filed their Motion to Quash the Search Warrants contending
that their issuances violated the rule against forum shopping; that Benjamin Yu (Yu) is the sole owner and
distributor of the product known as "TOP-GEL"; and there was a prejudicial question posed in Civil Case No.
05-54747 entitled Zenna Chemical Industry v. Ling Na Lau, et al., pending in Branch 93 of the RTC of Quezon
City, which is a case filed by Yu against respondent for damages due to infringement of trademark/tradename,
unfair competition with prayer for the immediate issuance of a temporary restraining order and/or preliminary
prohibitory injunction.
13

On January 9, 2006, respondent filed her Comment/Opposition thereto arguing the non-existence of forum
shopping; that Yu is not a party- respondent in these cases and the pendency of the civil case filed by him is
immaterial and irrelevant; and that Yu cannot be considered the sole owner and distributor of "TOP GEL T.G.
& DEVICE OF A LEAF." The motion was then submitted for resolution in an Order dated January 30, 2006.
During the pendency of the case, respondent, on April 20, 2006, filed a Submission in relation to the Motion
to Quash attaching an Order dated March 21, 2006 of the IPO in IPV Case No. 10-2005-00001 filed by
respondent against Yu, doing business under the name and style of MCA Manufacturing and Heidi S. Cua,
proprietor of South Ocean Chinese Drug Stores for trademark infringement and/or unfair competition and
damages with prayer for preliminary injunction. The Order approved therein the parties' Joint Motion To
Approve Compromise Agreement filed on March 8, 2006. We quote in its entirety the Order as follows:
14

15

16

The Compromise Agreement between the herein complainant and respondents provides as follows:

1. Respondents acknowledge the exclusive right of Complainant over the trademark TOP GEL T.G. &
DEVICE OF A LEAF for use on papaya whitening soap as registered under Registration No. 4-2000009881 issued on August 24, 2003.

2. Respondents acknowledge the appointment by Zenna Chemical Industry Co., Ltd. of Complainant
as the exclusive Philippine distributor of its products under the tradename and trademark TOP GEL
MCA & MCA DEVICE (A SQUARE DEVICE CONSISTING OF A STYLIZED REPRESENTATION OF A
LETTER "M" ISSUED " OVER THE LETTER "CA") as registered under Registration No. 4-1996109957 issued on November 17, 2000, as well as the assignment by Zenna Chemical Industry Co.,
Ltd. to Complainant of said mark for use on papaya whitening soap.

3. Respondents admit having used the tradename and trademark aforesaid but after having realized
that Complainant is the legitimate assignee of TOP GEL MCA & MCA DEVICE and the registered
owner of TOP GEL T.G. & DEVICE OF A LEAF, now undertake to voluntarily cease and desist from
using the aforesaid tradename and trademark and further undertake not to manufacture, sell,
distribute, and otherwise compete with Complainant, now and at anytime in the future, any papaya
whitening soap using or bearing a mark or name identical or confusingly similar to, or constituting a
colorable imitation of, the tradename and trademark TOP GEL MCA & MCA DEVICE and/or TOP GEL
T.G. & DEVICE OF A LEAF as registered and described above.

4. Respondents further undertake to withdraw and/or dismiss their counterclaim and petition to cancel
and/or revoke Registration No. 4-2000-009881 issued to Complainant. Respondents also further

undertake to pull out within 45 days from approval of the Compromise Agreement all their products
bearing a mark or name identical or confusingly similar to, or constituting a colorable imitation of, the
tradename and trademark TOP GEL MCA & MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A
LEAF, from the market nationwide.

5. Respondents finally agree and undertake to pay Complainant liquidated damages in the amount of
FIVE HUNDRED THOUSAND (Php500,000.00) PESOS for every breach or violation of any of the
foregoing undertakings which complainant may enforce by securing a writ of execution from this
Office, under this case.

6. Complainant, on the other hand, agrees to waive all her claim for damages against Respondents as
alleged in her complaint filed in the Intellectual Property Office only.

7. The Parties hereby agree to submit this Compromise Agreement for Approval of this Office and pray
for issuance of a decision on the basis thereof.

Finding the Compromise Agreement to have been duly executed and signed by the parties and/or their
representatives/counsels and the terms and conditions thereof to be in conformity with the law, morals, good
customs, public order and public policy, the same is hereby APPROVED. Accordingly, the above-entitled case
is DISMISSED as all issues raised concerning herein parties have been rendered MOOT AND ACADEMIC.

SO ORDERED.

17

On September 25, 2006, the RTC issued its Order sustaining the Motion to Quash the Search Warrants, the
dispositive portion of which reads as follows:
18

WHEREFORE, finding that the issuance of the questioned search warrants were not supported by probable
cause, the Motion to Quash is GRANTED. Search warrants nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05025, 05-042, 05-043 are ordered lifted and recalled.

The NBI Officers who effected the search warrants are hereby ordered to return the seized items to herein
respondents within ten (10) days from receipt of this Order.

So Ordered.

19

In quashing the search warrants, the RTC applied the Rules on Search and Seizure for Civil Action in
Infringement of Intellectual Property Rights. It found the existence of a prejudicial question which was
pending before Branch 93 of RTC Quezon City, docketed as Civil Case No. 05-54747, on the determination
as to who between respondent and Yu is the rightful holder of the intellectual property right over the trademark
TOP GEL T.G. & DEVICE OF A LEAF; and there was also a case for trademark infringement and/or unfair
competition filed by respondent against Yu before the IPO which was pending at the time of the application for
the search warrants. It is clear, therefore, that at the time of the filing of the application for the search
warrants, there is yet no determination of the alleged right of respondent over the subject
trademark/tradename. Also, the RTC found that petitioners relied heavily on Yu's representation that he is the
sole owner/distributor of the Top Gel whitening soap, as the latter even presented Registration No. 4-1996109957 from the IPO for a term of 20 years from November 17, 2000 covering the same product. There too
was the notarized certification from Zenna Chemical Industry of Taiwan, owner of Top Gel MCA, with the
caveat that the sale, production or representation of any imitated products under its trademark and tradename
shall be dealt with appropriate legal action.
20

The RTC further said that in the determination of probable cause, the court must necessarily resolve whether
or not an offense exists to justify the issuance of a search warrant or the quashal of the one already issued. In
this case, respondent failed to prove the existence of probable cause, which warranted the quashal of the

questioned search warrants.

On November 13, 2006, respondent filed an Urgent Motion to Hold in Abeyance the Release of Seized
Evidence.
21

Respondent filed a motion for reconsideration, which the RTC denied in its Order dated March 7, 2007.
22

Respondent then filed her appeal with the CA. After respondent filed her appellant's brief and petitioners their
appellee's brief, the case was submitted for decision.

On March 31, 2009, the CA rendered its assailed Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the appeal
filed in this case and SETTING ASIDE the Order dated March 7, 2007 issued by Branch 143 of the Regional
Trial Court of the National Capital Judicial Region stationed in Makati City in the case involving Search
Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042, 05-043.
23

In reversing the RTC's quashal of the search warrants, the CA found that the search warrants were applied for
and issued for violations of Sections 155 and 168, in relation to Section 170, of the Intellectual Property Code
and that the applications for the search warrants were in anticipation of criminal actions which are to be
instituted against petitioners; thus, Rule 126 of the Rules of Criminal Procedure was applicable. It also ruled
that the basis for the applications for issuance of the search warrants on grounds of trademarks infringement
and unfair competition was the trademark TOP GEL T.G. & DEVICE OF A LEAF; that respondent was the
registered owner of the said trademark, which gave her the right to enforce and protect her intellectual
property rights over it by seeking assistance from the NBI.

The CA did not agree with the RTC that there existed a prejudicial question, since Civil Case No. 05-54747
was already dismissed on June 10, 2005, i.e., long before the search warrants subject of this appeal were
applied for; and that Yu's motion for reconsideration was denied on September 15, 2005 with no appeal
having been filed thereon as evidenced by the Certificate of Finality issued by the said court.

Petitioners' motion for reconsideration was denied by the CA in a Resolution dated July 2, 2009. Hence, this
petition filed by petitioners raising the issue that:

(A) THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN REVERSING
THE FINDINGS OF THE REGIONAL TRIAL COURT AND HELD THAT THE LATTER APPLIED THE
RULES ON SEARCH AND SEIZURE IN CIVIL ACTIONS FOR INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS.
24

(B) THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT
BASED ITS RULING ON THE ARGUMENT WHICH WAS BROUGHT UP FOR THE FIRST TIME IN
RESPONDENT LING NA LAU'S APPELLANT'S BRIEF.
25

Petitioners contend that the products seized from their respective stores cannot be the subject of the search
warrants and seizure as those Top Gel products are not fruits of any crime, infringed product nor intended to
be used in any crime; that they are legitimate distributors who are authorized to sell the same, since those
genuine top gel products bore the original trademark/tradename of TOP GEL MCA, owned and distributed by
Yu. Petitioners also claim that despite the RTC's order to release the seized TOP GEL products, not one had
been returned; that one or two samples from each petitioners' drugstore would have sufficed in case there is
a need to present them in a criminal prosecution, and that confiscation of thousands of these products was an
overkill.

Petitioners also argue that the issue that the RTC erred in applying the rules on search and seizure in
anticipation of a civil action was never raised in the RTC.

The issue for resolution is whether or not the CA erred in reversing the RTC's quashal of the assailed search
warrants.

We find no merit in the petition.

The applications for the issuance of the assailed search warrants were for violations of Sections 155 and 168,
both in relation to Section 170 of Republic Act (RA) No. 8293, otherwise known as the Intellectual Property
Code of the Philippines. Section 155, in relation to Section 170, punishes trademark infringement; while
Section 168, in relation to Section 170, penalizes unfair competition, to wit:

Sec 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the registered
mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the
same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive; or

While

Sec. 168. Unfair Competition, Rights, Regulation and Remedies.

xxxx

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives 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;

And

SEC. 170. Penalties. - Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos
(P50,000.00) to Two hundred thousand pesos (P200,000.00) shall be imposed on any person who is found
guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition]
and Subsection 169.1 [False Designation of Origin and False Description or Representation].

Thus, we agree with the CA that A.M. No. 02-1-06-SC, which provides for the Rules on the Issuance of the
Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights, is not applicable in this
case as the search warrants were not applied based thereon, but in anticipation of criminal actions for
violation of intellectual property rights under RA 8293. It was established that respondent had asked the NBI

for assistance to conduct investigation and search warrant implementation for possible apprehension of
several drugstore owners selling imitation or counterfeit TOP GEL T.G. & DEVICE OF A LEAF papaya
whitening soap. Also, in his affidavit to support his application for the issuance of the search warrants, NBI
Agent Furing stated that "the items to be seized will be used as relevant evidence in the criminal actions that
are likely to be instituted." Hence, Rule 126 of the Rules of Criminal Procedure applies.

Rule 126 of the Revised Rules of Court, which governs the issuance of the assailed Search Warrants,
provides, to wit:

SEC. 3. Personal property to be seized. - A search warrant may be issued for the search and seizure of
personal property:

(a) Subject of the offense;

(b) Stolen or embezzled and other proceeds or fruits of the offense; or

(c) Used or intended to be used as the means of committing an offense.

SEC. 4. Requisites for issuing search warrant. - A search warrant shall not issue except upon probable cause
in connection with one specific offense to be determined personally by the judge after examination under oath
or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to
be searched and the things to be seized which may be anywhere in the Philippines.

SEC. 5. Examination of complainant; record. - The judge must, before issuing the warrant, personally examine
in the form of searching questions and answers, in writing and under oath, the complainant and the witnesses
he may produce on facts personally known to them and attach to the record their sworn statements together
with the affidavits submitted.

A core requisite before a warrant shall validly issue is the existence of a probable cause, meaning "the
existence of such facts and circumstances which would lead a reasonably discreet and prudent man to
believe that an offense has been committed and that the objects sought in connection with the offense are in
the place to be searched." And when the law speaks of facts, the reference is to facts, data or information
personally known to the applicant and the witnesses he may present. Absent the element of personal
knowledge by the applicant or his witnesses of the facts upon which the issuance of a search warrant may be
justified, the warrant is deemed not based on probable cause and is a nullity, its issuance being, in legal
contemplation, arbitrary. The determination of probable cause does not call for the application of rules and
standards of proof that a judgment of conviction requires after trial on the merits. As implied by the words
themselves, "probable cause" is concerned with probability, not absolute or even moral certainty. The
prosecution need not present at this stage proof beyond reasonable doubt. The standards of judgment are
those of a reasonably prudent man, not the exacting calibrations of a judge after a full-blown trial.
26

27

28

29

30

The RTC quashed the search warrants, saying that (1) there exists a prejudicial question pending before
Branch 93 of the RTC of Quezon City, docketed as Civil Case No. 05-54747, i.e., the determination as to who
between respondent and Yu is the rightful holder of the intellectual property right over the trademark TOP GEL
T.G. & DEVICE OF A LEAF; and there was also a case for trademark infringement and/or unfair competition
filed by respondent against Yu pending before the IPO, docketed as IPV Case No. 10-2005-00001; and (2)
Yu's representation that he is the sole distributor of the Top Gel whitening soap, as the latter even presented
Registration No. 4-1996-109957 issued by the IPO to Zenna Chemical Industry as the registered owner of the
trademark TOP GEL MCA & DEVICE MCA for a term of 20 years from November 17, 2000 covering the same
product.

We do not agree. We affirm the CA's reversal of the RTC Order quashing the search warrants.

The affidavits of NBI Agent Furing and his witnesses, Esmael and Ling, clearly showed that they are seeking
protection for the trademark "TOP GEL T.G. and DEVICE OF A LEAF" registered to respondent under
Certificate of Registration 4-2000-009881 issued by the IPO on August 24, 2003, and no other. While
petitioners claim that the product they are distributing was owned by Yu with the trademark TOP GEL MCA
and MCA DEVISE under Certificate of Registration 4-1996-109957, it was different from the trademark TOP
GEL T.G. and DEVICE OF A LEAF subject of the application. We agree with the CA's finding in this wise:

x x x It bears stressing that the basis for the applications for issuances of the search warrants on grounds of
trademark infringement and unfair competition is the trademark TOP GEL T.G. & DEVICE OF A LEAF. Private
complainant-appellant was issued a Certificate of Registration No. 4-2000-009881 of said trademark on
August 24, 2003 by the Intellectual Property Office, and is thus considered the lawful holder of the said
trademark. Being the registrant and the holder of the same, private complainant-appellant had the authority to
enforce and protect her intellectual property rights over it. This prompted her to request for assistance from
the agents of the NBI, who thereafter conducted a series of investigation, test buys and inspection regarding
the alleged trademark infringement by herein respondents-appellees. Subsequently, Ping Na Lau, private
complainant-appellants representative, issued a certification with the finding that the examined goods were
counterfeit. This prompted the NBI agents to apply for the issuances of search warrants against the
respondents-appellees. Said applications for the search warrants were granted after by Judge Laguilles after
examining under oath the applicant Agent Furing of the NBI and his witnesses Ping Na Lau and Junayd R.
Ismael.

Based on the foregoing, it is clear that the requisites for the issuance of the search warrants had been
complied with and that there is probable cause to believe that an offense had been committed and that the
objects sought in connection with the offense were in the places to be searched. The offense pertains to the
alleged violations committed by respondents-appellees upon the intellectual property rights of herein private
complainant-appellant, as holder of the trademark TOP GEL T.G. & DEVICE OF A LEAF under Certificate of
Registration No. 4-2000-009881, issued on August 24, 2003 by the Intellectual Property Office.
31

Notably, at the time the applications for the issuance of the search warrants were filed on November 21, 2005,
as the CA correctly found, Civil Case No. Q-05-54747, which the RTC found to be where a prejudicial
question was raised, was already dismissed on June 10, 2005, because of the pendency of a case involving
the same issues and parties before the IPO. Yu's motion for reconsideration was denied in an Order dated
September 15, 2005. In fact, a Certificate of Finality was issued by the RTC on January 4, 2007.
32

33

34

Moreover, the IPO case for trademark infringement and unfair competition and damages with prayer for
preliminary injunction filed by respondent against Yu and Heidi Cua, docketed as IPV Case No. 10-200500001, would not also be a basis for quashing the warrants. In fact, prior to the applications for the issuance
of the assailed search warrants on November 21, 2005, the IPO had issued an Order dated October 20,
2005 granting a writ of preliminary injunction against Yu and Cua, the dispositive portion of which reads:
1avvphi1

35

WHEREFORE, the WRIT OF PRELIMINARY INJUNCTION is hereby issued against Respondent, Benjamin
Yu, doing business under the name and style of MCA Manufacturing and Heidi S. Cua, Proprietor of South
Ocean Chinese Drug Store, and their agents, representatives, dealers and distributors and all persons acting
in their behalf, to cease and desist using the trademark "TOP GEL T.G. & DEVICE OF A LEAF" or any
colorable imitation thereof on Papaya whitening soaps they manufacture, sell, and/or offer for sale, and
otherwise, from packing their Papaya Whitening Soaps in boxes with the same general appearance as those
of complainant's boxes within a period of NINETY (90) DAYS, effective upon the receipt of respondent of the
copy of the COMPLIANCE filed with this Office by the Complainant stating that it has posted a CASH BOND
in the amount of ONE HUNDRED THOUSAND PESOS (Php100,000.00) together with the corresponding
Official Receipt Number and date thereof. Consequently, complainant is directed to inform this Office of actual
date of receipt by Respondent of the aforementioned COMPLIANCE.
36

To inform the public of the issuance of the writ of preliminary injunction, respondent's counsel had the
dispositive portion of the Order published in The Philippine Star newspaper on October 30, 2005. Thus, it
was clearly stated that Yu, doing business under the name and style of MCA Manufacturing, his agents,
representatives, dealers and distributors and all persons acting in his behalf, were to cease and desist from
using the trademark "TOP GEL & DEVICE OF A LEAF" or any colorable imitation thereof on Papaya
Whitening soaps they manufacture, sell and/or offer for sale. Petitioners, who admitted having derived their
TOP GEL products from Yu, are, therefore, notified of such injunction and were enjoined from selling the
same.
37

Notwithstanding, at the time of the application of the search warrants on November 21, 2005, and while the
injunction was in effect, petitioners were still selling the alleged counterfeit products bearing the trademark
TOP GEL T.G. & DEVICE OF A LEAF. There exists a probable cause for violation of respondent's intellectual
property rights, which entitles her as the registered owner of the trademark TOP GEL and DEVICE OF A
LEAF to be protected by the issuance of the search warrants.

More importantly, during the pendency of petitioners' motion to quash in the RTC, respondent submitted the
Order dated March 8, 2006 of the IPO in IPV Case No. 10-2005-00001, where the writ of preliminary
injunction was earlier issued, approving the compromise agreement entered into by respondent with Yu and
Cua where it was stated, among others, that:

1. Respondents acknowledge the exclusive right of Complainant over the trademark TOP GEL T.G. &
DEVICE OF A LEAF for use on papaya whitening soap as registered under Registration No. 4-2000009881 issued on August 24, 2003.

2. Respondents acknowledge the appointment by Zenna Chemical Industry Co., Ltd. of Complainant
as the exclusive Philippine distributor of its products under the tradename and trademark TOP GEL
MCA & MCA DEVICE (A SQUARE DEVICE CONSISTING OF A STYLIZED REPRESENTATION OF A
LETTER "M" OVER THE LETTER "CA") as registered under Registration No 4-1996-109957 issued
on November 17, 2000, as well as the assignment by Zenna Chemical Industry Co., Ltd. to
Complainant of said mark for use on papaya whitening soap.

3. Respondents admit having used the tradename and trademark aforesaid, but after having realized
that Complainant is the legitimate assignee of TOP GEL MCA & MCA DEVICE and the registered
owner of TOP GEL T.G. & DEVICE OF A LEAF, now undertake to voluntarily cease and desist from
using the aforesaid tradename and trademark, and further undertake not to manufacture, sell and
distribute and otherwise compete with complainant, now and at anytime in the future, any papaya
whitening soap using or bearing a mark or name identical or confusingly similar to, or constituting a
colorable imitation of the tradename and trademark TOP GEL MCA & MCA DEVICE and/or TOP GEL
T.G. & DEVICE OF A LEAF as registered and described above.
38

Hence, it appears that there is no more controversy as to who is the rightful holder of the trademark TOP GEL
T.G. & DEVICE OF A LEAF. Therefore, respondent, as owner of such registered trademark has the right to the
issuance of the search warrants.

Anent petitioners' claim that one or two samples of the Top Gel products from each of them, instead of
confiscating thousands of the products, would have sufficed for the purpose of an anticipated criminal action,
citing our ruling in Summerville General Merchandising Co. v. Court of Appeals, is not meritorious.
39

We do not agree.

The factual milieu of the two cases are different. In Summerville, the object of the violation of Summerville's
intellectual property rights, as assignee of Royal playing cards and Royal brand playing cards case, was
limited to the design of Summerville's Royal plastic container case which encased and wrapped the Crown
brand playing cards. In the application for the search warrant which the RTC subsequently issued, one of the
items to be seized were the Crown brand playing cards using the copyright plastic and Joker of Royal brand.
Thus, numerous boxes containing Crown playing cards were seized and upon the RTC's instruction were
turned over to Summerville, subject to the condition that the key to the said warehouse be turned over to the
court sheriff. Respondents moved for the quashal of the search warrant and for the return of the seized
properties. The RTC partially granted the motion by ordering the release of the seized Crown brand playing
cards and the printing machines; thus, only the Royal plastic container cases of the playing cards were left in
the custody of Summerville. The CA sustained the RTC order. On petition with us, we affirmed the CA. We
found therein that the Crown brand playing cards are not the subject of the offense as they are genuine and
the Crown trademark was registered to therein respondents names; that it was the design of the plastic
container/case that is alleged to have been utilized by respondents to deceive the public into believing that the
Crown brand playing cards are the same as those manufactured by Summerville. We then said that assuming
that the Crown playing cards could be considered subject of the offense, a sample or two are more than

enough to retain should there have been a need to examine them along with the plastic container/case; and
that there was no need to hold the hundreds of articles seized. We said so in the context that since what was
in dispute was the design of the Royal plastic cases/containers of playing cards and not the playing card per
se, a small number of Crown brand playing cards would suffice to examine them with the Royal plastic
cases/containers. And the return of the playing cards would better serve the purposes of justice and
expediency. However, in this case, the object of the violation of respondent's intellectual property right is the
alleged counterfeit TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap being sold by petitioners, so
there is a need to confiscate all these articles to protect respondent's right as the registered owner of such
trademark.

Petitioners next contend that the CA's ruling on the applicability of Rule 126 of the Rules of Court that the
search warrants were issued in anticipation of a criminal action was only based on respondent's claim which
was only brought for the first time in her appellant's brief.

We are not persuaded.We find worth quoting respondent's argument addressing this issue in its Comment,
thus:

In the assailed Decision, the Court of Appeals found that the Rule correctly applicable to the subject search
warrants was Rule 126 of the Rules of Court. Petitioners fault the appellate court for ruling that the Regional
Trial Court incorrectly applied the Rules on Search and Seizure in Civil Actions for Infringement of Intellectual
Property Rights on the basis of an argument that private respondent brought up for the first time in her
Appellant's Brief.

A cursory perusal of the Appellant's Brief shows that the following issues/errors were raised, that: (1) the
Honorable Trial Court erred in holding that the "Rules on Search and Seizure for Infringement of Intellectual
Property Rights" apply to the search warrants at bar; (2) x x x.

It must be remembered that there was no trial on the merits to speak of in the trial court, and the matter of the
application of the wrong set of Rules only arose in the Order dated 25th September 2006 which sustained the
Motion to Quash. A thorough examination of the Appellee's Brief filed by petitioners (respondents-appellees in
the Court of Appeals) reveals, however, that petitioners NEVER assailed the first issue/error on the ground
that the same was raised for the first time on appeal. It is only now, after the appellate court rendered a
Decision and Resolution unfavorable to them, that petitioners questioned the alleged procedural error.
Petitioners should now be considered in estoppel to question the same.
40

Indeed, perusing the appellee's (herein petitioners) brief filed with the CA, the matter of the non-applicability of
the rules on search and seizure in civil action for infringement of intellectual property rights was never
objected as being raised for the first time. On the contrary, petitioners had squarely faced respondent's
argument in this wise:

Appellant (herein respondent) contends that the rule (SC Adm. Memo 1-06, No. 02-1-06, Rule on Search and
Seizure in Civil Actions for Infringement of Intellectual Property Rights) does [not] apply to the search warrants
in the [case] at bar, for the reason that the search warrants themselves reveal that the same were applied for
and issued for violations of "Section 155 in relation to Section 170 of RA 8293" and violations of "Section 168
in relation to Section 170 of RA 8293," and that a perusal of the records would show that there is no mention
of a civil action or anticipation thereof, upon which the search warrants are applied for.

Appellees (herein petitioners) cannot agree with the contention of the appellant. Complainant NBI Agent
Joseph G. Furing, who applied for the search warrants, violated the very rule on search and seizure for
infringement of Intellectual Property Rights. The search warrants applied for by the complainants cannot be
considered a criminal action. There was no criminal case yet to speak of when complainants applied for
issuance of the search warrants. There is distinction here because the search applied for is civil in nature and
no criminal case had been filed. The complaint is an afterthought after the respondents-appellees filed their
Motion to Quash Search Warrant before the Regional Trial Court of Manila, Branch 24. The grounds
enumerated in the rule must be complied with in order to protect the constitutional mandate that "no person
shall be deprived of life liberty or property without due process of law nor shall any person be denied the
equal protection of the law." Clearly, the application of the search warrants for violation of unfair competition
1wphi1

and infringement is in the nature of a civil action. WHEREFORE, the petition for review is DENIED. The
Decision dated March 31, 2009 and the Resolution dated July 2, 2009 of the Court of Appeals, in CA-G.R.
CVNo. 88952, are hereby AFFIRMED.SO ORDERED.
41

SECOND DIVISION

COCA-COLA BOTTLERS,
PHILS., INC. (CCBPI), Naga Plant,
Petitioner,

G.R. No. 154491

Present:
*

- versus

QUISUMBING, J., Chairperson,

CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

QUINTIN J. GOMEZ, a.k.a.

KIT GOMEZ and DANILO E.
GALICIA,
a.k.a.
DANNYGALICIA,
Respondents.

Promulgated:
November 14, 2008

x -------------------------------------------------------------------------------------------x
DECISION
BRION, J.:
Is the hoarding of a competitors product containers punishable as unfair
competition under the Intellectual Property Code (IP Code, Republic Act No. 8293) that
would entitle the aggrieved party to a search warrant against the hoarder? This is the issue
we grapple with in this petition for review on certiorari involving two rival multinational
softdrink giants; petitioner Coca-Cola Bottlers, Phils., Inc. (Coca-Cola) accuses Pepsi Cola
Products Phils., Inc. (Pepsi), represented by the respondents, of hoarding empty Coke
bottles in bad faith to discredit its business and to sabotage its operation in Bicolandia.
BACKGROUND
The facts, as culled from the records, are summarized below.
On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for hoarding
Coke empty bottles in Pepsis yard in Concepcion Grande, Naga City, an act allegedly
penalized as unfair competition under the IP Code. Coca-Cola claimed that the bottles
must be confiscated to preclude their illegal use, destruction or concealment by the
respondents.[1] In support of the application, Coca-Cola submitted the sworn statements of

three witnesses: Naga plant representative Arnel John Ponce said he was informed that
one of their plant security guards had gained access into the Pepsi compound and had seen
empty Coke bottles; acting plant security officer Ylano A. Regaspi said he investigated
reports that Pepsi was hoarding large quantities of Coke bottles by requesting their security
guard to enter the Pepsi plant and he was informed by the security guard that Pepsi
hoarded several Coke bottles; security guard Edwin Lirio stated that he entered Pepsis
yard on July 2, 2001 at 4 p.m. and saw empty Coke bottles inside Pepsi shells or cases.[2]
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City, after
taking the joint deposition of the witnesses, issued Search Warrant No. 2001-01 [3] to
seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke bottles at Pepsis Naga yard
for violation of Section 168.3 (c) of the IP Code. [4] The local police seized and brought to
the MTCs custody 2,464 Litro and 4,036 eight and 12 ounces empty Coke bottles, 205
Pepsi shells for Litro, and 168 Pepsi shells for smaller (eight and 12 ounces) empty Coke
bottles, and later filed with the Office of the City Prosecutor of Naga a complaint against
two Pepsi officers for violation of Section 168.3 (c) in relation to Section 170 of the IP
Code.[5] The named respondents, also the respondents in this petition, were Pepsi regional
sales manager Danilo E. Galicia (Galicia) and its Naga general managerQuintin J.
Gomez, Jr. (Gomez).
In their counter-affidavits, Galicia and Gomez claimed that the bottles came from
various Pepsi retailers and wholesalers who included them in their return to make up for
shortages of empty Pepsi bottles; they had no way of ascertaining beforehand the return of
empty Coke bottles as they simply received what had been delivered; the presence of the
bottles in their yard was not intentional nor deliberate; Ponce and Regaspis statements are
hearsay as they had no personal knowledge of the alleged crime; there is no mention in the
IP Code of the crime of possession of empty bottles; and that the ambiguity of the law,
which has a penal nature, must be construed strictly against the State and liberally in their
favor. Pepsi security guards Eduardo E. Miral and Rene Acebuche executed a joint
affidavit stating that per their logbook, Lirio did not visit or enter the plant premises in the
afternoon of July 2, 2001.
The respondents also filed motions for the return of their shells and to quash the
search warrant. They contended that no probable cause existed to justify the issuance of
the search warrant; the facts charged do not constitute an offense; and their Naga plant was
in urgent need of the shells.
Coca-Cola opposed the motions as the shells were part of the evidence of the crime,
arguing that Pepsi used the shells in hoarding the bottles. It insisted that the issuance of
warrant was based on probable cause for unfair competition under the IP Code, and that
the respondents violated R.A. 623, the law regulating the use of stamped or marked
bottles, boxes, and other similar containers.
THE MTC RULINGS

On September 19, 2001, the MTC issued the first assailed order [6] denying the twin
motions. It explained there was an exhaustive examination of the applicant and its
witnesses through searching questions and that the Pepsi shells are prima facie evidence
that the bottles were placed there by the respondents.
In their motion for reconsideration, the respondents argued for the quashal of the
warrant as the MTC did not conduct a probing and exhaustive examination; the applicant
and its witnesses had no personal knowledge of facts surrounding the hoarding; the court
failed to order the return of the borrowed shells; there was no crime involved; the
warrant was issued based on hearsay evidence; and the seizure of the shells was illegal
because they were not included in the warrant.
On November 14, 2001, the MTC denied the motion for reconsideration in the
second assailed order,[7] explaining that the issue of whether there was unfair competition
can only be resolved during trial.
The respondents responded by filing a petition for certiorari under Rule 65 of the
Revised Rules of Court before the Regional Trial Court (RTC) of Naga City on the ground
that the subject search warrant was issued without probable cause and that the empty
shells were neither mentioned in the warrant nor the objects of the perceived crime.

THE RTC RULINGS

On May 8, 2002, the RTC voided the warrant for lack of probable cause and the
non-commission of the crime of unfair competition, even as it implied that other laws may
have been violated by the respondents. The RTC, though, found no grave abuse of
discretion on the part of the issuing MTC judge.[8] Thus,
Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the
Honorable Judge Julian C. Ocampo III on July 2, 2001 is ANNULLED and SET
ASIDE. The Orders issued by the Pairing Judge of Br. 1, MTCC of Naga City
dated September 19, 2001 and November 14, 2001 are also declared VOID and
SET ASIDE. The City Prosecutor of Naga City and SPO1 Ernesto Paredes are
directed to return to the Petitioner the properties seized by virtue of Search
Warrant No. 2001-02. No costs.
SO ORDERED.[9]

In a motion for reconsideration, which the RTC denied on July 12, 2002, the
petitioner stressed that the decision of the RTC was contradictory because it absolved
Judge Ocampo of grave abuse of discretion in issuing the search warrant, but at the same
time nullified the issued warrant. The MTC should have dismissed the petition when it
found out that Judge Ocampo did not commit any grave abuse of discretion.

Bypassing the Court of Appeals, the petitioner asks us through this petition for
review on certiorari under Rule 45 of the Rules of Court to reverse the decision of the
RTC. Essentially, the petition raises questions against the RTCs nullification of the
warrant when it found no grave abuse of discretion committed by the issuing judge.

THE PETITION and

THE PARTIES POSITIONS

In its petition, the petitioner insists the RTC should have dismissed the respondents
petition for certiorari because it found no grave abuse of discretion by the MTC in issuing
the search warrant. The petitioner further argues that the IP Code was enacted into law to
remedy various forms of unfair competition accompanying globalization as well as to
replace the inutile provision of unfair competition under Article 189 of the Revised Penal
Code. Section 168.3(c) of the IP Code does not limit the scope of protection on the
particular acts enumerated as it expands the meaning of unfair competition to include
other acts contrary to good faith of a nature calculated to discredit the goods, business or
services of another. The inherent element of unfair competition is fraud or deceit, and
that hoarding of large quantities of a competitors empty bottles is necessarily
characterized by bad faith. It claims that its Bicol bottling operation was prejudiced by the
respondents hoarding and destruction of its empty bottles.
The petitioner also argues that the quashal of the search warrant was improper
because it complied with all the essential requisites of a valid warrant. The empty bottles
were concealed in Pepsi shells to prevent discovery while they were systematically being
destroyed to hamper the petitioners bottling operation and to undermine the capability of
its bottling operations in Bicol.
The respondents counter-argue that although Judge Ocampo conducted his own
examination, he gravely erred and abused his discretion when he ignored the rule on the
need of sufficient evidence to establish probable cause; satisfactory and convincing
evidence is essential to hold them guilty of unfair competition; the hoarding of empty
Coke bottles did not cause actual or probable deception and confusion on the part of the
general public; the alleged criminal acts do not show conduct aimed at deceiving the
public; there was no attempt to use the empty bottles or pass them off as the respondents
goods.
The respondents also argue that the IP Code does not criminalize bottle hoarding, as
the acts penalized must always involve fraud and deceit. The hoarding does not make
them liable for unfair competition as there was no deception or fraud on the end-users.
THE ISSUE

Based on the parties positions, the basic issue submitted to us for resolution is
whether the Naga MTC was correct in issuing Search Warrant No. 2001-01 for the seizure
of the empty Coke bottles from Pepsis yard for probable violation of Section 168.3 (c) of
the IP Code. This basic issue involves two sub-issues, namely, the substantive issue of
whether the application for search warrant effectively charged an offense, i.e., a violation
of Section 168.3 (c) of the IP Code; and the procedural issue of whether the MTC observed
the procedures required by the Rules of Court in the issuance of search warrants.
OUR RULING
We resolve to deny the petition for lack of merit.
We clarify at the outset that while we agree with the RTC decision, our agreement is
more in the result than in the reasons that supported it. The decision is correct in
nullifying the search warrant because it was issued on an invalid substantive basis the
acts imputed on the respondents do not violate Section 168.3 (c) of the IP Code. For this
reason, we deny the present petition.
The issuance of a search warrant[10] against a personal property[11] is governed by
Rule 126 of the Revised Rules of Court whose relevant sections state:
Section 4. Requisites for issuing search warrant. A search warrant
shall not issue except upon probable cause in connection with one specific
offense to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the things to be seized which
may be anywhere in the Philippines.
Section 5.
Examination of complainant; record. The judge must,
before issuing the warrant, personally examine in the form of searching
questions and answers, in writing and under oath, the complainant and the
witnesses he may produce on facts personally known to them and attach to the
record their sworn statements together with the affidavits submitted.
Section 6.
Issuance and form of search warrant. If the judge is
satisfied of the existence of facts upon which the application is based or that
there is probable cause to believe that they exist, he shall issue the warrant,
which must be substantially in the form prescribed by these Rules. [Emphasis
supplied]

To paraphrase this rule, a search warrant may be issued only if there is probable
cause in connection with a specific offense alleged in an application based on the personal
knowledge of the applicant and his or her witnesses. This is the substantive requirement in
the issuance of a search warrant. Procedurally, the determination of probable cause is a
personal task of the judge before whom the application for search warrant is filed, as he
has to examine under oath or affirmation the applicant and his or her witnesses in the form
of searching questions and answers in writing and under oath. The warrant, if issued,
must particularly describe the place to be searched and the things to be seized.

We paraphrase these requirements to stress that they have substantive and

procedural aspects. Apparently, the RTC recognized this dual nature of the requirements
and, hence, treated them separately; it approved of the way the MTC handled the
procedural aspects of the issuance of the search warrant but found its action on the
substantive aspect wanting. It therefore resolved to nullify the warrant, without however
expressly declaring that the MTC gravely abused its discretion when it issued the warrant
applied for. The RTCs error, however, is in the form rather than the substance of the
decision as the nullification of the issued warrant for the reason the RTC gave was
equivalent to the declaration that grave abuse of discretion was committed. In fact, we so
rule as the discussions below will show.
Jurisprudence teaches us that probable cause, as a condition for the issuance of a
search warrant, is such reasons supported by facts and circumstances as will warrant a
cautious man in the belief that his action and the means taken in prosecuting it are legally
just and proper. Probable cause requires facts and circumstances that would lead a
reasonably prudent man to believe that an offense has been committed and the objects
sought in connection with that offense are in the place to be searched. [12] Implicit in this
statement is the recognition that an underlying offense must, in the first place, exist. In
other words, the acts alleged, taken together, must constitute an offense and that these acts
are imputable to an offender in relation with whom a search warrant is applied for.
In the context of the present case, the question is whether the act charged alleged
to be hoarding of empty Coke bottles constitutes an offense under Section 168.3 (c) of
the IP Code. Section 168 in its entirety states:
SECTION 168. Unfair Competition, Rights, Regulation and Remedies.
168.1. 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 registered mark 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.
168.2. 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.
168.3. In particular, and without in any way limiting the scope of
protection against unfair competition, the following shall be deemed guilty of
unfair competition:
(a)
Any person, who is selling his goods and gives 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
(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.
168.4. The remedies provided by Sections 156, 157 and 161 shall apply
mutatis mutandis. (Sec. 29, R.A. No. 166a)

The petitioner theorizes that the above section does not limit the scope of protection
on the particular acts enumerated as it expands the meaning of unfair competition to
include other acts contrary to good faith of a nature calculated to discredit the goods,
business or services of another. Allegedly, the respondents hoarding of Coca Cola empty
bottles is one such act.
We do not agree with the petitioners expansive interpretation of Section 168.3 (c).
Unfair competition, previously defined in Philippine jurisprudence in relation with
R.A. No. 166 and Articles 188 and 189 of the Revised Penal Code, is now covered by
Section 168 of the IP Code as this Code has expressly repealed R.A. No. 165 and R.A. No.
166, and Articles 188 and 189 of the Revised Penal Code.
Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on
the definition of unfair competition. The law does not thereby cover every unfair act
committed in the course of business; it covers only acts characterized by deception or any
other means contrary to good faith in the passing off of goods and services as those of
another who has established goodwill in relation with these goods or services, or any other
act calculated to produce the same result.
What unfair competition is, is further particularized under Section 168.3 when it
provides specifics of what unfair competition is without in any way limiting the scope of
protection against unfair competition. Part of these particulars is provided under Section
168.3(c) which provides the general catch-all phrase that the petitioner cites. Under this
phrase, a person shall be guilty of unfair competition who shall commit any other act
contrary to good faith of a nature calculated to discredit the goods, business or services of
another.
From jurisprudence, unfair competition has been defined as the passing off (or
palming off) or attempting to pass off upon the public the goods or business of one person

as the goods or business of another with the end and probable effect of deceiving the
public. It formulated the true test of unfair competition: whether the acts of defendant
are such as are calculated to deceive the ordinary buyer making his purchases under the
ordinary conditions which prevail in the particular trade to which the controversy relates.
[13]
One of the essential requisites in an action to restrain unfair competition is proof of
fraud; the intent to deceive must be shown before the right to recover can exist. [14] The
advent of the IP Code has not significantly changed these rulings as they are fully in
accord with what Section 168 of the Code in its entirety provides. Deception, passing
off andfraud upon the public are still the key elements that must be present for unfair
competition to exist.
The act alleged to violate the petitioners rights under Section 168.3 (c) is hoarding
which we gather to be the collection of the petitioners empty bottles so that they can be
withdrawn from circulation and thus impede the circulation of the petitioners bottled
products. This, according to the petitioner, is an act contrary to good faith a conclusion
that, if true, is indeed an unfair act on the part of the respondents. The critical question,
however, is not the intrinsic unfairness of the act of hoarding; what is critical for purposes
of Section 168.3 (c) is to determine if the hoarding, as charged, is of a nature calculated to
discredit the goods, business or services of the petitioner.
We hold that it is not. Hoarding as defined by the petitioner is not even an act
within the contemplation of the IP Code.
The petitioners cited basis is a provision of the IP Code, a set of rules that refer to a
very specific subject intellectual property. Aside from the IP Codes actual substantive
contents (which relate specifically to patents, licensing, trademarks, trade names, service
marks, copyrights, and the protection and infringement of the intellectual properties that
these protective measures embody), the coverage and intent of the Code is expressly
reflected in its Declaration of State Policy which states:
Section 2. Declaration of State Policy. The State recognizes that an
effective intellectual and industrial property system is vital to the development
of domestic and creative activity, facilitates transfer of technology, attracts
foreign investments, and ensures market access for our products. It shall protect
and secure the exclusive rights of scientists, inventors, artists and other gifted
citizens to their intellectual property and creations, particularly when beneficial
to the people, for such periods as provided in this Act.
The use of intellectual property bears a social function. To this end, the
State shall promote the diffusion of knowledge and information for the
promotion of national development and progress and the common good.
It is also the policy of the State to streamline administrative procedures of
registering patents, trademarks and copyright, to liberalize the registration on the
transfer of technology, and to enhance the enforcement of intellectual property
rights in the Philippines. (n)

Intellectual property rights have furthermore been defined under Section 4 of the Code
to consist of: a) Copyright and Related Rights; b) Trademarks and Service Marks;
c) Geographic Indications; d) IndustrialDesigns; e) Patents; f) Layout-Designs
(Topographies) of Integrated Circuits; and g)Protection of Undisclosed Information.
Given the IP Codes specific focus, a first test that should be made when a question
arises on whether a matter is covered by the Code is to ask if it refers to an intellectual
property as defined in the Code. If it does not, then coverage by the Code may be negated.
A second test, if a disputed matter does not expressly refer to an intellectual
property right as defined above, is whether it falls under the general unfair competition
concept and definition under Sections 168.1 and 168.2 of the Code. The question then is
whether there is deception or any other similar act in passing off of goods or services
to be those of another who enjoys established goodwill.
Separately from these tests is the application of the principles of statutory
construction giving particular attention, not so much to the focus of the IP Code generally,
but to the terms of Section 168 in particular. Under the principle of noscitur a
sociis, when a particular word or phrase is ambiguous in itself or is equally susceptible
of various meanings, its correct construction may be made clear and specific by
considering the company of words in which it is found or with which it is associated.[15]
As basis for this interpretative analysis, we note that Section 168.1 speaks of a
person who has earned goodwill with respect to his goods and services and who is entitled
to protection under the Code, with or without a registered mark. Section 168.2, as
previously discussed, refers to the general definition of unfair competition. Section
168.3, on the other hand, refers to the specific instances of unfair competition,
with Section 168.1 referring to the sale of goods given the appearance of the goods of
another; Section 168.2, to the inducement of belief that his or her goods or services are
that of another who has earned goodwill; while the disputed Section 168.3 being a catch
all clause whose coverage the parties now dispute.
Under all the above approaches, we conclude that the hoarding - as defined and
charged by the petitioner does not fall within the coverage of the IP Code and of Section
168 in particular. It does not relate to any patent, trademark, trade name or service mark
that the respondents have invaded, intruded into or used without proper authority from the
petitioner. Nor are the respondents alleged to be fraudulently passing off their products
or services as those of the petitioner. The respondents are not also alleged to be
undertaking any representation or misrepresentation that would confuse or tend to confuse
the goods of the petitioner with those of the respondents, or vice versa. What in fact the
petitioner alleges is an act foreign to the Code, to the concepts it embodies and to the acts
it regulates; as alleged, hoarding inflicts unfairness by seeking to limit the oppositions
sales by depriving it of the bottles it can use for these sales.
In this light, hoarding for purposes of destruction is closer to what another law R.A. No. 623 covers, to wit:

SECTION 1. Persons engaged or licensed to engage in the manufacture,

bottling or selling of soda water, mineral or aerated waters, cider, milk, cream, or
other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar
containers, with their names or the names of their principals or products, or other
marks of ownership stamped or marked thereon, may register with the Philippine
Patent Office a description of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by law or regulation to the
issuance of trademarks.
SECTION 2. It shall be unlawful for any person, without the written
consent of the manufacturer, bottler or seller who has successfully registered the
marks of ownership in accordance with the provisions of the next preceding
section, to fill such bottles, boxes, kegs, barrels, or other similar containers so
marked or stamped, for the purpose of sale, or to sell, dispose of, buy, or traffic
in, or wantonly destroy the same, whether filled or not, or to use the same for
drinking vessels or glasses or for any other purpose than that registered by the
manufacturer, bottler or seller. Any violation of this section shall be punished
by a fine or not more than one hundred pesos or imprisonment of not more than
thirty days or both.

As its coverage is defined under Section 1, the Act appears to be a measure that may
overlap or be affected by the provisions of Part II of the IP Code on The Law on
Trademarks, Service Marks and Trade Names. What is certain is that the IP Code has not
expressly repealed this Act. The Act appears, too, to have specific reference to a special
type of registrants the manufacturers, bottlers or sellers of soda water, mineral or aerated
waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs, or
barrels, and other similar containers who are given special protection with respect to the
containers they use. In this sense, it is in fact a law of specific coverage and application,
compared with the general terms and application of the IP Code. Thus, under its Section 2,
it speaks specifically of unlawful use of containers and even of the unlawfulness of their
wanton destruction a matter that escapes the IP Codes generalities unless linked with the
concepts of deception and passing off as discussed above.
Unfortunately, the Act is not the law in issue in the present case and one that the
parties did not consider at all in the search warrant application. The petitioner in fact
could not have cited it in its search warrant application since the one specific offense
that the law allows and which the petitioner used was Section 168.3 (c). If it serves any
purpose at all in our discussions, it is to show that the underlying factual situation of the
present case is in fact covered by another law, not by the IP Code that the petitioner cites.
Viewed in this light, the lack of probable cause to support the disputed search warrant at
once becomes apparent.
Where, as in this case, the imputed acts do not violate the cited offense, the ruling of
this Court penned by Mr. Justice Bellosillo is particularly instructive:
In the issuance of search warrants, the Rules of Court requires a finding of
probable cause in connection with one specific offense to be determined
personally by the judge after examination of the complainant and the witnesses

he may produce, and particularly describing the place to be searched and the
things to be seized. Hence, since there is no crime to speak of, the search
warrant does not even begin to fulfill these stringent requirements and is
therefore defective on its face. The nullity of the warrant renders moot and
academic the other issues raised in petitioners Motion to Quash and Motion for
Reconsideration. Since the assailed search warrant is null and void, all property
seized by virtue thereof should be returned to petitioners in accordance with
established jurisprudence.[16]

Based on the foregoing, we conclude that the RTC correctly ruled that the
petitioners search warrant should properly be quashed for the petitioners failure to show
that the acts imputed to the respondents do not violate the cited offense. There could not
have been any probable cause to support the issuance of a search warrant because no crime
in the first place was effectively charged. This conclusion renders unnecessary any
further discussion on whether the search warrant application properly alleged that the
imputed act of holding Coke empties was in fact a hoarding in bad faith aimed to
prejudice the petitioners operations, or whether the MTC duly complied with the
procedural requirements for the issuance of a search warrant under Rule 126 of the Rules
of Court.
WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we
confirm that Search Warrant No. 2001-01, issued by the Municipal Trial Court, Branch
1, Naga City, is NULL and VOID. Costs against the petitioner.
SO ORDERED.

SECOND DIVISION
COFFEE PARTNERS, INC.,
Petitioner,

G.R. No. 169504

Present:

- versus -

CARPIO, J., Chairperson,

VELASCO, JR.,*
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

SAN FRANCISCO COFFEE &

Promulgated:
ROASTERY, INC.,
Respondent.
March 3, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION
CARPIO, J.:
The Case
This is a petition for review[1] of the 15 June 2005 Decision[2] and the 1 September
2005 Resolution[3] of the Court of Appeals in CA-G.R. SP
No. 80396. In its 15 June
2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision [4] of the Office
of the Director General-Intellectual Property Office and reinstated the 14 August 2002
Decision[5] of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September
2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and
respondents motion for partial reconsideration.
The Facts
Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of
establishing and maintaining coffee shops in the country. It registered with the Securities
and Exchange Commission (SEC) in January 2001. It has a franchise agreement [6] with
Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of
British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines

using trademarks designed by CPL such as SAN FRANCISCO COFFEE.

Respondent is a local corporation engaged in the wholesale and retail sale of coffee.
It registered with the SEC in May 1995. It registered the business name SAN
FRANCISCO COFFEE & ROASTERY, INC. with the Department of Trade and Industry
(DTI) in June 1995. Respondent had since built a customer base that included Figaro
Company, Tagaytay Highlands, Fat Willys, and other coffee companies.
In 1998, respondent formed a joint venture company with Boyd Coffee USA under
the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in
the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a
project study of setting up coffee carts in malls and other commercial establishments in
Metro Manila.
In June 2001, respondent discovered that petitioner was about to open a coffee shop
under the name SAN FRANCISCO COFFEE in Libis, Quezon City. According to
respondent, petitioners shop caused confusion in the minds of the public as it bore a
similar name and it also engaged in the business of selling coffee. Respondent sent a letter
to petitioner demanding that the latter stop using the name SAN FRANCISCO
COFFEE. Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual
Property Office (BLA-IPO) for infringement and/or unfair competition with claims for
damages.
In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it
filed with the Intellectual Property Office (IPO) applications for registration of the mark
SAN FRANCISCO COFFEE & DEVICE for class 42 in 1999 and for class 35 in 2000.
Petitioner maintained its mark could not be confused with respondents trade name
because of the notable distinctions in their appearances. Petitioner argued respondent
stopped operating under the trade name SAN FRANCISCO COFFEE when it formed a
joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any
specific acts that would lead one to believe petitioner had, through fraudulent means,
passed off its mark as that of respondent, or that it had diverted business away from
respondent.
Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in
Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be
opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant
to a franchise agreement executed in January 2001 with CPL, a British Virgin Island
Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business
when one Arthur Gindang invited him to invest in a coffee shop and introduced him to Mr.
Boxwell. For his part, Mr. Boxwell attested that the coffee shop SAN FRANCISCO
COFFEE has branches in Malaysia and Singapore. He added that he formed CPL in 1997
along with two other colleagues, Shirley Miller John and Leah Warren, who were former
managers of Starbucks Coffee Shop in the United States. He said they decided to invest in
a similar venture and adopted the name SAN FRANCISCO COFFEE from the famous
city in California where he and his former colleagues once lived and where special coffee
roasts came from.
The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark
infringed on respondents trade name. It ruled that the right to the exclusive use of a trade
name with freedom from infringement by similarity is determined from priority of
adoption. Since respondent registered its business name with the DTI in 1995 and
petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in
other countries, then respondent must be protected from infringement of its trade name.
The BLA-IPO also held that respondent did not abandon the use of its trade name as
substantial evidence indicated respondent continuously used its trade name in connection
with the purpose for which it was organized. It found that although respondent was no
longer involved in blending, roasting, and distribution of coffee because of the creation of
BCCPI, it continued making plans and doing research on the retailing of coffee and the
setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse
must be permanent, intentional, and voluntary.
The BLA-IPO held that petitioners use of the trademark SAN FRANCISCO
COFFEE will likely cause confusion because of the exact similarity in sound, spelling,
pronunciation, and commercial impression of the words SAN FRANCISCO which is the
dominant portion of respondents trade name and petitioners trademark. It held that no
significant difference resulted even with a diamond-shaped figure with a cup in the center
in petitioner's trademark because greater weight is given to words the medium
consumers use in ordering coffee products.
On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It
found that petitioner adopted the trademark SAN FRANCISCO COFFEE because of the
authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent
to defraud on the part of petitioner.
The BLA-IPO also dismissed respondents claim of actual damages because its
claims of profit loss were based on mere assumptions as respondent had not even started
the operation of its coffee carts. The BLA-IPO likewise dismissed respondents claim of
moral damages, but granted its claim of attorneys fees.
Both parties moved for partial reconsideration. Petitioner protested the finding of
infringement, while respondent questioned the denial of actual damages. The BLA-IPO
denied the parties partial motion for reconsideration. The parties appealed to the Office of
the Director General-Intellectual Property Office (ODG-IPO).
The Ruling of the Office of the Director GeneralIntellectual Property Office
In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that
petitioners use of the trademark SAN FRANCISCO COFFEE did not infringe on
respondent's trade name. The ODG-IPO found that respondent had stopped using its trade
name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner
continuously used the trademark since June 2001 when it opened its first coffee shop in
Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith
and a prior user who had stopped using such trade name, it would be inequitable to rule in

favor of the latter.

The Ruling of the Court of Appeals
In its 15 June 2005 Decision, the Court of Appeals set aside the
22 October 2003
decision of the ODG-IPO in so far as it ruled that there was no infringement. It reinstated
the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court
denied respondents claim for actual damages and retained the award of attorneys fees. In
its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for
reconsideration and respondents motion for partial reconsideration.
The Issue
The sole issue is whether petitioners use of the trademark SAN FRANCISCO
COFFEE constitutes infringement of respondents trade name SAN FRANCISCO
COFFEE & ROASTERY, INC., even if the trade name is not registered with the
Intellectual Property Office (IPO).
The Courts Ruling
The petition has no merit.
Petitioner contends that when a trade name is not registered, a suit for infringement
is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner
points out that respondents registration of its business name with the DTI expired on 16
June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon
City that respondent made a belated effort to seek the renewal of its business name
registration. Petitioner stresses respondents failure to continue the use of its trade name to
designate its goods negates any allegation of infringement. Petitioner claims no confusion
is likely to occur between its trademark and respondents trade name because of a wide
divergence in the channels of trade, petitioner serving ready-made coffee while respondent
is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the
proper noun San Francisco and the generic word coffee are not capable of exclusive
appropriation.
Respondent maintains the law protects trade names from infringement even if they
are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)
[7]
dispensed with registration of a trade name with the IPO as a requirement for the filing of
an action for infringement. All that is required is that the trade name is previously used in
trade or commerce in the Philippines. Respondent insists it never abandoned the use of its
trade name as evidenced by its letter to petitioner demanding immediate discontinuation of
the use of its trademark and by the filing of the infringement case. Respondent alleges
petitioners trademark is confusingly similar to respondents trade name. Respondent
stresses ordinarily prudent consumers are likely to be misled about the source, affiliation,

or sponsorship of petitioners coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO
found that respondent continued to make plans and do research on the retailing of coffee
and the establishment of coffee carts, which negates abandonment. This finding was
upheld by the Court of Appeals, which further found that while respondent stopped using
its trade name in its business of selling coffee, it continued to import and sell coffee
machines, one of the services for which the use of the business name has been registered.
The binding effect of the factual findings of the Court of Appeals on this Court applies
with greater force when both the quasi-judicial body or tribunal like the BLA-IPO and the
Court of Appeals are in complete agreement on their factual findings. It is also settled that
absent any circumstance requiring the overturning of the factual conclusions made by the
quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court
necessarily upholds such findings of fact.[8]
Coming now to the main issue, in Prosource International, Inc. v. Horphag Research
Management SA,[9] this Court laid down what constitutes infringement of an unregistered
trade name, thus:
(1) The trademark being infringed is registered in the Intellectual
Property
Office; however, in infringement of trade name, the same need not be
registered;
(2) The trademark or trade name is reproduced, counterfeited, copied, or
colorably imitated by the infringer;
(3) The infringing mark or trade name is used in connection with the sale,
offering for sale, or advertising of any goods, business or services; or the
infringing mark or trade name 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;
(4) The use or application of the infringing mark or trade name is likely to cause confusion
or mistake or to deceive purchasers or others as to the goods or services themselves or as to
the source or origin of such goods or services or the identity of such business; and
(5) It is without the consent of the trademark or trade name owner or the assignee thereof.
(Emphasis supplied)

[10]

Clearly, a trade name need not be registered with the IPO before an infringement suit
may be filed by its owner against the owner of an infringing trademark. All that is required
is that the trade name is previously used in trade or commerce in the Philippines.[11]
Section 22 of Republic Act No. 166,[12] as amended, required registration of a trade
name as a condition for the institution of an infringement suit, to wit:
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 trade name 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 trade name 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. (Emphasis supplied)

HOWEVER, RA 8293, WHICH TOOK EFFECT ON 1 JANUARY 1998, HAS

DISPENSED WITH THE REGISTRATION REQUIREMENT. SECTION 165.2 OF RA
8293 CATEGORICALLY STATES THAT TRADE NAMES SHALL BE PROTECTED,
EVEN PRIOR TO OR WITHOUT REGISTRATION WITH THE IPO, AGAINST ANY
UNLAWFUL ACT INCLUDING ANY SUBSEQUENT USE OF THE TRADE NAME
BY A THIRD PARTY, WHETHER AS A TRADE NAME OR A TRADEMARK LIKELY
TO MISLEAD THE PUBLIC. THUS:
SEC. 165.2 (A) NOTWITHSTANDING ANY LAWS OR
REGULATIONS PROVIDING FOR ANY OBLIGATION TO REGISTER
TRADE NAMES, SUCH NAMES SHALL BE PROTECTED, EVEN
PRIOR TO OR WITHOUT REGISTRATION, AGAINST ANY
UNLAWFUL ACT COMMITTED BY THIRD PARTIES.
(B) IN PARTICULAR, ANY SUBSEQUENT USE OF A TRADE NAME BY A
THIRD PARTY, WHETHER AS A TRADE NAME OR A MARK OR COLLECTIVE
MARK, OR ANY SUCH USE OF A SIMILAR TRADE NAME OR MARK, LIKELY TO
MISLEAD THE PUBLIC, SHALL BE DEEMED UNLAWFUL. (EMPHASIS SUPPLIED)

IT IS THE LIKELIHOOD OF CONFUSION THAT IS THE GRAVAMEN OF

INFRINGEMENT. BUT THERE IS NO ABSOLUTE STANDARD FOR LIKELIHOOD
OF CONFUSION. ONLY THE PARTICULAR, AND SOMETIMES PECULIAR,
CIRCUMSTANCES OF EACH CASE CAN DETERMINE ITS EXISTENCE. THUS, IN
INFRINGEMENT CASES, PRECEDENTS MUST BE EVALUATED IN THE LIGHT
OF EACH PARTICULAR CASE.[13]
IN DETERMINING SIMILARITY AND LIKELIHOOD OF CONFUSION, OUR
JURISPRUDENCE HAS DEVELOPED TWO TESTS: THE DOMINANCY TEST AND
THE HOLISTIC TEST. THE DOMINANCY TEST FOCUSES ON THE SIMILARITY
OF THE PREVALENT FEATURES OF THE COMPETING TRADEMARKS THAT
MIGHT CAUSE CONFUSION AND DECEPTION, THUS CONSTITUTING
INFRINGEMENT. IF THE COMPETING TRADEMARK CONTAINS THE MAIN,
ESSENTIAL, AND DOMINANT FEATURES OF ANOTHER, AND CONFUSION OR
DECEPTION IS LIKELY TO RESULT, INFRINGEMENT OCCURS. EXACT
DUPLICATION OR IMITATION IS NOT REQUIRED. THE QUESTION IS WHETHER
THE USE OF THE MARKS INVOLVED IS LIKELY TO CAUSE CONFUSION OR
MISTAKE IN THE MIND OF THE PUBLIC OR TO DECEIVE CONSUMERS. [14]

IN CONTRAST, THE HOLISTIC TEST ENTAILS A CONSIDERATION OF THE

ENTIRETY OF THE MARKS AS APPLIED TO THE PRODUCTS, INCLUDING THE
LABELS AND PACKAGING, IN DETERMINING CONFUSING SIMILARITY.[15] THE
DISCERNING EYE OF THE OBSERVER MUST FOCUS NOT ONLY ON THE
PREDOMINANT WORDS BUT ALSO ON THE OTHER FEATURES APPEARING ON
BOTH MARKS IN ORDER THAT THE OBSERVER MAY DRAW HIS CONCLUSION
WHETHER ONE IS CONFUSINGLY SIMILAR TO THE OTHER.[16]
APPLYING EITHER THE DOMINANCY TEST OR THE HOLISTIC TEST,
PETITIONERS SAN FRANCISCO COFFEE TRADEMARK IS A CLEAR
INFRINGEMENT OF RESPONDENTS SAN FRANCISCO COFFEE & ROASTERY,
INC. TRADE NAME. THE DESCRIPTIVE WORDS SAN FRANCISCO COFFEE
ARE PRECISELY THE DOMINANT FEATURES OF RESPONDENTS TRADE
NAME. PETITIONER AND RESPONDENT ARE ENGAGED IN THE SAME
BUSINESS OF SELLING COFFEE, WHETHER WHOLESALE OR RETAIL. THE
LIKELIHOOD OF CONFUSION IS HIGHER IN CASES WHERE THE BUSINESS OF
ONE CORPORATION IS THE SAME OR SUBSTANTIALLY THE SAME AS THAT OF
ANOTHER CORPORATION. IN THIS CASE, THE CONSUMING PUBLIC WILL
LIKELY BE CONFUSED AS TO THE SOURCE OF THE COFFEE BEING SOLD AT
PETITIONERS COFFEE SHOPS. PETITIONERS ARGUMENT THAT SAN
FRANCISCO IS JUST A PROPER NAME REFERRING TO THE FAMOUS CITY IN
CALIFORNIA AND THAT COFFEE IS SIMPLY A GENERIC TERM, IS
UNTENABLE. RESPONDENT HAS ACQUIRED AN EXCLUSIVE RIGHT TO THE
USE OF THE TRADE NAME SAN FRANCISCO COFFEE & ROASTERY, INC.
SINCE THE REGISTRATION OF THE BUSINESS NAME WITH THE DTI IN 1995.
THUS, RESPONDENTS USE OF ITS TRADE NAME FROM THEN ON MUST BE
FREE FROM ANY INFRINGEMENT BY SIMILARITY. OF COURSE, THIS DOES
NOT MEAN THAT RESPONDENT HAS EXCLUSIVE USE OF THE GEOGRAPHIC
WORD SAN FRANCISCO OR THE GENERIC WORD COFFEE. GEOGRAPHIC
OR GENERIC WORDS ARE NOT, PER SE, SUBJECT TO EXCLUSIVE
APPROPRIATION. IT IS ONLY THE COMBINATION OF THE WORDS SAN
FRANCISCO COFFEE, WHICH IS RESPONDENTS TRADE NAME IN ITS COFFEE
BUSINESS, THAT IS PROTECTED AGAINST INFRINGEMENT ON MATTERS
RELATED TO THE COFFEE BUSINESS TO AVOID CONFUSING OR DECEIVING
THE PUBLIC.
IN PHILIPS EXPORT B.V. V. COURT OF APPEALS,[17] THIS COURT HELD THAT
A CORPORATION HAS AN EXCLUSIVE RIGHT TO THE USE OF ITS NAME. THE
RIGHT PROCEEDS FROM THE THEORY THAT IT IS A FRAUD ON THE
CORPORATION WHICH HAS ACQUIRED A RIGHT TO THAT NAME AND
PERHAPS CARRIED ON ITS BUSINESS THEREUNDER, THAT ANOTHER
SHOULD ATTEMPT TO USE THE SAME NAME, OR THE SAME NAME WITH
A SLIGHT VARIATION IN SUCH A WAY AS TO INDUCE PERSONS TO DEAL WITH
IT IN THE BELIEF THAT THEY ARE DEALING WITH THE CORPORATION WHICH
HAS GIVEN A REPUTATION TO THE NAME.[18]
THIS COURT IS NOT JUST A COURT OF LAW, BUT ALSO OF EQUITY. WE
CANNOT ALLOW PETITIONER TO PROFIT BY THE NAME AND REPUTATION
SO FAR BUILT BY RESPONDENT WITHOUT RUNNING AFOUL OF THE BASIC

DEMANDS OF FAIR PLAY. NOT ONLY THE LAW BUT EQUITY

CONSIDERATIONS HOLD PETITIONER LIABLE FOR INFRINGEMENT OF
RESPONDENTS TRADE NAME.
THE COURT OF APPEALS WAS CORRECT IN SETTING ASIDE THE 22
OCTOBER 2003 DECISION OF THE OFFICE OF THE DIRECTOR GENERALINTELLECTUAL PROPERTY OFFICE AND IN REINSTATING THE 14 AUGUST
2002 DECISION OF THE BUREAU OF LEGAL AFFAIRS-INTELLECTUAL
PROPERTY OFFICE.
WHEREFORE, WE DENY THE PETITION FOR REVIEW. WE AFFIRM THE
15 JUNE 2005 DECISION AND 1 SEPTEMBER 2005 RESOLUTION OF THE COURT
OF APPEALS IN CA-G.R. SP NO. 80396.
COSTS AGAINST PETITIONER.
SO ORDERED.

G.R. No. G.R. No. 185830 , JUN 0 5 2013

PDF

FIRST DIVISION
MANLY SPORTWEAR
MANUFACTURING, INC.,
Petitioner,
- versus -

DADODETTE ENTERPRISES
AND/OR HERMES SPORTS
CENTER,
Respondents.

G.R. No. 165306

Present:
Davide, Jr., C.J. (Chairman),
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
Promulgated:
September 20, 2005

x ---------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari [1] under Rule 45 of the Revised Rules of Civil
Procedure assails the July 13, 2004 decision[2] of the Court of Appeals[3] in CA-G.R. SP
No. 79887 and its September 15, 2004 resolution[4] denying reconsideration thereof.
The facts are as follows:
On March 14, 2003, Special Investigator Eliezer P. Salcedo of the National Bureau
of Investigation (NBI) applied for a search warrant before the Regional Trial Court (RTC)
of Quezon City, based on the information that Dadodette Enterprises and/or Hermes Sports
Center were in possession of goods, the copyright of which belonged to Manly Sportswear
Mfg., Inc. (MANLY).[5]
After finding reasonable grounds that a violation of Sections 172 and 217 of
Republic Act (RA) No. 8293[6] has been committed, Judge Estrella T. Estrada of RTCQuezon City, Branch 83, issued on March 17, 2003 Search Warrant No. 4044(03).[7]
Respondents thereafter moved to quash and annul the search warrant contending
that the same is invalid since the requisites for its issuance have not been complied with.
They insisted that the sporting goods manufactured by and/or registered in the name of
MANLY are ordinary and common hence, not among the classes of work protected under
Section 172 of RA 8293.

On June 10, 2003, the trial court granted the motion to quash and declared Search
Warrant No. 4044(03) null and void based on its finding that the copyrighted products of
MANLY do not appear to be original creations and were being manufactured and
distributed by different companies locally and abroad under various brands, and therefore
unqualified for protection under Section 172 of RA 8293. Moreover, MANLYs
certificates of registrations were issued only in 2002, whereas there were certificates of
registrations for the same sports articles which were issued earlier than MANLYs, thus
further negating the claim that its copyrighted products were original creations.[8]
On August 11, 2003, the trial court denied[9] MANLYs motion for reconsideration.
Hence it filed a petition for certiorari [10] before the Court of Appeals which was denied for
lack of merit. The appellate court found that the trial court correctly granted the motion to
quash and that its ruling in the ancillary proceeding did not preempt the findings of the
intellectual property court as it did not resolve with finality the status or character of the
seized items.
After denial of its motion for reconsideration on September 15, 2004, MANLY filed
the instant petition for review on certiorari raising the sole issue of whether or not the
Court of Appeals erred in finding that the trial court did not gravely abuse its discretion in
declaring in the hearing for the quashal of the search warrant that the copyrighted products
of MANLY are not original creations subject to the protection of RA 8293.
We deny the petition.
The power to issue search warrants is exclusively vested with the trial judges in the
exercise of their judicial function.[11] As such, the power to quash the same also rests solely
with them. After the judge has issued a warrant, he is not precluded to subsequently quash
the same, if he finds upon reevaluation of the evidence that no probable cause exists.
Our ruling in Solid Triangle Sales Corp. v. Sheriff, RTC, Q.C., Br. 93[12] is
instructive, thus:
Inherent in the courts power to issue search warrants is the power to
quash warrants already issued. In this connection, this Court has ruled that the
motion to quash should be filed in the court that issued the warrant unless a
criminal case has already been instituted in another court, in which case, the
motion should be filed with the latter. The ruling has since been incorporated in
Rule 126 of the Revised Rules of Criminal Procedure[.]

In the instant case, we find that the trial court did not abuse its discretion when it
entertained the motion to quash considering that no criminal action has yet been instituted
when it was filed. The trial court also properly quashed the search warrant it earlier issued
after finding upon reevaluation of the evidence that no probable cause exists to justify its
issuance in the first place. As ruled by the trial court, the copyrighted products do not
appear to be original creations of MANLY and are not among the classes of work

enumerated under Section 172 of RA 8293. The trial court, thus, may not be faulted for
overturning its initial assessment that there was probable cause in view of its inherent
power to issue search warrants and to quash the same. No objection may be validly posed
to an order quashing a warrant already issued as the court must be provided with the
opportunity to correct itself of an error unwittingly committed, or, with like effect, to allow
the aggrieved party the chance to convince the court that its ruling is erroneous.
Moreover, the trial court was acting within bounds when it ruled, in an ancillary
proceeding, that the copyrighted products of petitioner are not original creations. This is
because in the determination of the existence of probable cause for the issuance or quashal
of a warrant, it is inevitable that the court may touch on issues properly threshed out in a
regular proceeding. In so doing, it does not usurp the power of, much less preclude, the
court from making a final judicial determination of the issues in a full-blown trial.
Consequently, MANLYs assertion that the trial courts order quashing the warrant
preempted the finding of the intellectual property court has no legal basis.
As pertinently held in Solid Triangle Sales Corp. v. Sheriff, RTC, Q.C., Br. 93:[13]
When the court, in determining probable cause for issuing or quashing a
search warrant, finds that no offense has been committed, it does not interfere
with or encroach upon the proceedings in the preliminary investigation. The
court does not oblige the investigating officer not to file an information for the
courts ruling that no crime exists is only for purposes of issuing or quashing the
warrant. This does not, as petitioners would like to believe, constitute a
usurpation of the executive function. Indeed, to shirk from this duty would
amount to an abdication of a constitutional obligation.
...
... The finding by the court that no crime exists does not preclude the authorized
officer conducting the preliminary investigation from making his own
determination that a crime has been committed and that probable cause exists for
purposes of filing the information.

As correctly observed by the Court of Appeals, the trial courts finding that the
seized products are not copyrightable was merely preliminary as it did not finally and
permanently adjudicate on the status and character of the seized items. MANLY could still
file a separate copyright infringement suit against the respondents because the order for the
issuance or quashal of a warrant is not res judicata.
Thus, in Vlasons Enterprises Corporation v. Court of Appeals[14] we held that:
The proceeding for the seizure of property in virtue of a search warrant
does not end with the actual taking of the property by the proper officers and its
delivery, usually constructive, to the court. The order for the issuance of the
warrant is not a final one and cannot constitute res judicata. Such an order does
not ascertain and adjudicate the permanent status or character of the seized
property. By its very nature, it is provisional, interlocutory. It is merely the first
step in the process to determine the character and title of the property. That

determination is done in the criminal action involving the crime or crimes in

connection with which the search warrant was issued. Hence, such a criminal
action should be prosecuted, or commenced if not yet instituted, and prosecuted.
The outcome of the criminal action will dictate the disposition of the seized
property

We have also ruled in Ching v. Salinas, Sr., et al.[15] that:

The RTC had jurisdiction to delve into and resolve the issue whether the
petitioners utility models are copyrightable and, if so, whether he is the owner
of a copyright over the said models. It bears stressing that upon the filing of the
application for search warrant, the RTC was duty-bound to determine whether
probable cause existed, in accordance with Section 4, Rule 126 of the Rules of
Criminal Procedure[.]

Further, the copyright certificates issued in favor of MANLY constitute

merely prima facie evidence of validity and ownership. However, no presumption of
validity is created where other evidence exist that may cast doubt on the copyright
validity. Hence, where there is sufficient proof that the copyrighted products are not
original creations but are readily available in the market under various brands, as in this
case, validity and originality will not be presumed and the trial court may properly quash
the issued warrant for lack of probable cause.
Besides, no copyright accrues in favor of MANLY despite issuance of the
certificates of registration and deposit[16] pursuant to Section 2, Rule 7 of the Copyrights
Safeguards and Regulations[17] which states:
Sec. 2 Effects of Registration and Deposit of Work. The registration and
deposit of the work is purely for recording the date of registration and deposit of
the work and shall not be conclusive as to copyright ownership or the term of the
copyrights or the rights of the copyright owner, including neighboring rights.

At most, the certificates of registration and deposit issued by the National Library
and the Supreme Court Library serve merely as a notice of recording and registration of
the work but do not confer any right or title upon the registered copyright owner or
automatically put his work under the protective mantle of the copyright law. It is not a
conclusive proof of copyright ownership. As it is, non-registration and deposit of the work
within the prescribed period only makes the copyright owner liable to pay a fine.[18]
WHEREFORE, the petition is DENIED. The July 13, 2004 decision of the Court
of Appeals in CA-G.R. SP No. 79887 and resolution dated September 15, 2004,
areAFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

First Division
EN BANC

G.R. No. 175769-70

January 19, 2009

ABS-CBN BROADCASTING CORPORATION, Petitioners,

vs.
PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F.
ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M. COLAYCO, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court of Appeals in CA-G.R. SP
Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General of the
Intellectual Property Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11, 2006
Resolution3 denying the motion for reconsideration.

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of the
Philippines to engage in television and radio broadcasting. 4 It broadcasts television programs by wireless
means to Metro Manila and nearby provinces, and by satellite to provincial stations through Channel 2 on
Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired over
Channels 2 and 23 are either produced by ABS-CBN or purchased from or licensed by other producers.

ABS-CBN also owns regional television stations which pattern their programming in accordance with
perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces are
not necessarily shown in other provinces.

Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System. It
delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines. Herein
individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius
M. Colayco, are members of PMSIs Board of Directors.

PMSI was granted a legislative franchise under Republic Act No. 8630 5 on May 7, 1998 and was given a
Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to install,
operate and maintain a nationwide DTH satellite service. When it commenced operations, it offered as part of
its program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA Channel 7, RPN
Channel 9, and IBC Channel 13, together with other paid premium program channels.

However, on April 25, 2001,6 ABS-CBN demanded for PMSI to cease and desist from rebroadcasting
Channels 2 and 23. On April 27, 2001,7 PMSI replied that the rebroadcasting was in accordance with the
authority granted it by NTC and its obligation under NTC Memorandum Circular No. 4-08-88, 8 Section 6.2 of
which requires all cable television system operators operating in a community within Grade A or B contours
to carry the television signals of the authorized television broadcast stations. 9

Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the
negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSIs inability to ensure the

prevention of illegal retransmission and further rebroadcast of its signals, as well as the adverse effect of the
rebroadcasts on the business operations of its regional television stations. 10

On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws Involving Property Rights,
with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, which
was docketed as IPV No. 10-2002-0004. It alleged that PMSIs unauthorized rebroadcasting of Channels 2
and 23 infringed on its broadcasting rights and copyright.

On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs application for a temporary
restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23 and likewise
filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 71597.

Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule under
Memorandum Circular No. 04-08-88. It also submitted a letter dated December 20, 2002 of then NTC
Commissioner Armi Jane R. Borje to PMSI stating as follows:

This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this Commission
in connection with the application and coverage of NTC Memorandum Circular No. 4-08-88, particularly
Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay
television services of Philippine Multi-Media System, Inc. (PMSI).

Preliminarily, both DTH pay television and cable television services are broadcast services, the only difference
being the medium of delivering such services (i.e. the former by satellite and the latter by cable). Both can
carry broadcast signals to the remote areas, thus enriching the lives of the residents thereof through the
dissemination of social, economic, educational information and cultural programs.

The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services.
Concededly, PMSIs DTH pay television services covers very much wider areas in terms of carriage of
broadcast signals, including areas not reachable by cable television services thereby providing a better
medium of dissemination of information to the public.

In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88,
particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay
television services should be deemed covered by such NTC Memorandum Circular.

For your guidance. (Emphasis added)11

On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July 24,
2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under Memorandum
Circular No. 04-08-88, to wit:

Dear Mr. Abellada:

Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17, 2003
from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13)
complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or
explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the public.

We were told that, until now, this has been going on.

Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH)

broadcasting system, with a provisional authority (PA) from the NTC, your company, along with cable
television operators, are mandated to strictly comply with the existing policy of NTC on mandatory
carriage of television broadcast signals as provided under Memorandum Circular No. 04-08-88, also
known as the Revised Rules and Regulations Governing Cable Television System in the Philippines.

This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all cable
television system operators, operating in a community within the Grade A or B contours to mustcarry the television signals of the authorized television broadcast stations, one of which is IBC-13.
Said directive equally applies to your company as the circular was issued to give consumers and the
public a wider access to more sources of news, information, entertainment and other
programs/contents.

This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control over
all public services, which includes direct broadcast satellite operators, and taking into consideration the
paramount interest of the public in general, hereby directs you to immediately restore the signal of IBC-13 in
your network programs, pursuant to existing circulars and regulations of the Commission.

For strict compliance. (Emphasis added)12

Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled
Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct
Broadcast Satellite (DBS) Services to Promote Competition in the Sector. Article 6, Section 8 thereof states:

As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any television
signals without any agreement with or authorization from program/content providers are prohibited.

On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the NTC
explained to PMSI in a letter dated November 3, 2003 that:

To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of amending
the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the negative.

xxxx

The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable.

Please be advised, therefore, that as duly licensed direct-to-home satellite television service provider
authorized by this Commission, your company continues to be bound by the guidelines provided for
under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in addition to
your obligations under MC 10-10-2003. (Emphasis added)

Please be guided accordingly.13

On December 22, 2003, the BLA rendered a decision14 finding that PMSI infringed the broadcasting rights and
copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting Channels 2 and
23.

On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was
docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a
Motion to Withdraw Petition; Alternatively, Memorandum of the Petition for Certiorari in CA-G.R. SP No.
71597, which was granted in a resolution dated February 17, 2005.

On December 20, 2004, the Director-General of the IPO rendered a decision 15 in favor of PMSI, the
dispositive portion of which states:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No.
2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and SET
ASIDE.

Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate action, and
the records be returned to her for proper disposition. The Documentation, Information and Technology
Transfer Bureau is also given a copy for library and reference purposes.

SO ORDERED.16

Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and writ of
preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092.

On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a
petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the restraining
order. The case was docketed as CA- G.R. SP No. 90762.

On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and
90762.

In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the DirectorGeneral of the IPO and dismissed both petitions filed by ABS-CBN. 17

ABS-CBNs motion for reconsideration was denied, hence, this petition.

ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is an infringement of its
broadcasting rights and copyright under the Intellectual Property Code (IP Code); 18that Memorandum Circular
No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals interpretation of the mustcarry rule violates Section 9 of Article III19 of the Constitution because it allows the taking of property for public
use without payment of just compensation; that the Court of Appeals erred in dismissing the petition for
contempt docketed as CA-G.R. SP No. 90762 without requiring respondents to file comment.

Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2 and 23 is sanctioned by
Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid
exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it
found no need to exercise its power of contempt.

After a careful review of the facts and records of this case, we affirm the findings of the Director-General of the
IPO and the Court of Appeals.

There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights under Section 211 of the
IP Code which provides in part:

Chapter XIV
BROADCASTING ORGANIZATIONS

Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall enjoy

the exclusive right to carry out, authorize or prevent any of the following acts:

211.1. The rebroadcasting of their broadcasts;

xxxx

Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of the IP Code which states
that copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the
public performance of the work (Section 177.6), and other communication to the public of the work (Section
177.7).20

Section 202.7 of the IP Code defines broadcasting as the transmission by wireless means for the public
reception of sounds or of images or of representations thereof; such transmission by satellite is also
broadcasting where the means for decrypting are provided to the public by the broadcasting organization or
with its consent.

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection
of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as the 1961
Rome Convention, of which the Republic of the Philippines is a signatory, 21 is the simultaneous broadcasting
by one broadcasting organization of the broadcast of another broadcasting organization.

The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus cannot
be considered to have infringed ABS-CBNs broadcasting rights and copyright, thus:

That the Appellants [herein respondent PMSI] subscribers are able to view Appellees [herein petitioner ABSCBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is undisputed.
The question however is, would the Appellant in doing so be considered engaged in broadcasting. Section
202.7 of the IP Code states that broadcasting means

the transmission by wireless means for the public reception of sounds or of images or of representations
thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided to
the public by the broadcasting organization or with its consent.

Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit:

1. The transmission by wireless means for the public reception of sounds or of images or of
representations thereof; and

2. The transmission by satellite for the public reception of sounds or of images or of representations
thereof where the means for decrypting are provided to the public by the broadcasting organization or
with its consent.

It is under the second category that Appellants DTH satellite television service must be examined since it is
satellite-based. The elements of such category are as follows:

1. There is transmission of sounds or images or of representations thereof;

2. The transmission is through satellite;

3. The transmission is for public reception; and

4. The means for decrypting are provided to the public by the broadcasting organization or with its
consent.

It is only the presence of all the above elements can a determination that the DTH is broadcasting and
consequently, rebroadcasting Appellees signals in violation of Sections 211 and 177 of the IP Code, may be
arrived at.

Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP Code
presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is
attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the
rebroadcaster.

In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs broadcasted
by the Appellee. Appellant did not make and transmit on its own but merely carried the existing signals of the
Appellee. When Appellants subscribers view Appellees programs in Channels 2 and 23, they know that the
origin thereof was the Appellee.

Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are
scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its number,
type or class of recipients. To receive the signals, one is not required to subscribe or to pay any fee. One only
has to have a receiver, and in case of television signals, a television set, and to tune-in to the right
channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all
the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the air is possible
only through wireless means. The use of wire in transmitting signals, such as cable television, limits the
recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not
enough that one wants to be connected and possesses the equipment. The service provider, such as cable
television companies may choose its subscribers.

The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and other
equipment employed by the broadcaster. While the broadcaster may use a less powerful transmitter to limit its
coverage, this is merely a business strategy or decision and not an inherent limitation when transmission is
through cable.

Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible. On
this score, it may be said that making public means that accessibility is undiscriminating as long as it [is]
within the range of the transmitter and equipment of the broadcaster. That the medium through which the
Appellant carries the Appellees signal, that is via satellite, does not diminish the fact that it operates and
functions as a cable television. It remains that the Appellants transmission of signals via its DTH satellite
television service cannot be considered within the purview of broadcasting. x x x

xxxx

This Office also finds no evidence on record showing that the Appellant has provided decrypting means to the
public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of proving the
existence of the elements constituting the acts punishable rests on the shoulder of the complainant.

Accordingly, this Office finds that there is no rebroadcasting on the part of the Appellant of the Appellees
programs on Channels 2 and 23, as defined under the Rome Convention. 22

Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization. The Working Paper 23 prepared by the

Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting organizations
as entities that take the financial and editorial responsibility for the selection and arrangement of, and
investment in, the transmitted content.24 Evidently, PMSI would not qualify as a broadcasting organization
because it does not have the aforementioned responsibilities imposed upon broadcasting organizations, such
as ABS-CBN.

ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers receive
in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in Channels 2
and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar as Channels 2
and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum Circular 04-0888. With regard to its premium channels, it buys the channels from content providers and transmits on an asis basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting organization; thus, it
cannot be said that it is engaged in rebroadcasting Channels 2 and 23.

The Director-General of the IPO and the Court of Appeals also correctly found that PMSIs services are similar
to a cable television system because the services it renders fall under cable retransmission, as described in
the Working Paper, to wit:

(G) Cable Retransmission

47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by
means of cable or wire. In the early days of cable television, it was mainly used to improve signal reception,
particularly in so-called shadow zones, or to distribute the signals in large buildings or building complexes.
With improvements in technology, cable operators now often receive signals from satellites before
retransmitting them in an unaltered form to their subscribers through cable.

48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or delayed
(deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore, they might be
unaltered or altered, for example through replacement of commercials, etc. In general, however, the term
retransmission seems to be reserved for such transmissions which are both simultaneous and
unaltered.

49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a
right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to their
subscribers without permission from the broadcasting organizations or other rightholders and without
obligation to pay remuneration.25 (Emphasis added)

Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the
rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The
retransmission of ABS-CBNs signals by PMSI which functions essentially as a cable television does not
therefore constitute rebroadcasting in violation of the formers intellectual property rights under the IP Code.

It must be emphasized that the law on copyright is not absolute. The IP Code provides that:

Sec. 184. Limitations on Copyright. -

184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of
copyright:

xxxx

(h) The use made of a work by or under the direction or control of the Government, by the National Library or

by educational, scientific or professional institutions where such use is in the public interest and is compatible
with fair use;

The carriage of ABS-CBNs signals by virtue of the must-carry rule in Memorandum Circular No. 04-08-88 is
under the direction and control of the government though the NTC which is vested with exclusive jurisdiction
to supervise, regulate and control telecommunications and broadcast services/facilities in the
Philippines.26 The imposition of the must-carry rule is within the NTCs power to promulgate rules and
regulations, as public safety and interest may require, to encourage a larger and more effective use of
communications, radio and television broadcasting facilities, and to maintain effective competition among
private entities in these activities whenever the Commission finds it reasonably feasible. 27 As correctly
observed by the Director-General of the IPO:

Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the foregoing category of
limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the Must-Carry
Rule is in consonance with the principles and objectives underlying Executive Order No. 436, 28 to wit:

The Filipino people must be given wider access to more sources of news, information, education, sports event
and entertainment programs other than those provided for by mass media and afforded television programs to
attain a well informed, well-versed and culturally refined citizenry and enhance their socio-economic growth:

WHEREAS, cable television (CATV) systems could support or supplement the services provided by television
broadcast facilities, local and overseas, as the national information highway to the countryside. 29

The Court of Appeals likewise correctly observed that:

[T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few
networks would have unfettered power to make time available only to the highest bidders, to communicate
only their own views on public issues, people, and to permit on the air only those with whom they agreed
contrary to the state policy that the (franchise) grantee like the petitioner, private respondent and other TV
station owners, shall provide at all times sound and balanced programming and assist in the functions of
public information and education.

This is for the first time that we have a structure that works to accomplish explicit state policy goals. 30

Indeed, intellectual property protection is merely a means towards the end of making society benefit from the
creation of its men and women of talent and genius. This is the essence of intellectual property laws, and it
explains why certain products of ingenuity that are concealed from the public are outside the pale of
protection afforded by the law. It also explains why the author or the creator enjoys no more rights than are
consistent with public welfare.31

Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative franchises
granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution,
specifically Sections 9,32 17,33 and 2434 of Article II on the Declaration of Principles and State Policies.35

ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of which authorizes it
to construct, operate and maintain, for commercial purposes and in the public interest, television and radio
broadcasting in and throughout the Philippines x x x. Section 4 thereof mandates that it shall provide
adequate public service time to enable the government, through the said broadcasting stations, to reach the
population on important public issues; provide at all times sound and balanced programming; promote public
participation such as in community programming; assist in the functions of public information and education x
x x.

PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which similarly

states that it shall provide adequate public service time to enable the government, through the said
broadcasting stations, to reach the population on important public issues; provide at all times sound and
balanced programming; promote public participation such as in community programming; assist in the
functions of public information and education x x x. Section 5, paragraph 2 of the same law provides that the
radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege
conferred upon the grantee by the State and may be withdrawn anytime, after due process.

In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,36 the Court held that a franchise is a mere
privilege which may be reasonably burdened with some form of public service. Thus:

All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave
frequencies have to be allocated as there are more individuals who want to broadcast than there are
frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by Congress
in accordance with the constitutional provision that any such franchise or right granted . . . shall be subject to
amendment, alteration or repeal by the Congress when the common good so requires.

xxxx

Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and
television broadcast stations and, until the present case was brought, such provisions had not been thought of
as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the amendment of
franchises for the common good. What better measure can be conceived for the common good than one for
free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that
they will be fully informed of the issues in an election? [I]t is the right of the viewers and listeners, not the right
of the broadcasters, which is paramount.

Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air
time. Even in the United States, there are responsible scholars who believe that government controls on
broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to
further the system of free expression. For this purpose, broadcast stations may be required to give free air
time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School,
in urging reforms in regulations affecting the broadcast industry, writes:

xxxx

In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves
and frequencies through which they transmit broadcast signals and images. They are merely given the
temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may
reasonably be burdened with the performance by the grantee of some form of public service. x x x 37

There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for a commercial purpose;
that its being the countrys top broadcasting company, the availability of its signals allegedly enhances PMSIs
attractiveness to potential customers;38 or that the unauthorized carriage of its signals by PMSI has created
competition between its Metro Manila and regional stations.

ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such
carriage adversely affected the business operations of its regional stations. Except for the testimonies of its
witnesses,[39] no studies, statistical data or information have been submitted in evidence.

Administrative charges cannot be based on mere speculation or conjecture. The complainant has the burden
of proving by substantial evidence the allegations in the complaint.40 Mere allegation is not evidence, and is
not equivalent to proof.41

Anyone in the country who owns a television set and antenna can receive ABS-CBNs signals for free. Other
broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise
be accessed for free. No payment is required to view the said channels 42 because these broadcasting
networks do not generate revenue from subscription from their viewers but from airtime revenue from
contracts with commercial advertisers and producers, as well as from direct sales.

In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its
customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN,
among others, thus allowing its customers to go beyond the limits of Free TV and Cable TV. 43 It does not
advertise itself as a local channel carrier because these local channels can be viewed with or without DTH
television.

Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the ratings and audience share of
ABS-CBN and its programs. These ratings help commercial advertisers and producers decide whether to buy
airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting networks
because it provides them with increased viewership which attracts commercial advertisers and producers.

On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television providers
such as PMSI. PMSI uses none of ABS-CBNs resources or equipment and carries the signals and shoulders
the costs without any recourse of charging.44 Moreover, such carriage of signals takes up channel space
which can otherwise be utilized for other premium paid channels.

There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23 resulted in competition
between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its regional
programming in accordance with perceived demands of the region; however, it cannot impose this kind of
programming on the regional viewers who are also entitled to the free-to-air channels. It must be emphasized
that, as a national broadcasting organization, one of ABS-CBNs responsibilities is to scatter its signals to the
widest area of coverage as possible. That it should limit its signal reach for the sole purpose of gaining profit
for its regional stations undermines public interest and deprives the viewers of their right to access to
information.

Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of
profit. The right of the viewers and listeners to the most diverse choice of programs available is
paramount.45 The Director-General correctly observed, thus:

The Must-Carry Rule favors both broadcasting organizations and the public. It prevents cable television
companies from excluding broadcasting organization especially in those places not reached by signal. Also,
the rule prevents cable television companies from depriving viewers in far-flung areas the enjoyment of
programs available to city viewers. In fact, this Office finds the rule more burdensome on the part of the cable
television companies. The latter carries the television signals and shoulders the costs without any recourse of
charging. On the other hand, the signals that are carried by cable television companies are dispersed and
scattered by the television stations and anybody with a television set is free to pick them up.

With its enormous resources and vaunted technological capabilities, Appellees [herein petitioner ABS-CBN]
broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it chooses
to maintain regional stations, is a business decision. That the Must-Carry Rule adversely affects the
profitability of maintaining such regional stations since there will be competition between them and its Metro
Manila station is speculative and an attempt to extrapolate the effects of the rule. As discussed above,
Appellants DTH satellite television services is of limited subscription. There was not even a showing on part
of the Appellee the number of Appellants subscribers in one region as compared to non-subscribing television
owners. In any event, if this Office is to engage in conjecture, such competition between the regional stations
and the Metro Manila station will benefit the public as such competition will most likely result in the production
of better television programs.46

All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that PMSI
did not infringe on ABS-CBNs intellectual property rights under the IP Code. The findings of facts of
administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and

in the absence of substantial showing that such findings are made from an erroneous estimation of the
evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should
not be disturbed.47

Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by
the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a
lower fact-finding body,48 as in the instant case.

There is likewise no merit to ABS-CBNs contention that the Memorandum Circular excludes from its coverage
DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum Circular requires
all cable television system operators operating in a community within Grade A or B contours to carry the
television signals of the authorized television broadcast stations. 49 The rationale behind its issuance can be
found in the whereas clauses which state:

Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability to offer
additional programming and to carry much improved broadcast signals in the remote areas, thereby enriching
the lives of the rest of the population through the dissemination of social, economic, educational information
and cultural programs;

Whereas, the national government supports the promotes the orderly growth of the Cable Television industry
within the framework of a regulated fee enterprise, which is a hallmark of a democratic society;

Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or
prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media;

Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National
Telecommunications Commission the authority to set down rules and regulations in order to protect the public
and promote the general welfare, the National Telecommunications Commission hereby promulgates the
following rules and regulations on Cable Television Systems;

The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the
general public and to promote dissemination of information. In line with this policy, it is clear that DTH
television should be deemed covered by the Memorandum Circular. Notwithstanding the different
technologies employed, both DTH and cable television have the ability to carry improved signals and promote
dissemination of information because they operate and function in the same way.

In its December 20, 2002 letter,50 the NTC explained that both DTH and cable television services are of a
similar nature, the only difference being the medium of delivering such services. They can carry broadcast
signals to the remote areas and possess the capability to enrich the lives of the residents thereof through the
dissemination of social, economic, educational information and cultural programs. Consequently, while the
Memorandum Circular refers to cable television, it should be understood as to include DTH television which
provides essentially the same services.

In Eastern Telecommunications Philippines, Inc. v. International Communication Corporation, 51 we held:

The NTC, being the government agency entrusted with the regulation of activities coming under its special
and technical forte, and possessing the necessary rule-making power to implement its objectives, is in the
best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and
accorded great respect to the interpretation by administrative agencies of their own rules unless there is an
error of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly conflicting with the letter
and spirit of the law.52

With regard to the issue of the constitutionality of the must-carry rule, the Court finds that its resolution is not

necessary in the disposition of the instant case. One of the essential requisites for a successful judicial inquiry
into constitutional questions is that the resolution of the constitutional question must be necessary in deciding
the case.53 In Spouses Mirasol v. Court of Appeals,54 we held:

As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other
grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of
the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to
sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had
first been carefully studied by the legislative and executive departments and found to be in accord with the
Constitution before it was finally enacted and approved. 55

The instant case was instituted for violation of the IP Code and infringement of ABS-CBNs broadcasting rights
and copyright, which can be resolved without going into the constitutionality of Memorandum Circular No. 0408-88. As held by the Court of Appeals, the only relevance of the circular in this case is whether or not
compliance therewith should be considered manifestation of lack of intent to commit infringement, and if it is,
whether such lack of intent is a valid defense against the complaint of petitioner.56

The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by way
of a collateral attack before the Court of Appeals. In Philippine National Bank v. Palma,57 we ruled that for
reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is deemed valid
unless declared null and void by a competent court; more so when the issue has not been duly pleaded in the
trial court.58

As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not
raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will not
be considered on appeal.59 In Philippine Veterans Bank v. Court of Appeals,60 we held:

We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review are
not present herein. Specifically, the question of constitutionality will not be passed upon by the Court
unless, at the first opportunity, it is properly raised and presented in an appropriate case, adequately
argued, and is necessary to a determination of the case, particularly where the issue of
constitutionality is the very lis mota presented.x x x61

Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order.

Indirect contempt may either be initiated (1) motu proprio by the court by issuing an order or any other formal
charge requiring the respondent to show cause why he should not be punished for contempt or (2) by the
filing of a verified petition, complying with the requirements for filing initiatory pleadings. 62

ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No. 90762, for
PMSIs alleged disobedience to the Resolution and Temporary Restraining Order, both dated July 18, 2005,
issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of Appeals did not
require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R. SP No. 88092 and
ordered the dismissal of both petitions.

ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having
ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No. 90762
and order respondents to show cause why they should not be held in contempt.It bears stressing that the
proceedings for punishment of indirect contempt are criminal in nature. The modes of procedure and rules of
evidence adopted in contempt proceedings are similar in nature to those used in criminal
prosecutions. 63 While it may be argued that the Court of Appeals should have ordered respondents to
comment, the issue has been rendered moot in light of our ruling on the merits. To order respondents to
comment and have the Court of Appeals conduct a hearing on the contempt charge when the main case has
already been disposed of in favor of PMSI would be circuitous. Where the issues have become moot, there is
no justiciable controversy, thereby rendering the resolution of the same of no practical use or value. 64

WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP
Nos. 88092 and 90762, sustaining the findings of the Director-General of the Intellectual Property Office and
dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the December 11, 2006
Resolutiondenying the motion for reconsideration, are AFFIRMED.SO ORDERED.

FIRST DIVISION

[G.R. No. 147043. June 21, 2005]

NBI

MICROSOFT
CORPORATION
&
LOTUS
DEVELOPMENT
CORP., petitioners, vs. JUDY C. HWANG, BENITO KEH & YVONNE K.
CHUA/BELTRON COMPUTER PHILIPPINES INC., JONATHAN K. CHUA,
EMILY K. CHUA, BENITO T. SANCHEZ, NANCY I. VELASCO, ALFONSO
CHUA, ALBERTO CHUA, SOPHIA ONG, DEANNA CHUA/TAIWAN
MACHINERY DISPLAY & TRADE CENTER, INC., and THE SECRETARY
OF JUSTICE, respondents.
DECISION

CARPIO, J.:

The Case
This is a petition for certiorari[1] of the Resolutions[2] of the Department of Justice
dismissing for lack of merit and insufficiency of evidence petitioner Microsoft
Corporations complaint against respondents for copyright infringement and unfair
competition.

The Facts
Petitioner Microsoft Corporation (Microsoft), a Delaware, United States
corporation, owns the copyright and trademark to several computer software.
[3]
Respondents Benito Keh and Yvonne Keh are the President/Managing Director and
General Manager, respectively, of respondent Beltron Computer Philippines, Inc.
(Beltron), a domestic corporation. Respondents Jonathan K. Chua, Emily K. Chua,
Benito T. Sanchez, and Nancy I. Velasco are Beltrons Directors. On the other hand,
respondents Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and
Deanna Chua are the Directors of respondent Taiwan Machinery Display & Trade
Center, Inc. (TMTC), also a domestic corporation.[4]
In May 1993, Microsoft and Beltron entered into a Licensing Agreement
(Agreement). Under Section 2(a) of the Agreement, as amended in January 1994,
Microsoft authorized Beltron, for a fee, to:

(i) xxx reproduce and install no more than one (1) copy of [Microsoft] software on each
Customer System hard disk or Read Only Memory (ROM); [and]
(ii) xxx distribute directly or indirectly and license copies of the Product (reproduced as per
Section 2(a)(i) and/or acquired from Authorized Replicator or Authorized Distributor) in
object code form to end users[.] xxxx[5]
The Agreement also authorized Microsoft and Beltron to terminate the contract if
the other fails to comply with any of the Agreements provisions. Microsoft terminated
the Agreement effective 22 June 1995 for Beltrons non-payment of royalties.[6]
Afterwards, Microsoft learned that respondents were illegally copying and selling
Microsoft software. Consequently, Microsoft, through its Philippine agent,[7] hired the
services of Pinkerton Consulting Services (PCS), a private investigative firm.
Microsoft also sought the assistance of the National Bureau of Investigation (NBI).
On 10 November 1995, PCS employee John Benedic [8] Sacriz (Sacriz) and NBI
agent Dominador Samiano, Jr. (Samiano), posing as representatives of a computer
shop,[9] bought computer hardware (central processing unit (CPU) and computer
monitor) and software (12 computer disks (CDs) in read-only memory (ROM)
format) from respondents. The CPU contained pre-installed [10]Microsoft Windows 3.1
and MS-DOS software. The 12 CD-ROMs, encased in plastic containers with
Microsoft packaging, also contained Microsoft software.[11] At least two of the CDROMs were installers, so-called because they contain several software (Microsoft
only or both Microsoft and non-Microsoft).[12] Sacriz and Samiano were not given the
Microsoft end-user license agreements, users manuals, registration cards or
certificates of authenticity for the articles they purchased. The receipt issued to Sacriz
and Samiano for the CPU and monitor bore the heading T.M.T.C. (PHILS.) INC.
BELTRON COMPUTER.[13] The receipt for the 12 CD-ROMs did not indicate its
source although the name Gerlie appears below the entry delivered by.[14]
On 17 November 1995, Microsoft applied for search warrants against
respondents in the Regional Trial Court, Branch 23, Manila (RTC).[15] The RTC
granted Microsofts application and issued two search warrants (Search Warrant
Nos. 95-684 and 95-685).[16] Using Search Warrant Nos. 95-684 and 95-685, the NBI
searched the premises of Beltron and TMTC and seized several computer-related
hardware, software, accessories, and paraphernalia. Among these were 2,831
pieces of CD-ROMs containing Microsoft software.[17]
Based on the articles obtained from respondents, Microsoft and a certain Lotus
Development Corporation (Lotus Corporation) charged respondents before the
Department of Justice (DOJ) with copyright infringement under Section 5(A) in
relation to Section 29 of Presidential Decree No. 49, as amended, (PD 49)[18] and
with unfair competition under Article 189(1)[19] of the Revised Penal Code. In its
Complaint (I.S. No. 96-193), which the NBI indorsed, Microsoft alleged that
respondents illegally copied and sold Microsoft software.[20]
In their joint counter-affidavit, respondents Yvonne Keh (respondent Keh) and
Emily K. Chua (respondent Chua) denied the charges against respondents.
Respondents Keh and Chua alleged that: (1) Microsofts real intention in filing the
complaint under I.S. No. 96-193 was to pressure Beltron to pay its alleged unpaid
royalties, thus Microsoft should have filed a collection suit instead of a criminal
complaint; (2) TMTC bought the confiscated 59 boxes of MS-DOS CDs from a
Microsoft dealer in Singapore (R.R. Donnelly); (3) respondents are not the source of
the Microsoft Windows 3.1 software pre-installed in the CPU bought by Sacriz and

Samiano, but only of the MS-DOS software; (4) Microsofts alleged proof of purchase
(receipt) for the 12 CD-ROMs is inconclusive because the receipt does not indicate
its source; and (5) respondents Benito Keh, Jonathan K. Chua, Alfonso Chua, Alberto
Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are stockholders of
Beltron and TMTC in name only and thus cannot be held criminally liable.[21]
The other respondents did not file counter-affidavits.
Meanwhile, respondents moved to quash Search Warrant Nos. 95-684 and 95685. The RTC partially granted their motion in its Order of 16 April 1996. Microsoft
sought reconsideration but the RTC denied Microsofts motion in its Order of 19 July
1996. Microsoft appealed to the Court of Appeals in CA-G.R. CV No. 54600. In its
Decision of 29 November 2001, the Court of Appeals granted Microsofts appeal and
set aside the RTC Orders of 16 April 1996 and 19 July 1996. The Court of Appeals
Decision became final on 27 December 2001.

The DOJ Resolutions

In the Resolution of 26 October 1999, DOJ State Prosecutor Jocelyn A. Ong
(State Prosecutor Ong) recommended the dismissal of Microsofts complaint for
lack of merit and insufficiency of evidence. State Prosecutor Ong also recommended
the dismissal of Lotus Corporations complaint for lack of interest to prosecute and for
insufficiency of evidence. Assistant Chief State Prosecutor Lualhati R. Buenafe
(Assistant Chief State Prosecutor Buenafe) approved State Prosecutor Ongs
recommendations.[22] The 26 October 1999 Resolution reads in part:
[T]wo (2) issues have to be resolved in this case, namely:
a)

Whether or not Beltron Computer and/or its stockholders should be held liable for the
offenses charged.

b)

Whether or not prima facie case exist[s] against Taiwan Machinery Display and Trade
Center, Inc. (TMTC) for violation of the offense charged.

Complainant had alleged that from the time the license agreement was terminated,
respondent/s is/are no longer authorized to copy/distribute/sell Microsoft products. However,
respondent/s averred that the case is civil in nature, not criminal, considering that the case
stemmed only out of the desire of complainant to collect from them the amount of
US$135,121.32 and that the contract entered into by the parties cannot be unilaterally
terminated.
In the order of Honorable William Bayhon dated July 19, 1996 [denying reconsideration to the
Order partially quashing the search warrants], he observed the following:
It is further argued by counsel for respondent that the act taken by private complainant is to
spite revenge against the respondent Beltron for the latter failed to pay the alleged monetary
obligation in the amount of US$135,121.32. That respondent has some monetary obligation
to complainant which is not denied by the complainant.
[]It appears therefore that prior to the issuance of the subject search warrants, complainant
had some business transactions with the respondent [Beltron] along the same line of products.
Complainant failed to reveal the true circumstances existing between the two of them as it

now appears, indeed the search warrant[s] xxx [are] being used as a leverage to secure
collection of the money obligation which the Court cannot allow.
From said order, it can be gleaned that the [RTC] xxx, had admitted that the search warrants
applied for by complainant were merely used as a leverage for the collection of the alleged
monetary obligation of the respondent/s.
From said order, it can be surmise (sic) that the obligations between the parties is civil in
nature not criminal.
Moreover, complainant had time and again harped that respondent/s is/are not authorized to
sell/copy/distribute Microsoft products at the time of the execution of the search warrants.
Still, this office has no power to pass upon said issue for one has then to interpret the
provisions of the contract entered into by the parties, which question, should be raised in a
proper civil proceeding.
Accordingly, absen[t] a resolution from the proper court of (sic) whether or not the contract is
still binding between the parties at the time of the execution of the search warrants, this office
cannot pass upon the issue of whether respondent/s is or are liable for the offense charged.
As to the second issue, we find for the respondent/s. TMTC had provided sufficient evidence
such as pro-forma invoice from R.R. Donnelley; Debt Advice of the Bank of Commerce;
Official Receipts from the Bureau of Customs; and Import Entry Declaration of the Bureau of
Customs to prove that indeed the Microsoft software in their possession were bought from
Singapore.
Thus, respondent/s in this case has/have no intent to defraud the public, as provided under
Article 189 of the Revised Penal Code, for they bought said Microsoft MS-DOS 6.0 from an
alleged licensee of Microsoft in Singapore, with all the necessary papers. In their opinion,
what they have are genuine Microsoft software, therefore no unfair competition exist.
Moreover, violation of P.D. 49 does not exist, for respondent/s was/were not the
manufacturers of the Microsoft software seized and were selling their products as genuine
Microsoft software, considering that they bought it from a Microsoft licensee.
Complainant, on the other hand, considering that it has the burden of proving that the
respondent/s is/are liable for the offense charged, has not presented any evidence that the
items seized namely the 59 boxes of MS-DOS 6.0 software are counterfeit.
The certification issued on December 12, 1995 by Christopher Austin, Corporate Attorney of
the complainant, does not disclose this fact. For the term used by Mr. Austin was that the
items seized were unauthorized.
The question now, is whether the products were unauthorized because TMTC has no license
to sell Microsoft products, or is it unauthorized because R.R. Donnelley has no authority to
sell said products here in the Philippines.
Still, to determine the culpability of the respondents, complainant should present evidence that
what is in the possession of the respondent/s is/are counterfeit Microsoft products.
This it failed to do.[23]
Microsoft sought reconsideration and prayed for an ocular inspection of the
articles seized from respondents. However, in the Resolution of 3 December 1999,
Assistant Chief State Prosecutor Buenafe, upon State Prosecutor Ongs
recommendation, denied Microsofts motion.[24]

Microsoft appealed to the Office of the DOJ Secretary. In the Resolution of 3

August 2000, DOJ Undersecretary Regis V. Puno dismissed Microsofts appeal.
[25]
Microsoft sought reconsideration but its motion was denied in the Resolution of 22
December 2000.[26]
Hence, this petition. Microsoft contends that:
I.

THE DOJ ERRED IN RULING THAT THE LIABILITY OF RESPONDENTS WAS ONLY
CIVIL IN NATURE BY VIRTUE OF THE LICENSE AGREEMENT.

II.

THE DOJ MISAPPRECIATED THE FACT THAT RESPONDENTS WERE ENGAGED IN

THE ILLEGAL IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT
SOFTWARE AS EVIDENCED BY THE ITEMS PURCHASED DURING THE TEST-BUY
AND THE ITEMS SEIZED FROM RESPONDENTS PREMISES.

III.

THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT INFRINGEMENT AND UNFAIR

COMPETITION.

IV.

ONLY TWO OUT OF THE NINE RESPONDENTS BOTHERED TO FILE COUNTERAFFIDAVITS; HENCE, THE CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN
UNCONTROVERTED.[27]

In its Comment, filed by the Solicitor General, the DOJ maintains that it did not
commit grave abuse of discretion in dismissing Microsofts complaint.[28]
For their part, respondents allege in their Comment that Microsoft is guilty of
forum-shopping because its petition in CA-G.R. CV No. 54600 was filed ahead of,
and has a common interest with, this petition. On the merits, respondents reiterate
their claims in their motion to quash Search Warrant Nos. 95-684 and 95-685 that the
articles seized from them were either owned by others, purchased from legitimate
sources, or not produced by Microsoft. Respondents also insist that the Agreement
entitled Beltron to copy and replicate or reproduce Microsoft products. On the
confiscated 2,831 CD-ROMs, respondents allege that a certain corporation [29] left the
CD-ROMs with them for safekeeping. Lastly, respondents claim that there is no proof
that the CPU Sacriz and Samiano bought from them contained pre-installed Microsoft
software because the receipt for the CPU does not indicate [s]oftware hard disk. [30]
In its Reply, Microsoft counters that it is not liable for forum-shopping because its
petition in CA-G.R. CV No. 54600 involved the Orders of the RTC partially quashing
Search Warrant Nos. 95-684 and 95-685 while this petition concerns the DOJ
Resolutions dismissing its complaint against respondents for copyright infringement
and unfair competition. On the merits, Microsoft maintains that respondents should
be indicted for copyright infringement and unfair competition.[31]

The Issues
The petition raises the following issues:
(1) Whether Microsoft engaged in forum-shopping; and
(2) Whether the DOJ acted with grave abuse of discretion in not finding probable
cause to charge respondents with copyright infringement and unfair
competition.

The Ruling of the Court

The petition has merit.
Microsoft did not Engage in Forum-Shopping
Forum-shopping takes place when a litigant files multiple suits involving the same
parties, either simultaneously or successively, to secure a favorable judgment.
[32]
Thus, it exists where the elements of litis pendentia are present, namely: (a)
identity of parties, or at least such parties who represent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on
the same facts; and (c) the identity with respect to the two preceding particulars in the
two cases is such that any judgment that may be rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other
case.[33] Forum-shopping is an act of malpractice because it abuses court processes.
[34]
To check this pernicious practice, Section 5, Rule 7 of the 1997 Rules of Civil
Procedure requires the principal party in an initiatory pleading to submit a certification
against forum-shopping.[35] Failure to comply with this requirement is a cause for the
dismissal of the case and, in case of willful forum-shopping, for the imposition of
administrative sanctions.
Here, Microsoft correctly contends that it is not liable for forum-shopping. What
Microsoft appealed in CA-G.R. CV No. 54600 were the RTC Orders partially
quashing Search Warrant Nos. 95-684 and 95-685. In the present case, Microsoft is
appealing from the DOJ Resolutions dismissing its complaint against respondents for
copyright infringement and unfair competition. Thus, although the parties in CA-G.R.
CV No. 54600 and this petition are identical, the rights asserted and the reliefs
prayed for are not such that the judgment in CA-G.R. CV No. 54600 does not amount
to res judicata in the present case. This renders forum-shopping impossible here.
The DOJ Acted with Grave Abuse of Discretion
in not Finding Probable Cause to Charge Respondents with
Copyright Infringement and Unfair Competition
Generally, this Court is loath to interfere in the prosecutors discretion in
determining probable cause[36] unless such discretion is shown to have been
abused.[37] This case falls under the exception.
Unlike the higher quantum of proof beyond reasonable doubt required to secure a
conviction, it is the lower standard of probable cause which is applied during the
preliminary investigation to determine whether the accused should be held for trial.
This standard is met if the facts and circumstances incite a reasonable belief that the
act or omission complained of constitutes the offense charged. As we explained
in Pilapil v. Sandiganbayan:[38]
The term [probable cause] does not mean actual and positive cause nor does it import
absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of
probable cause does not require an inquiry into whether there is sufficient evidence to procure
a conviction. It is enough that it is believed that the act or omission complained of constitutes
the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution
in support of the charge.
PD 49 and Article 189(1)

Section 5[39] of PD 49 (Section 5) enumerates the rights vested exclusively on

the copyright owner. Contrary to the DOJs ruling, the gravamen of copyright
infringement is not merely the unauthorized manufacturing of intellectual works but
rather the unauthorized performance of any of the acts covered by Section 5. Hence,
any person who performs any of the acts under Section 5 without obtaining the
copyright owners prior consent renders himself civilly[40] and criminally[41] liable for
copyright infringement. We held in Columbia Pictures, Inc. v. Court of Appeals:[42]
Infringement of a copyright is a trespass on a private domain owned and occupied by the
owner of the copyright, and, therefore, protected by law, and infringement of copyright, or
piracy, which is a synonymous term in this connection, consists in the doing by any person,
without the consent of the owner of the copyright, of anything the sole right to do which is
conferred by statute on the owner of the copyright. (Emphasis supplied)
Significantly, under Section 5(A), a copyright owner is vested with the exclusive
right to copy, distribute, multiply, [and] sell his intellectual works.
On the other hand, the elements of unfair competition under Article 189(1)[43] of
the Revised Penal Code are:
(a)

That the offender gives his goods the general appearance of the goods of another
manufacturer or dealer;

(b)

That the general appearance is shown in the (1) goods themselves, or in the (2)
wrapping of their packages, or in the (3) device or words therein, or in (4) any other
feature of their appearance[;]

(c) That the offender offers to sell or sells those goods or gives other persons a chance or
opportunity to do the same with a like purpose[; and]
(d) That there is actual intent to deceive the public or defraud a competitor.[44]

The element of intent to deceive may be inferred from the similarity of the goods
or their appearance.[45]
On the Sufficiency of Evidence to
Support a Finding of Probable Cause
Against Respondents
In its pleadings filed with the DOJ, Microsoft invoked three clusters of evidence to
support its complaint against respondents, namely: (1) the 12 CD-ROMs containing
Microsoft software Sacriz and Samiano bought from respondents; (2) the CPU with
pre-installed Microsoft software Sacriz and Samiano also purchased from
respondents; and (3) the 2,831 CD-ROMs containing Microsoft software seized from
respondents.[46] The DOJ, on the one hand, refused to pass upon the relevance of
these pieces of evidence because: (1) the obligations between the parties is civil and
not criminal considering that Microsoft merely sought the issuance of Search
Warrant Nos. 95-684 and 95-685 to pressure Beltron to pay its obligation under the
Agreement, and (2) the validity of Microsofts termination of the Agreement must first
be resolved by the proper court. On the other hand, the DOJ ruled that Microsoft
failed to present evidence proving that what were obtained from respondents were
counterfeit Microsoft products.
This is grave abuse of discretion.[47]

First. Being the copyright and trademark owner of Microsoft software, Microsoft
acted well within its rights in filing the complaint under I.S. No. 96-193 based on the
incriminating evidence obtained from respondents. Hence, it was highly irregular for
the DOJ to hold, based on the RTC Order of 19 July 1996, that Microsoft sought the
issuance of Search Warrant Nos. 95-684 and 95-685, and by inference, the filing of
the complaint under I.S. No. 96-193, merely to pressure Beltron to pay its overdue
royalties to Microsoft. Significantly, in its Decision in CA-G.R. CV No. 54600 dated 29
November 2001, the Court of Appeals set aside the RTC Order of 19 July 1996.
Respondents no longer contested that ruling which became final on 27 December
2001.
Second. There is no basis for the DOJ to rule that Microsoft must await a prior
resolution from the proper court of (sic) whether or not the [Agreement] is still binding
between the parties. Beltron has not filed any suit to question Microsofts termination
of the Agreement. Microsoft can neither be expected nor compelled to wait until
Beltron decides to sue before Microsoft can seek remedies for violation of its
intellectual property rights.
Furthermore, some of the counterfeit CD-ROMs bought from respondents were
installer CD-ROMs containing Microsoft software only or both Microsoft and nonMicrosoft software. These articles are counterfeit per se because Microsoft does not
(and could not have authorized anyone to) produce such CD-ROMs. The copying of
the genuine Microsoft software to produce these fake CD-ROMs and their distribution
are illegal even if the copier or distributor is a Microsoft licensee. As far as these
installer CD-ROMs are concerned, the Agreement (and the alleged question on the
validity of its termination) is immaterial to the determination of respondents liability for
copyright infringement and unfair competition.
Lastly, Section 10(b)[48] of the Agreement provides that Microsofts rights and
remedies under the contract are not xxx exclusive and are in addition to any other
rights and remedies provided by law or [the] Agreement. Thus, even if the
Agreement still subsists, Microsoft is not precluded from seeking remedies under PD
49 and Article 189(1) of the Revised Penal Code to vindicate its rights.
Third. The Court finds that the 12 CD-ROMs (installer and non-installer) and
the CPU with pre-installed Microsoft software Sacriz and Samiano bought from
respondents and the 2,831 Microsoft CD-ROMs seized from respondents suffice to
support a finding of probable cause to indict respondents for copyright infringement
under Section 5(A) in relation to Section 29 of PD 49 for unauthorized copying and
selling of protected intellectual works. The installer CD-ROMs with Microsoft
software, to repeat, are counterfeit per se. On the other hand, the illegality of the
non-installer CD-ROMs purchased from respondents and of the Microsoft software
pre-installed in the CPU is shown by the absence of the standard features
accompanying authentic Microsoft products, namely, the Microsoft end-user license
agreements, users manuals, registration cards or certificates of authenticity.
On the 2,831 Microsoft CD-ROMs [49] seized from respondents, respondent
Beltron, the only respondent who was party to the Agreement, could not have
reproduced them under the Agreement as the Solicitor General[50] and respondents
contend. Beltrons rights[51] under the Agreement were limited to:
(1) the reproduc[tion] and install[ation of] no more than one copy of [Microsoft]
software on each Customer System hard disk or Read Only Memory (ROM); and

(2) the distribut[ion] xxx and licens[ing of] copies of the [Microsoft] Product [as
reproduced above] and/or acquired from Authorized Replicator or Authorized
Distributor) in object code form to end users.
The Agreement defines an authorized replicator as a third party approved by
[Microsoft] which may reproduce and manufacture [Microsoft] Product[s] for [Beltron]
xxx.[52] An authorized distributor, on the other hand, is a third party approved by
[Microsoft] from which [Beltron] may purchase MED [53] Product.[54] Being a mere
reproducer/installer of one Microsoft software copy on each customers hard disk or
ROM, Beltron could only have acquired the hundreds of Microsoft CD-ROMs found in
respondents possession from Microsoft distributors or replicators.
However, respondents makes no such claim. What respondents contend is that
these CD-ROMs were left to them for safekeeping. But neither is this claim tenable
for lack of substantiation. Indeed, respondents Keh and Chua, the only respondents
who filed counter-affidavits, did not make this claim in the DOJ. These circumstances
give rise to the reasonable inference that respondents mass-produced the CD-ROMs
in question without securing Microsofts prior authorization.
The counterfeit non-installer CD-ROMs Sacriz and Samiano bought from
respondents also suffice to support a finding of probable cause to indict respondents
for unfair competition under Article 189(1) of the Revised Penal Code for passing off
Microsoft products. From the pictures of the CD-ROMs packaging, [55] one cannot
distinguish them from the packaging of CD-ROMs containing genuine Microsoft
software. Such replication, coupled with the similarity of content of these fake CDROMs and the CD-ROMs with genuine Microsoft software, implies intent to deceive.
Respondents contention that the 12 CD-ROMs Sacriz and Samiano purchased
cannot be traced to them because the receipt for these articles does not indicate its
source is unavailing. The receipt in question should be taken together with Microsofts
claim that Sacriz and Samiano bought the CD-ROMs from respondents. [56] Together,
these considerations point to respondents as the vendor of the counterfeit CD-ROMs.
Respondents do not give any reason why the Court should not give credence to
Microsofts claim. For the same reason, the fact that the receipt for the CPU does not
indicate [s]oftware hard disk does not mean that the CPU had no pre-installed
Microsoft software. Respondents Keh and Chua admit in their counter-affidavit that
respondents are the source of the pre-installed MS-DOS software.
WHEREFORE, we GRANT the petition. We SET ASIDE the Resolutions dated 26
October 1999, 3 December 1999, 3 August 2000, and 22 December 2000 of the
Department of Justice.
SO ORDERED.