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TANADA v.

ANGARA
The emergence on January 1, 1995 of the World Trade Organization, abetted by
the membership thereto of the vast majority of countries has revolutionized
international business and economic relations amongst states. It has irreversibly
propelled
the
world
towards
trade
liberalization
and
economic
globalization. Liberalization, globalization, deregulation and privatization, the thirdmillennium buzz words, are ushering in a new borderless world of business by
sweeping away as mere historical relics the heretofore traditional modes of
promoting and protecting national economies like tariffs, export subsidies, import
quotas, quantitative restrictions, tax exemptions and currency controls. Finding
market niches and becoming the best in specific industries in a market-driven and
export-oriented global scenario are replacing age-old beggar-thy-neighbor policies
that unilaterally protect weak and inefficient domestic producers of goods and
services. In the words of Peter Drucker, the well-known management guru, Increased
participation in the world economy has become the key to domestic economic
growth and prosperity.

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second


World War, plans for the establishment of three multilateral institutions -- inspired by
that grand political body, the United Nations -- were discussed at Dumbarton Oaks
and Bretton Woods. The first was the World Bank (WB) which was to address the
rehabilitation and reconstruction of war-ravaged and later developing countries;
the second, the International Monetary Fund (IMF) which was to deal with currency
problems; and the third, the International Trade Organization (ITO), which was to
foster order and predictability in world trade and to minimize unilateral protectionist
policies that invite challenge, even retaliation, from other states. However, for a
variety of reasons, including its non-ratification by the United States, the ITO, unlike
the IMF and WB, never took off. What remained was only GATT -- the General
Agreement on Tariffs and Trade. GATT was a collection of treaties governing access
to the economies of treaty adherents with no institutionalized body administering
the agreements or dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the
Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave
birth to that administering body -- the World Trade Organization -- with the signing of
the Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by its
members.[1]
Like many other developing countries, the Philippines joined WTO as a
founding member with the goal, as articulated by President Fidel V. Ramos in two
letters to the Senate (infra), of improving Philippine access to foreign markets,
especially its major trading partners, through the reduction of tariffs on its exports,
particularly agricultural and industrial products. The President also saw in the WTO
the opening of new opportunities for the services sector x x x, (the reduction of)
costs and uncertainty associated with exporting x x x, and (the attraction of) more
investments into the country. Although the Chief Executive did not expressly
mention it in his letter, the Philippines - - and this is of special interest to the legal
profession - - will benefit from the WTO system of dispute settlement by judicial
adjudication through the independent WTO settlement bodies called (1) Dispute

Settlement Panels and (2) Appellate Tribunal.Heretofore, trade disputes were settled
mainly through negotiations where solutions were arrived at frequently on the basis
of relative bargaining strengths, and where naturally, weak and underdeveloped
countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines to place nationals and
products of member-countries on the same footing as Filipinos and local products
and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of
both Congress and the Supreme Court, the instant petition before this Court assails
the WTO Agreement for violating the mandate of the 1987 Constitution to develop a
self-reliant and independent national economy effectively controlled by Filipinos x x
x (to) give preference to qualified Filipinos (and to) promote the preferential use of
Filipino labor, domestic materials and locally produced goods.
Simply stated, does the Philippine Constitution prohibit Philippine participation
in worldwide trade liberalization and economic globalization? Does it prescribe
Philippine integration into a global economy that is liberalized, deregulated and
privatized? These are the main questions raised in this petition for certiorari,
prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the
nullification, on constitutional grounds, of the concurrence of the Philippine Senate in
the ratification by the President of the Philippines of the Agreement Establishing the
World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of
its implementation and enforcement through the release and utilization of public
funds, the assignment of public officials and employees, as well as the use of
government properties and resources by respondent-heads of various executive
offices concerned therewith. This concurrence is embodied in Senate Resolution No.
97, dated December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of


the Department of Trade and Industry (Secretary Navarro, for brevity), representing
the Government of the Republic of the Philippines, signed in Marrakesh, Morocco,
the Final Act Embodying the Results of the Uruguay Round of Multilateral
Negotiations (Final Act, for brevity).
By signing the Final Act,[2] Secretary Navarro on behalf of the Republic of the
Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities, with a view to seeking approval of the Agreement
in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter
dated August 11, 1994 from the President of the Philippines,[3] stating among others

that the Uruguay Round Final Act is hereby submitted to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution.
On August 13, 1994, the members of the Philippine Senate received another
letter from the President of the Philippines[4] likewise dated August 11, 1994, which
stated among others that the Uruguay Round Final Act, the Agreement Establishing
the World Trade Organization, the Ministerial Declarations and Decisions, and the
Understanding on Commitments in Financial Services are hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the Constitution.

On December 9, 1994, the President of the Philippines certified the necessity of


the immediate adoption of P.S. 1083, a resolution entitled Concurring in the
Ratification of the Agreement Establishing the World Trade Organization.[5]
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which
Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in
the ratification by the President of the Philippines of the Agreement Establishing the
World Trade Organization.[6] The text of the WTO Agreement is written on pages
137 et seq. of Volume I of the 36-volumeUruguay Round of Multilateral Trade
Negotiations and includes various agreements and associated legal instruments
(identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively
referred to as Multilateral Trade Agreements, for brevity) as follows:

ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture

Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights


ANNEX 2
Understanding on Rules and Procedures Governing the
Settlement of Disputes

Agreement on the Application of Sanitary and


ANNEX 3
Phytosanitary Measures

Trade Policy Review Mechanism

Agreement on Textiles and Clothing


Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994
Agreement on Implementation of Article VII of the General
on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures

On December 16, 1994, the President of the Philippines signed [7] the
Instrument of Ratification, declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of
the Philippines, after having seen and considered the aforementioned Agreement
Establishing the World Trade Organization and the agreements and associated legal
instruments included in Annexes one (1), two (2) and three (3) of that Agreement
which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines
is composed of the Agreement Proper and the associated legal instruments included
in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof.
On the other hand, the Final Act signed by Secretary Navarro embodies not
only the WTO Agreement (and its integral annexes aforementioned) but also (1) the
Ministerial Declarations and Decisions and (2) the Understanding on Commitments
in Financial Services. In his Memorandum dated May 13, 1996,[8] the Solicitor General
describes these two latter documents as follows:

Agreement on Subsidies and Coordinating Measures


Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes

The Ministerial Decisions and Declarations are twenty-five declarations and decisions
on a wide range of matters, such as measures in favor of least developed countries,
notification procedures, relationship of WTO with the International Monetary Fund
(IMF), and agreements on technical barriers to trade and on dispute settlement.

The Understanding on Commitments in Financial Services dwell on, among other


things, standstill or limitations and qualifications of commitments to existing nonconforming measures, market access, national treatment, and definitions of nonresident supplier of financial services, commercial presence and new financial
service.
On December 29, 1994, the present petition was filed. After careful
deliberation on respondents comment and petitioners reply thereto, the Court
resolved on December 12, 1995, to give due course to the petition, and the parties
thereafter filed their respective memoranda. The Court also requested the
Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations
stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as
Bautista Paper,[9] for brevity, (1) providing a historical background of and (2)
summarizing the said agreements.
During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in
controversy and (2) the transcript of proceedings/hearings in the Senate; and
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine
treaties signed prior to the Philippine adherence to the WTO Agreement, which
derogate from Philippine sovereignty and (2) copies of the multi-volume WTO
Agreement and other documents mentioned in the Final Act, as soon as possible.
After receipt of the foregoing documents, the Court said it would consider the
case submitted for resolution. In a Compliance dated September 16, 1996, the
Solicitor General submitted a printed copy of the 36-volume Uruguay Round of
Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996,
he listed the various bilateral or multilateral treaties or international instruments
involving derogation of Philippine sovereignty. Petitioners, on the other hand,
submitted their Compliance dated January 28, 1997, on January 30, 1997.

D. Whether provisions of the Agreement Establishing the World Trade


Organization unduly limit, restrict and impair Philippine sovereignty
specifically the legislative power which, under Sec. 2, Article VI, 1987
Philippine Constitution is vested in the Congress of the Philippines;
E. Whether provisions of the Agreement Establishing the World Trade
Organization interfere with the exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they voted for
concurrence in the ratification of the constitutionally-infirm Agreement
Establishing the World Trade Organization.
G. Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they concurred
only in the ratification of the Agreement Establishing the World Trade
Organization, and not with the Presidential submission which included the
Final Act, Ministerial Declaration and Decisions, and the Understanding on
Commitments in Financial Services.
On the other hand, the Solicitor General as counsel for respondents
synthesized the several issues raised by petitioners into the following: [10]
1. Whether or not the provisions of the Agreement Establishing the World Trade
Organization and the Agreements and Associated Legal Instruments included in
Annexes one (1), two (2) and three (3) of that agreement cited by petitioners
directly contravene or undermine the letter, spirit and intent of Section 19, Article II
and Sections 10 and 12, Article XII of the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair
the exercise of legislative power by Congress.

The Issues

3. Whether or not certain provisions of the Agreement impair the exercise of judicial
power by this Honorable Court in promulgating the rules of evidence.

In their Memorandum dated March 11, 1996, petitioners summarized the


issues as follows:

4. Whether or not the concurrence of the Senate in the ratification by the President
of the Philippines of the Agreement establishing the World Trade Organization
implied rejection of the treaty embodied in the Final Act.

A. Whether the petition presents a political question or is otherwise not justiciable.


B. Whether the petitioner members of the Senate who participated in the
deliberations and voting leading to the concurrence are estopped from
impugning the validity of the Agreement Establishing the World Trade
Organization or of the validity of the concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade
Organization contravene the provisions of Sec. 19, Article II, and Secs. 10
and 12, Article XII, all of the 1987 Philippine Constitution.

By raising and arguing only four issues against the seven presented by
petitioners, the Solicitor General has effectively ignored three, namely: (1) whether
the petition presents a political question or is otherwise not justiciable; (2) whether
petitioner-members of the Senate (Wigberto E. Taada and Anna Dominique
Coseteng) are estopped from joining this suit; and (3) whether the respondentmembers of the Senate acted in grave abuse of discretion when they voted for
concurrence in the ratification of the WTO Agreement. The foregoing
notwithstanding, this Court resolved to deal with these three issues thus:
(1) The political question issue -- being very fundamental and vital, and being a
matter that probes into the very jurisdiction of this Court to hear and decide this
case -- was deliberated upon by the Court and will thus be ruled upon as the first
issue;

(2) The matter of estoppel will not be taken up because this defense is waivable and
the respondents have effectively waived it by not pursuing it in any of their
pleadings; in any event, this issue, even if ruled in respondents favor, will not cause
the petitions dismissal as there are petitioners other than the two senators, who are
not vulnerable to the defense of estoppel; and

becomes a legal issue which the Court is bound by constitutional mandate to decide.

(3) The issue of alleged grave abuse of discretion on the part of the respondent
senators will be taken up as an integral part of the disposition of the four issues
raised by the Solicitor General.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
government.

During its deliberations on the case, the Court noted that the respondents did
not question the locus standi of petitioners. Hence, they are also deemed to have
waived the benefit of such issue. They probably realized that grave constitutional
issues, expenditures of public funds and serious international commitments of the
nation are involved here, and that transcendental public interest requires that the
substantive issues be met head on and decided on the merits, rather than skirted or
deflected by procedural matters.[11]
To recapitulate, the issues that will be ruled upon shortly are:
(1)

DOES
THE
PETITION
PRESENT
A
JUSTICIABLE
CONTROVERSY? OTHERWISE STATED, DOES THE PETITION INVOLVE
A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO
JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE


ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12,
ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT,
RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY
CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE
EXERCISE OF JUDICIAL POWER BY THIS COURT IN PROMULGATING
RULES ON EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT
AND ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT
IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS
AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN
FINANCIAL SERVICES?

[13]

The jurisdiction of this Court to adjudicate the matters [14] raised in the petition
is clearly set out in the 1987 Constitution,[15] as follows:

The foregoing text emphasizes the judicial departments duty and power to
strike down grave abuse of discretion on the part of any branch or instrumentality of
government including Congress. It is an innovation in our political law. [16] As
explained by former Chief Justice Roberto Concepcion,[17] the judiciary is the final
arbiter on the question of whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction or so capriciously
as to constitute an abuse of discretion amounting to excess of jurisdiction. This is
not only a judicial power but a duty to pass judgment on matters of this nature.
As this Court has repeatedly and firmly emphasized in many cases, [18] it will not
shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it in
appropriate cases, committed by any officer, agency, instrumentality or department
of the government.
As the petition alleges grave abuse of discretion and as there is no other plain,
speedy or adequate remedy in the ordinary course of law, we have no hesitation at
all in holding that this petition should be given due course and the vital questions
raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari,
prohibition and mandamus are appropriate remedies to raise constitutional issues
and to review and/or prohibit/nullify, when proper, acts of legislative and executive
officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this
Court will not review the wisdom of the decision of the President and the Senate in
enlisting the country into the WTO, or pass upon the merits of trade liberalization as
a policy espoused by said international body. Neither will it rule on the propriety of
the governments economic policy of reducing/removing tariffs, taxes, subsidies,
quantitative restrictions, and other import/trade barriers. Rather, it will only exercise
its constitutional duty to determine whether or not there had been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the Senate in
ratifying the WTO Agreement and its three annexes.

The First Issue: Does the Court Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it


contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the
judiciary to settle the dispute. The question thus posed is judicial rather than
political. The duty (to adjudicate) remains to assure that the supremacy of the
Constitution is upheld.[12] Once a controversy as to the application or interpretation
of a constitutional provision is raised before this Court (as in the instant case), it

Second Issue: The WTO Agreement and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the letter, spirit and intent of the Constitution
mandating economic nationalism are violated by the so-called parity provisions and
national treatment clauses scattered in various parts not only of the WTO
Agreement and its annexes but also in the Ministerial Decisions and Declarations
and in the Understanding on Commitments in Financial Services.

Specifically, the flagship constitutional provisions referred to are Sec. 19,


Article II, and Secs. 10 and 12, Article XII, of the Constitution, which are worded as
follows:
Article II
DECLARATION OF PRINCIPLES AND STATE POLICIES
xx xx xx xx
Sec. 19. The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos.
xx xx xx xx
Article XII
NATIONAL ECONOMY AND PATRIMONY
xx xx xx xx
Sec. 10. x x x. The Congress shall enact measures that will encourage the formation
and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
xx xx xx xx
Sec. 12. The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt measures that help make them
competitive.
Petitioners aver that these sacred constitutional principles are desecrated by
the following WTO provisions quoted in their memorandum:[19]
a) In the area of investment measures related to trade in goods (TRIMS,
for brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994. no
Member shall apply any TRIM that is inconsistent with the provisions of
Article III or Article XI of GATT 1994.

2. An Illustrative list of TRIMS that are inconsistent with the obligations of


general elimination of quantitative restrictions provided for in
paragraph I of Article XI of GATT 1994 is contained in the Annex to this
Agreement. (Agreement on Trade-Related Investment Measures, Vol.
27, Uruguay Round, Legal Instruments, p.22121, emphasis supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national
treatment provided for in paragraph 4 of Article III of GATT 1994
include those which are mandatory or enforceable under domestic
law or under administrative rulings, or compliance with which is
necessary to obtain an advantage, and which require:
(a) the purchase or use by an enterprise of products of domestic origin or
from any domestic source, whether specified in terms of particular
products, in terms of volume or value of products, or in terms of
proportion of volume or value of its local production; or
(b) that an enterprises purchases or use of imported products be limited
to an amount related to the volume or value of local products that it
exports.
2. TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph 1 of Article XI of GATT
1994 include those which are mandatory or enforceable under domestic
laws or under administrative rulings, or compliance with which is necessary
to obtain an advantage, and which restrict:
(a) the importation by an enterprise of products used in or related to the
local production that it exports;
(b) the importation by an enterprise of products used in or related to its
local production by restricting its access to foreign exchange inflows
attributable to the enterprise; or
(c) the exportation or sale for export specified in terms of particular
products, in terms of volume or value of products, or in terms of a
preparation of volume or value of its local production. (Annex to the
Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round Legal Documents, p.22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:
The products of the territory of any contracting party imported into the territory of
any other contracting party shall be accorded treatment no less favorable
than that accorded to like products of national origin in respect of laws,

regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use. the provisions of this paragraph shall
not prevent the application of differential internal transportation charges which are
based exclusively on the economic operation of the means of transport and not on
the nationality of the product. (Article III, GATT 1947, as amended by the Protocol
Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in
relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol.
1, Uruguay Round, Legal Instruments p.177, emphasis supplied).
b) In the area of trade related aspects of intellectual property rights
(TRIPS, for brevity):
Each Member shall accord to the nationals of other Members treatment no
less favourable than that it accords to its own nationals with regard to the
protection of intellectual property... (par. 1, Article 3, Agreement on Trade-Related
Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments,
p.25432 (emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions
and qualifications set out therein, each Member shall accord to
services and service suppliers of any other Member, in respect of all
measures affecting the supply of services, treatment no less
favourable than it accords to its own like services and service
suppliers.
2. A Member may meet the requirement of paragraph I by according to
services and service suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords to
its own like services and service suppliers.
3. Formally identical or formally different treatment shall be considered to
be less favourable if it modifies the conditions of completion in favour
of services or service suppliers of the Member compared to like
services or service suppliers of any other Member. (Article XVII,
General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal
Instruments, p.22610 emphasis supplied).
It is petitioners position that the foregoing national treatment and parity
provisions of the WTO Agreement place nationals and products of member countries
on the same footing as Filipinos and local products, in contravention of the Filipino
First policy of the Constitution. They allegedly render meaningless the phrase
effectively controlled by Filipinos. The constitutional conflict becomes more manifest
when viewed in the context of the clear duty imposed on the Philippines as a WTO
member to ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed agreements. [20] Petitioners
further argue that these provisions contravene constitutional limitations on the role
exports play in national development and negate the preferential treatment
accorded to Filipino labor, domestic materials and locally produced goods.

On the other hand, respondents through the Solicitor General counter (1) that
such Charter provisions are not self-executing and merely set out general policies;
(2) that these nationalistic portions of the Constitution invoked by petitioners should
not be read in isolation but should be related to other relevant provisions of Art. XII,
particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do
not conflict with the Constitution; and (4) that the WTO Agreement contains
sufficient provisions to protect developing countries like the Philippines from the
harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

By its very title, Article II of the Constitution is a declaration of principles and


state policies. The counterpart of this article in the 1935 Constitution [21] is called the
basic political creed of the nation by Dean Vicente Sinco.[22] These principles in
Article II are not intended to be self-executing principles ready for enforcement
through the courts.[23] They are used by the judiciary as aids or as guides in the
exercise of its power of judicial review, and by the legislature in its enactment of
laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato,[24] the
principles and state policies enumerated in Article II and some sections of Article XII
are not self-executing provisions, the disregard of which can give rise to a cause of
action in the courts.They do not embody judicially enforceable constitutional rights
but guidelines for legislation.
In the same light, we held in Basco vs. Pagcor[25] that broad constitutional
principles need legislative enactments to implement them, thus:
On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12
(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII
and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it
to state also that these are merely statements of principles and policies. As such,
they are basically not self-executing, meaning a law should be passed by Congress
to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing
principles ready for enforcement through the courts. They were rather directives
addressed to the executive and to the legislature. If the executive and the
legislature failed to heed the directives of the article, the available remedy was not
judicial but political. The electorate could express their displeasure with the failure of
the executive and the legislature through the language of the ballot. (Bernas, Vol. II,
p. 2).
The reasons for denying a cause of action to an alleged infringement of broad
constitutional principles are sourced from basic considerations of due process and
the lack of judicial authority to wade into the uncharted ocean of social and
economic policy making. Mr. Justice Florentino P. Feliciano in his concurring opinion
in Oposa vs. Factoran, Jr.,[26] explained these reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more
specific legal right -- a right cast in language of a significantly lower order of
generality than Article II (15) of the Constitution -- that is or may be violated by the

actions, or failures to act, imputed to the public respondent by petitioners so that


the trial court can validly render judgment granting all or part of the relief prayed
for. To my mind, the court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the
general policy principles found in the Constitution and the existence of the Philippine
Environment Code, and that the trial court should have given petitioners an effective
opportunity so to demonstrate, instead of aborting the proceedings on a motion to
dismiss.
It seems to me important that the legal right which is an essential component of a
cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons.One is that unless the legal right
claimed to have been violated or disregarded is given specification in operational
terms, defendants may well be unable to defend themselves intelligently and
effectively; in other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration -- where a specific violation of law or
applicable regulation is not alleged or proved, petitioners can be expected to fall
back on the expanded conception of judicial power in the second paragraph of
Section 1 of Article VIII of the Constitution which reads:
Section 1. x x x
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphases supplied)

services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. x x x
xxxxxxxxx
Sec. 13. The State shall pursue a trade policy that serves the general welfare and
utilizes all forms and arrangements of exchange on the basis of equality and
reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of
national economic development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the
nation for the benefit of the people; and
3. An expanding productivity as the key to raising the quality of life for all
especially the underprivileged.

When substantive standards as general as the right to a balanced and healthy


ecology and the right to health are combined with remedial standards as broad
ranging as a grave abuse of discretion amounting to lack or excess of jurisdiction,
the result will be, it is respectfully submitted, to propel courts into the uncharted
ocean of social and economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to special
technical competence and experience and professional qualification. Where no
specific, operable norms and standards are shown to exist, then the policy making
departments -- the legislative and executive departments -- must be given a real
and effective opportunity to fashion and promulgate those norms and standards,
and to implement them before the courts should intervene.

With these goals in context, the Constitution then ordains the ideals of
economic nationalism (1) by expressing preference in favor of qualified Filipinos in
the grant of rights, privileges and concessions covering the national economy and
patrimony[27] and in the use of Filipino labor, domestic materials and locally-produced
goods; (2) by mandating the State to adopt measures that help make them
competitive;[28] and (3) by requiring the State to develop a self-reliant and
independent national economy effectively controlled by Filipinos.[29] In similar
language, the Constitution takes into account the realities of the outside world as it
requires the pursuit of a trade policy that serves the general welfare and utilizes all
forms and arrangements of exchange on the basis of equality and reciprocity; [30] and
speaks of industries which are competitive in both domestic and foreign markets as
well as of the protection of Filipino enterprises against unfair foreign competition and
trade practices.

Economic Nationalism Should Be Read with Other Constitutional Mandates


to Attain Balanced Development of Economy

It is true that in the recent case of Manila Prince Hotel vs. Government Service
Insurance System, et al.,[31] this Court held that Sec. 10, second par., Art. XII of the
1987 Constitution is a mandatory, positive command which is complete in itself and
which needs no further guidelines or implementing laws or rules for its
enforcement. From its very words the provision does not require any legislation to
put it in operation. It is per se judicially enforceable. However, as the constitutional
provision itself states, it is enforceable only in regard to the grants of rights,
privileges and concessions covering national economy and patrimony and not to
every aspect of trade and commerce. It refers to exceptions rather than the
rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is selfexecuting or not. Rather, the issue is whether, as a rule, there are enough balancing

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying
down general principles relating to the national economy and patrimony, should be
read and understood in relation to the other sections in said article, especially Secs.
1 and 13 thereof which read:
Section 1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and

provisions in the Constitution to allow the Senate to ratify the Philippine concurrence
in the WTO Agreement. And we hold that there are.
All told, while the Constitution indeed mandates a bias in favor of Filipino
goods, services, labor and enterprises, at the same time, it recognizes the need for
business exchange with the rest of the world on the bases of equality and reciprocity
and limits protection of Filipino enterprises only against foreign competition and
trade practices that are unfair.[32] In other words, the Constitution did not intend to
pursue an isolationist policy. It did not shut out foreign investments, goods and
services in the development of the Philippine economy. While the Constitution does
not encourage the unlimited entry of foreign goods, services and investments into
the country, it does not prohibit them either. In fact, it allows an exchange on the
basis of equality and reciprocity, frowning only on foreign competition that is unfair.

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some builtin advantages to protect weak and developing economies, which comprise the vast
majority of its members. Unlike in the UN where major states have permanent seats
and veto powers in the Security Council, in the WTO, decisions are made on the
basis of sovereign equality, with each members vote equal in weight to that of any
other. There is no WTO equivalent of the UN Security Council.
WTO decides by consensus whenever possible, otherwise, decisions of the
Ministerial Conference and the General Council shall be taken by the majority of the
votes cast, except in cases of interpretation of the Agreement or waiver of the
obligation of a member which would require three fourths vote. Amendments would
require two thirds vote in general. Amendments to MFN provisions and the
Amendments provision will require assent of all members. Any member may
withdraw from the Agreement upon the expiration of six months from the date of
notice of withdrawals.[33]
Hence, poor countries can protect their common interests more effectively
through the WTO than through one-on-one negotiations with developed
countries. Within the WTO, developing countries can form powerful blocs to push
their economic agenda more decisively than outside the Organization. This is not
merely a matter of practical alliances but a negotiating strategy rooted in law. Thus,
the basic principles underlying the WTO Agreement recognize the need of
developing countries like the Philippines to share in the growth in international
trade commensurate with the needs of their economic development. These basic
principles are found in the preamble[34] of the WTO Agreement as follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and economic endeavour should
be conducted with a view to raising standards of living, ensuring full employment
and a large and steadily growing volume of real income and effective demand, and
expanding the production of and trade in goods and services, while allowing for the
optimal use of the worlds resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance
the means for doing so in a manner consistent with their respective needs and
concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure
a share in the growth in international trade commensurate with the needs of their
economic development,
Being desirous of contributing to these objectives by entering into reciprocal and
mutually advantageous arrangements directed to the substantial reduction of tariffs
and other barriers to trade and to theelimination of discriminatory treatment in
international trade relations,
Resolved, therefore, to develop an integrated, more viable and durable multilateral
trading system encompassing the General Agreement on Tariffs and Trade, the
results of past trade liberalization efforts, and all of the results of the Uruguay Round
of Multilateral Trade Negotiations,
Determined to preserve the basic principles and to further the objectives underlying
this multilateral trading system, x x x. (underscoring supplied.)

Specific WTO Provisos Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the
foregoing basic principles, the WTO Agreement grants developing countries a more
lenient treatment, giving their domestic industries some protection from the rush of
foreign competition. Thus, with respect to tariffs in general, preferential treatment is
given to developing countries in terms of the amount of tariff reduction and
the period within which the reduction is to be spread out. Specifically, GATT requires
an average tariff reduction rate of 36% for developed countries to be effected within
a period of six (6) years while developing countries -- including the Philippines -are required to effect an average tariff reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT requires developed countries to reduce
domestic support to agricultural products by 20% over six (6) years, as compared
to only 13% for developing countries to be effected within ten (10) years.
In regard to export subsidy for agricultural products, GATT requires developed
countries to reduce their budgetary outlays for export subsidy by 36% and export
volumes receiving export subsidy by 21% within a period of six (6) years. For
developing countries, however, the reduction rate is only two-thirds of that
prescribed for developed countries and a longer period of ten (10) years within
which to effect such reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign
competition and trade practices including anti-dumping measures, countervailing
measures and safeguards against import surges. Where local businesses are
jeopardized by unfair foreign competition, the Philippines can avail of these
measures. There is hardly therefore any basis for the statement that under the WTO,
local industries and enterprises will all be wiped out and that Filipinos will be
deprived of control of the economy. Quite the contrary, the weaker situations of
developing nations like the Philippines have been taken into account; thus, there
would be no basis to say that in joining the WTO, the respondents have gravely
abused their discretion.True, they have made a bold decision to steer the ship of
state into the yet uncharted sea of economic liberalization. But such decision cannot
be set aside on the ground of grave abuse of discretion, simply because we disagree

with it or simply because we believe only in other economic policies. As earlier


stated, the Court in taking jurisdiction of this case will not pass upon the advantages
and disadvantages of trade liberalization as an economic policy. It will only perform
its constitutional duty of determining whether the Senate committed grave abuse of
discretion.

Will WTO/GATT succeed in promoting the Filipinos general welfare because it


will -- as promised by its promoters -- expand the countrys exports and generate
more employment?
Will it bring more prosperity, employment, purchasing power and quality
products at the most reasonable rates to the Filipino public?

Constitution Does Not Rule Out Foreign Competition

The responses to these questions involve judgment calls by our policy makers,
for which they are answerable to our people during appropriate electoral
exercises. Such questions and the answers thereto are not subject to judicial
pronouncements based on grave abuse of discretion.

Furthermore, the constitutional policy of a self-reliant and independent national


economy[35] does not necessarily rule out the entry of foreign investments, goods
and services. It contemplates neither economic seclusion nor mendicancy in the
international community. As explained by Constitutional Commissioner Bernardo
Villegas, sponsor of this constitutional policy:

Constitution Designed to Meet Future Events and Contingencies

Economic self-reliance is a primary objective of a developing country that is keenly


aware of overdependence on external assistance for even its most basic needs. It
does not mean autarky or economic seclusion; rather, it means avoiding
mendicancy in the international community. Independence refers to the freedom
from undue foreign control of the national economy, especially in such strategic
industries as in the development of natural resources and public utilities. [36]
The WTO reliance on most favored nation, national treatment, and trade
without discrimination cannot be struck down as unconstitutional as in fact they are
rules of equality and reciprocity that apply to all WTO members. Aside from
envisioning a trade policy based on equality and reciprocity, [37] the fundamental law
encourages industries that are competitive in both domestic and foreign markets,
thereby demonstrating a clear policy against a sheltered domestic trade
environment, but one in favor of the gradual development of robust industries that
can compete with the best in the foreign markets. Indeed, Filipino managers and
Filipino enterprises have shown capability and tenacity to compete
internationally. And given a free trade environment, Filipino entrepreneurs and
managers in Hongkong have demonstrated the Filipino capacity to grow and to
prosper against the best offered under a policy of laissez faire.

Constitution Favors Consumers, Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any
business or enterprise, nor does it contain any specific pronouncement that Filipino
companies
should
be
pampered
with
a
total
proscription of foreign competition. On the other hand, respondents claim
that
WTO/GATT aims to make available to the Filipino consumer the best goods and
services obtainable anywhere in the world at the most reasonable
prices. Consequently, the question boils down to whether WTO/GATT will favor the
general welfare of the public at large.
Will adherence to the WTO treaty bring this ideal (of favoring the general
welfare) to reality?

No doubt, the WTO Agreement was not yet in existence when the Constitution
was drafted and ratified in 1987. That does not mean however that the Charter is
necessarily flawed in the sense that its framers might not have anticipated the
advent of a borderless world of business. By the same token, the United Nations was
not yet in existence when the 1935 Constitution became effective. Did that
necessarily mean that the then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the Philippines signed the UN
Charter, thereby effectively surrendering part of its control over its foreign relations
to the decisions of various UN organs like the Security Council?
It is not difficult to answer this question. Constitutions are designed to meet
not only the vagaries of contemporary events. They should be interpreted to cover
even future and unknown circumstances. It is to the credit of its drafters that a
Constitution can withstand the assaults of bigots and infidels but at the same time
bend with the refreshing winds of change necessitated by unfolding events. As one
eminent political law writer and respected jurist [38] explains:
The Constitution must be quintessential rather than superficial, the root and not the
blossom, the base and framework only of the edifice that is yet to rise. It is but the
core of the dream that must take shape, not in a twinkling by mandate of our
delegates, but slowly in the crucible of Filipino minds and hearts, where it will in time
develop its sinews and gradually gather its strength and finally achieve its
substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown
from the brow of the Constitutional Convention, nor can it conjure by mere fiat an
instant Utopia. It must grow with the society it seeks to re-structure and march
apace with the progress of the race, drawing from the vicissitudes of history the
dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing,
living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that (e)ach Member shall ensure the conformity
of its laws, regulations and administrative procedures with its obligations as
provided in the annexed Agreements.[39] Petitioners maintain that this undertaking
unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative
power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in
the Congress of the Philippines. It is an assault on the sovereign powers of the

Philippines because this means that Congress could not pass legislation that will be
good for our national interest and general welfare if such legislation will not conform
with the WTO Agreement, which not only relates to the trade in goods x x x but also
to the flow of investments and money x x x as well as to a whole slew of agreements
on socio-cultural matters x x x.[40]
More specifically, petitioners claim that said WTO proviso derogates from the
power to tax, which is lodged in the Congress. [41] And while the Constitution allows
Congress to authorize the President to fix tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts, such authority is subject
to specified limits and x x x such limitations and restrictions as Congress may
provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs Code.

Sovereignty Limited by International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners
stressed their arguments on this issue. However, while sovereignty has traditionally
been deemed absolute and all-encompassing on the domestic level, it is however
subject to restrictions and limitations voluntarily agreed to by the Philippines,
expressly or impliedly, as a member of the family of nations. Unquestionably, the
Constitution did not envision a hermit-type isolation of the country from the rest of
the world. In its Declaration of Principles and State Policies, the Constitution adopts
the generally accepted principles of international law as part of the law of the land,
and adheres to the policy of peace, equality, justice, freedom, cooperation and
amity, with all nations."[43] By the doctrine of incorporation, the country is bound by
generally accepted principles of international law, which are considered to be
automatically part of our own laws.[44] One of the oldest and most fundamental rules
in international law is pacta sunt servanda -- international agreements must be
performed in good faith. A treaty engagement is not a mere moral obligation but
creates a legally binding obligation on the parties x x x. A state which has
contracted valid international obligations is bound to make in its legislations such
modifications as may be necessary to ensure the fulfillment of the obligations
undertaken.[45]
By their inherent nature, treaties really limit or restrict the absoluteness of
sovereignty. By their voluntary act, nations may surrender some aspects of their
state power in exchange for greater benefits granted by or derived from a
convention or pact. After all, states, like individuals, live with coequals, and in
pursuit of mutually covenanted objectives and benefits, they also commonly agree
to limit the exercise of their otherwise absolute rights. Thus, treaties have been used
to record agreements between States concerning such widely diverse matters as, for
example, the lease of naval bases, the sale or cession of territory, the termination of
war, the regulation of conduct of hostilities, the formation of alliances, the regulation
of commercial relations, the settling of claims, the laying down of rules governing
conduct in peace and the establishment of international organizations. [46] The
sovereignty of a state therefore cannot in fact and in reality be considered
absolute. Certain restrictions enter into the picture: (1) limitations imposed by the
very nature of membership in the family of nations and (2) limitations imposed by
treaty stipulations. As aptly put by John F. Kennedy, Today, no nation can build its
destiny alone. The age of self-sufficient nationalism is over. The age of
interdependence is here.[47]

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the concept of
sovereignty as auto-limitation.47-A Under Article 2 of the UN Charter, (a)ll members
shall give the United Nations every assistance in any action it takes in accordance
with the present Charter, and shall refrain from giving assistance to any state
against which the United Nations is taking preventive or enforcement action. Such
assistance includes payment of its corresponding share not merely in administrative
expenses but also in expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961, the International Court of
Justice held that money used by the United Nations Emergency Force in the Middle
East and in the Congo were expenses of the United Nations under Article 17,
paragraph 2, of the UN Charter. Hence, all its members must bear their
corresponding share in such expenses. In this sense, the Philippine Congress is
restricted in its power to appropriate. It is compelled to appropriate funds whether it
agrees with such peace-keeping expenses or not. So too, under Article 105 of the
said Charter, the UN and its representatives enjoy diplomatic privileges and
immunities, thereby limiting again the exercise of sovereignty of members within
their own territory. Another example: although sovereign equality and domestic
jurisdiction of all members are set forth as underlying principles in the UN Charter,
such provisos are however subject to enforcement measures decided by the
Security Council for the maintenance of international peace and security under
Chapter VII of the Charter. A final example: under Article 103, (i)n the event of a
conflict between the obligations of the Members of the United Nations under the
present Charter and their obligations under any other international agreement, their
obligation under the present charter shall prevail, thus unquestionably denying the
Philippines -- as a member -- the sovereign power to make a choice as to which of
conflicting obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered into many other
international pacts -- both bilateral and multilateral -- that involve limitations on
Philippine sovereignty. These are enumerated by the Solicitor General in his
Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes on income,
where the Philippines agreed, among others, to exempt from tax, income
received in the Philippines by, among others, the Federal Reserve Bank of
the United States, the Export/Import Bank of the United States, the
Overseas Private Investment Corporation of the United States. Likewise,
in said convention, wages, salaries and similar remunerations paid by the
United States to its citizens for labor and personal services performed by
them as employees or officials of the United States are exempt from
income tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among others, for the
avoidance of double taxation with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of
double taxation.
(d) Bilateral convention with the French Republic for the avoidance of double
taxation.

(e) Bilateral air transport agreement with Korea where the Philippines agreed to
exempt from all customs duties, inspection fees and other duties or taxes
aircrafts of South Korea and the regular equipment, spare parts and
supplies arriving with said aircrafts.
(f) Bilateral air service agreement with Japan, where the Philippines agreed to
exempt from customs duties, excise taxes, inspection fees and other
similar duties, taxes or charges fuel, lubricating oils, spare parts, regular
equipment, stores on board Japanese aircrafts while on Philippine soil.
(g) Bilateral air service agreement with Belgium where the Philippines granted
Belgian air carriers the same privileges as those granted to Japanese and
Korean air carriers under separate air service agreements.
(h) Bilateral notes with Israel for the abolition of transit and visitor visas where
the Philippines exempted Israeli nationals from the requirement of
obtaining transit or visitor visas for a sojourn in the Philippines not
exceeding 59 days.
(I) Bilateral agreement with France exempting French nationals from the
requirement of obtaining transit and visitor visa for a sojourn not
exceeding 59 days.
(j) Multilateral Convention on Special Missions, where the Philippines agreed
that premises of Special Missions in the Philippines are inviolable and its
agents can not enter said premises without consent of the Head of Mission
concerned. Special Missions are also exempted from customs duties, taxes
and related charges.
(k) Multilateral Convention on the Law of Treaties. In this convention, the
Philippines agreed to be governed by the Vienna Convention on the Law of
Treaties.
(l) Declaration of the President of the Philippines accepting compulsory
jurisdiction of the International Court of Justice. The International Court of
Justice has jurisdiction in all legal disputes concerning the interpretation of
a treaty, any question of international law, the existence of any fact which,
if established, would constitute a breach of international obligation.
In the foregoing treaties, the Philippines has effectively agreed to limit the
exercise of its sovereign powers of taxation, eminent domain and police power. The
underlying consideration in this partial surrender of sovereignty is the reciprocal
commitment of the other contracting states in granting the same privilege and
immunities to the Philippines, its officials and its citizens. The same reciprocity
characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the
environment, the law of the sea, or trade, constrain domestic political sovereignty
through the assumption of external obligations. But unless anarchy in international
relations is preferred as an alternative, in most cases we accept that the benefits of
the reciprocal obligations involved outweigh the costs associated with any loss of
political sovereignty. (T)rade treaties that structure relations by reference to durable,
well-defined substantive norms and objective dispute resolution procedures reduce

the risks of larger countries exploiting raw economic power to bully smaller
countries, by subjecting power relations to some form of legal ordering. In addition,
smaller countries typically stand to gain disproportionately from trade
liberalization. This is due to the simple fact that liberalization will provide access to a
larger set of potential new trading relationship than in case of the larger country
gaining enhanced success to the smaller countrys market.[48]
The point is that, as shown by the foregoing treaties, a portion of sovereignty
may be waived without violating the Constitution, based on the rationale that the
Philippines adopts the generally accepted principles of international law as part of
the law of the land and adheres to the policy of x x x cooperation and amity with all
nations.

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and


Basic Principles of the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS)[49]intrudes on the power of the Supreme Court to promulgate rules
concerning pleading, practice and procedures.[50]
To understand the scope and meaning of Article 34, TRIPS, [51] it will be fruitful
to restate its full text as follows:
Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the infringement of the
rights of the owner referred to in paragraph 1(b) of Article 28, if the subject
matter of a patent is a process for obtaining a product, the judicial authorities
shall have the authority to order the defendant to prove that the process to
obtain an identical product is different from the patented process. Therefore,
Members shall provide, in at least one of the following circumstances, that any
identical product when produced without the consent of the patent owner
shall, in the absence of proof to the contrary, be deemed to have been
obtained by the patented process:
(a) if the product obtained by the patented process is new;
(b) if there is a substantial likelihood that the identical product was made
by the process and the owner of the patent has been unable through
reasonable efforts to determine the process actually used.
2. Any Member shall be free to provide that the burden of proof indicated in
paragraph 1 shall be on the alleged infringer only if the condition referred to in
subparagraph (a) is fulfilled or only if the condition referred to in subparagraph
(b) is fulfilled.

3. In the adduction of proof to the contrary, the legitimate interests of


defendants in protecting their manufacturing and business secrets shall be
taken into account.

Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other
Documents Contained in the Final Act

From the above, a WTO Member is required to provide a rule of disputable


(note the words in the absence of proof to the contrary) presumption that a product
shown to be identical to one produced with the use of a patented process shall be
deemed to have been obtained by the (illegal) use of the said patented process, (1)
where such product obtained by the patented product is new, or (2) where there is
substantial likelihood that the identical product was made with the use of the said
patented process but the owner of the patent could not determine the exact process
used in obtaining such identical product. Hence, the burden of proof contemplated
by Article 34 should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly understood, actually
refers to the burden of evidence (burden of going forward) placed on the producer of
the identical (or fake) product to show that his product was produced without the
use of the patented process.

Petitioners allege that the Senate concurrence in the WTO Agreement and its
annexes -- but not in the other documents referred to in the Final Act, namely the
Ministerial Declaration and Decisions and the Understanding on Commitments in
Financial Services -- is defective and insufficient and thus constitutes abuse of
discretion. They submit that such concurrence in the WTO Agreement alone is
flawed because it is in effect a rejection of the Final Act, which in turn was the
document signed by Secretary Navarro, in representation of the Republic upon
authority of the President. They contend that the second letter of the President to
the Senate[53] which enumerated what constitutes the Final Act should have been the
subject of concurrence of the Senate.

The foregoing notwithstanding, the patent owner still has the burden of proof
since, regardless of the presumption provided under paragraph 1 of Article 34, such
owner still has to introduce evidence of the existence of the alleged identical
product, the fact that it is identical to the genuine one produced by the patented
process and the fact of newness of the genuine product or the fact of substantial
likelihood that the identical product was made by the patented process.
The foregoing should really present no problem in changing the rules of
evidence as the present law on the subject, Republic Act No. 165, as amended,
otherwise known as the Patent Law, provides a similar presumption in cases of
infringement of patented design or utility model, thus:
SEC. 60. Infringement. - Infringement of a design patent or of a patent for utility
model shall consist in unauthorized copying of the patented design or utility model
for the purpose of trade or industry in the article or product and in the making, using
or selling of the article or product copying the patented design or utility
model. Identity or substantial identity with the patented design or utility model shall
constitute evidence of copying. (underscoring supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a
disputable presumption applies only if (1) the product obtained by the patented
process is NEW or (2) there is a substantial likelihood that the identical product was
made by the process and the process owner has not been able through reasonable
effort to determine the process used. Where either of these two provisos does not
obtain, members shall be free to determine the appropriate method of implementing
the provisions of TRIPS within their own internal systems and processes.
By and large, the arguments adduced in connection with our disposition of the
third issue -- derogation of legislative power - will apply to this fourth issue
also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if
any actually exists. Besides, Article 34 does not contain an unreasonable burden,
consistent as it is with due process and the concept of adversarial dispute
settlement inherent in our judicial system.
So too, since the Philippine is a signatory to most international conventions on
patents, trademarks and copyrights, the adjustment in legislation and rules of
procedure will not be substantial.[52]

A final act, sometimes called protocol de clture, is an instrument which


records the winding up of the proceedings of a diplomatic conference and usually
includes a reproduction of the texts of treaties, conventions, recommendations and
other acts agreed upon and signed by the plenipotentiaries attending the
conference.[54] It is not the treaty itself. It is rather a summary of the proceedings of
a protracted conference which may have taken place over several years. The text of
the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations is contained in just one page [55] in Vol. I of the 36volume Uruguay Round of Multilateral Trade Negotiations. By signing said Final Act,
Secretary Navarro as representative of the Republic of the Philippines undertook:
"(a) to submit, as appropriate, the WTO Agreement for the consideration of
their respective competent authorities with a view to seeking approval of
the Agreement in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions."
The assailed Senate Resolution No. 97 expressed concurrence in exactly what
the Final Act required from its signatories, namely, concurrence of the Senate in the
WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need
for ratification. They were approved by the ministers by virtue of Article XXV: 1 of
GATT which provides that representatives of the members can meet to give effect to
those provisions of this Agreement which invoke joint action, and generally with a
view to facilitating the operation and furthering the objectives of this Agreement. [56]
The Understanding on Commitments in Financial Services also approved in
Marrakesh does not apply to the Philippines. It applies only to those 27 Members
which have indicated in their respective schedules of commitments on standstill,
elimination of monopoly, expansion of operation of existing financial service
suppliers, temporary entry of personnel, free transfer and processing of information,
and national treatment with respect to access to payment, clearing systems and
refinancing available in the normal course of business.[57]
On the other hand, the WTO Agreement itself expresses what multilateral
agreements are deemed included as its integral parts, [58] as follows:
Article II

Scope of the WTO


1. The WTO shall provide the common institutional framework for the conduct
of trade relations among its Members in matters to the agreements and
associated legal instruments included in the Annexes to this Agreement.
2. The Agreements and associated legal instruments included in Annexes 1, 2,
and 3 (hereinafter referred to as Multilateral Agreements) are integral parts of
this Agreement, binding on all Members.
3. The Agreements and associated legal instruments included in Annex 4
(hereinafter referred to as Plurilateral Trade Agreements) are also part of this
Agreement for those Members that have accepted them, and are binding on
those Members. The Plurilateral Trade Agreements do not create either
obligation or rights for Members that have not accepted them.
4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A
(hereinafter referred to as GATT 1994) is legally distinct from the General
Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final
Act adopted at the conclusion of the Second Session of the Preparatory
Committee of the United Nations Conference on Trade and Employment, as
subsequently rectified, amended or modified (hereinafter referred to as GATT
1947).
It should be added that the Senate was well-aware of what it was concurring in
as shown by the members deliberation on August 25, 1994. After reading the letter
of President Ramos dated August 11, 1994, [59] the senators of the Republic minutely
dissected what the Senate was concurring in, as follows: [60]
THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in
the first day hearing of this Committee yesterday. Was the observation made by
Senator Taada that what was submitted to the Senate was not the agreement on
establishing the World Trade Organization by the final act of the Uruguay Round
which is not the same as the agreement establishing the World Trade
Organization? And on that basis, Senator Tolentino raised a point of order which,
however, he agreed to withdraw upon understanding that his suggestion for an
alternative solution at that time was acceptable. That suggestion was to treat the
proceedings of the Committee as being in the nature of briefings for Senators until
the question of the submission could be clarified.
And so, Secretary Romulo, in effect, is the President submitting a new... is he making
a new submission which improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no
misunderstanding, it was his intention to clarify all matters by giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator Taada and later on Senator Tolentino since
they were the ones that raised this question yesterday?
Senator Taada, please.

SEN. TAADA: Thank you, Mr. Chairman.


Based on what Secretary Romulo has read, it would now clearly appear that what is
being submitted to the Senate for ratification is not the Final Act of the Uruguay
Round, but rather the Agreement on the World Trade Organization as well as the
Ministerial Declarations and Decisions, and the Understanding and Commitments in
Financial Services.
I am now satisfied with the wording of the new submission of President Ramos.
SEN. TAADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator
Tolentino? And after him Senator Neptali Gonzales and Senator Lina.
SEN TOLENTINO, Mr. Chairman, I have not seen the new submission actually
transmitted to us but I saw the draft of his earlier, and I think it now complies with
the provisions of the Constitution, and with the Final Act itself. The Constitution does
not require us to ratify the Final Act. It requires us to ratify the Agreement which is
now being submitted. The Final Act itself specifies what is going to be submitted to
with the governments of the participants.
In paragraph 2 of the Final Act, we read and I quote:
By signing the present Final Act, the representatives agree: (a) to submit as
appropriate the WTO Agreement for the consideration of the respective competent
authorities with a view to seeking approval of the Agreement in accordance with
their procedures.
In other words, it is not the Final Act that was agreed to be submitted to the
governments for ratification or acceptance as whatever their constitutional
procedures may provide but it is the World Trade Organization Agreement. And if
that is the one that is being submitted now, I think it satisfies both the Constitution
and the Final Act itself.
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of
record. And they had been adequately reflected in the journal of yesterdays session
and I dont see any need for repeating the same.
Now, I would consider the new submission as an act ex abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make
any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales
out of the abundance of question. Then the new submission is, I believe, stating the
obvious and therefore I have no further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the WTO


Agreement, petitioners are invoking this Courts constitutionally imposed duty to
determine whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the Senate in giving its concurrence
therein via Senate Resolution No. 97. Procedurally, a writ ofcertiorari grounded on
grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of
Court when it is amply shown that petitioners have no other plain, speedy and
adequate remedy in the ordinary course of law.
By grave abuse of discretion is meant such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction. [61] Mere abuse of discretion is not
enough. It must begrave abuse of discretion as when the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be
so patent and so gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law. [62] Failure
on the part of the petitioner to show grave abuse of discretion will result in the
dismissal of the petition.[63]
In rendering this Decision, this Court never forgets that the Senate, whose act
is under review, is one of two sovereign houses of Congress and is thus entitled to
great respect in its actions. It is itself a constitutional body independent and
coordinate, and thus its actions are presumed regular and done in good faith. Unless
convincing proof and persuasive arguments are presented to overthrow such
presumptions, this Court will resolve every doubt in its favor. Using the foregoing
well-accepted definition of grave abuse of discretion and the presumption of
regularity in the Senates processes, this Court cannot find any cogent reason to
impute grave abuse of discretion to the Senates exercise of its power of concurrence
in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. [64]
It is true, as alleged by petitioners, that broad constitutional principles require
the State to develop an independent national economy effectively controlled by
Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials
and locally produced goods. But it is equally true that such principles -- while serving
as judicial and legislative guides -- are not in themselves sources of causes of
action. Moreover, there are other equally fundamental constitutional principles relied
upon by the Senate which mandate the pursuit of a trade policy that serves the
general welfare and utilizes all forms and arrangements of exchange on the basis of
equality and reciprocity and the promotion of industries which are competitive in
both domestic and foreign markets, thereby justifying its acceptance of said
treaty. So too, the alleged impairment of sovereignty in the exercise of legislative
and judicial powers is balanced by the adoption of the generally accepted principles
of international law as part of the law of the land and the adherence of the
Constitution to the policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly
gave its consent to the WTO Agreement thereby making it a part of the law of the
land is a legitimate exercise of its sovereign duty and power. We find no patent and
gross arbitrariness or despotism by reason of passion or personal hostility in such
exercise. It is not impossible to surmise that this Court, or at least some of its

members, may even agree with petitioners that it is more advantageous to the
national interest to strike down Senate Resolution No. 97. But that isnot a legal
reason to attribute grave abuse of discretion to the Senate and to nullify its
decision. To do so would constitute grave abuse in the exercise of our own judicial
power and duty.Ineludably, what the Senate did was a valid exercise of its
authority. As to whether such exercise was wise, beneficial or viable is outside the
realm of judicial inquiry and review. That is a matter between the elected policy
makers and the people. As to whether the nation should join the worldwide march
toward trade liberalization and economic globalization is a matter that our people
should determine in electing their policy makers. After all, the WTO Agreement
allows withdrawal of membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends,
predicts an Asian Renaissance[65] where the East will become the dominant region of
the world economically, politically and culturally in the next century. He refers to the
free market espoused by WTO as the catalyst in this coming Asian
ascendancy. There are at present about 31 countries including China, Russia and
Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections
against possible limitations on national sovereignty, the WTO remains as the only
viable structure for multilateral trading and the veritable forum for the development
of international trade law. The alternative to WTO is isolation, stagnation, if not
economic self-destruction. Duly enriched with original membership, keenly aware of
the advantages and disadvantages of globalization with its on-line experience, and
endowed with a vision of the future, the Philippines now straddles the crossroads of
an international strategy for economic prosperity and stability in the new
millennium. Let the people, through their duly authorized elected officers, make
their free choice.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS


INDUSTRIAL
DEVELOPMENT,
INC.,petitioners,
vs.
COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and STANDARD
PHILIPS CORPORATION,respondents.
Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990,
in CA-GR Sp. No. 20067, upholding the Order of the Securities and Exchange
Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners'
prayer for the cancellation or removal of the word "PHILIPS" from private
respondent's corporate name.
Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the
laws of the Netherlands, although not engaged in business here, is the registered
owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under Certificates of
Registration Nos. R-1641 and R-1674, respectively issued by the Philippine Patents
Office (presently known as the Bureau of Patents, Trademarks and Technology
Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips Electrical, for brevity) and
Philips Industrial Developments, Inc. (Philips Industrial, for short), authorized users of
the trademarks PHILIPS and PHILIPS SHIELD EMBLEM, were incorporated on 29
August 1956 and 25 May 1956, respectively. All petitioner corporations belong to the
PHILIPS Group of Companies.
Respondent Standard Philips Corporation (Standard Philips), on the other hand,
was issued a Certificate of Registration by respondent Commission on 19 May 1982.
On 24 September 1984, Petitioners filed a letter complaint with the Securities
& Exchange Commission (SEC) asking for the cancellation of the word "PHILIPS" from
Private Respondent's corporate name in view of the prior registration with the
Bureau of Patents of the trademark "PHILIPS" and the logo "PHILIPS SHIELD
EMBLEM" in the name of Petitioner, PEBV, and the previous registration of Petitioners
Philips Electrical and Philips Industrial with the SEC.
As a result of Private Respondent's refusal to amend its Articles of
Incorporation, Petitioners filed with the SEC, on 6 February 1985, a Petition (SEC
Case No. 2743) praying for the issuance of a Writ of Preliminary Injunction, alleging,
among others, that Private Respondent's use of the word PHILIPS amounts to an
infringement and clear violation of Petitioners' exclusive right to use the same
considering that both parties engage in the same business.
In its Answer, dated 7 March 1985, Private Respondent countered that
Petitioner PEBV has no legal capacity to sue; that its use of its corporate name is not
at all similar to Petitioners' trademark PHILIPS when considered in its entirety; and
that its products consisting of chain rollers, belts, bearings and cutting saw are
grossly different from Petitioners' electrical products.
After conducting hearings with respect to the prayer for Injunction; the SEC
Hearing Officer, on 27 September 1985, ruled against the issuance of such Writ.
On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of
merit. In so ruling, the latter declared that inasmuch as the SEC found no sufficient
ground for the granting of injunctive relief on the basis of the testimonial and
documentary evidence presented, it cannot order the removal or cancellation of the
word "PHILIPS" from Private Respondent's corporate name on the basis of the same
evidence adopted in toto during trial on the merits. Besides, Section 18 of the
Corporation Code (infra) is applicable only when the corporate names in question
are identical. Here, there is no confusing similarity between Petitioners' and Private
Respondent's corporate names as those of the Petitioners contain at least two words

different from that of the Respondent. Petitioners' Motion for Reconsideration was
likewise denied on 17 June 1987.
On appeal, the SEC en banc affirmed the dismissal declaring that the corporate
names of Petitioners and Private Respondent hardly breed confusion inasmuch as
each contains at least two different words and, therefore, rules out any possibility of
confusing one for the other.
On 30 January 1990, Petitioners sought an extension of time to file a Petition
for Review on Certiorari before this Court, which Petition was later referred to the
Court of Appeals in a Resolution dated 12 February 1990.
In deciding to dismiss the petition on 31 July 1990, the Court of
Appeals 1 swept aside Petitioners' claim that following the ruling in Converse Rubber
Corporation v. Universal Converse Rubber Products, Inc., et al, (G. R. No. L-27906,
January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be used as part of Private
Respondent's corporate name as the same constitutes a dominant part of
Petitioners' corporate names. In so holding, the Appellate Court observed that
the Converse case is not four-square with the present case inasmuch as the
contending parties in Converse are engaged in a similar business, that is, the
manufacture of rubber shoes. Upholding the SEC, the Appellate Court concluded that
"private respondents' products consisting of chain rollers, belts, bearings and cutting
saw are unrelated and non-competing with petitioners' products i.e. electrical lamps
such that consumers would not in any probability mistake one as the source or origin
of the product of the other."
The Appellate Court denied Petitioners' Motion for Reconsideration on 20
November 1990, hence, this Petition which was given due course on 22 April 1991,
after which the parties were required to submit their memoranda, the latest of which
was received on 2 July 1991. In December 1991, the SEC was also required to
elevate its records for the perusal of this Court, the same not having been
apparently before respondent Court of Appeals.
We find basis for petitioners' plea.
As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927),
the Court declared that a corporation's right to use its corporate and trade name is a
property right, a right in rem, which it may assert and protect against the world in
the same manner as it may protect its tangible property, real or personal, against
trespass or conversion. It is regarded, to a certain extent, as a property right and
one which cannot be impaired or defeated by subsequent appropriation by another
corporation in the same field (Red Line Transportation Co. vs. Rural Transit Co.,
September 8, 1934, 20 Phil 549).
A name is peculiarly important as necessary to the very existence of a
corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S
Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs.
Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its name is one of its attributes,
an element of its existence, and essential to its identity (6 Fletcher [Perm Ed], pp. 34). The general rule as to corporations is that each corporation must have a name
by which it is to sue and be sued and do all legal acts. The name of a corporation in
this respect designates the corporation in the same manner as the name of an
individual designates the person (Cincinnati Cooperage Co. vs. Bate. 96 Ky 356, 26
SW 538; Newport Mechanics Mfg. Co. vs. Starbird. 10 NH 123); and the right to use
its corporate name is as much a part of the corporate franchise as any other
privilege granted (Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P
1100, 66 ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A
36).

A corporation acquires its name by choice and need not select a name identical
with or similar to one already appropriated by a senior corporation while an
individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v.
Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a
corporate name in violation of the rights of others than an individual can use his
name legally acquired so as to mislead the public and injure another (Armington vs.
Palmer, 21 RI 109. 42 A 308).
Our own Corporation Code, in its Section 18, expressly provides that:
No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to
that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing law.Where a change in a
corporate name is approved, the commission shall issue an amended certificate of
incorporation under the amended name. (Emphasis supplied)
The statutory prohibition cannot be any clearer. To come within its scope, two
requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of such
corporate name; and
(2) the proposed name is either:
(a) identical; or
(b) deceptively or confusingly similar
to that of any existing corporation or to any other name already protected by
law; or
(c) patently deceptive, confusing or contrary to existing law.
The right to the exclusive use of a corporate name with freedom from
infringement by similarity is determined by priority of adoption (1 Thompson, p.
80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco Oyster
House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt with
respect to Petitioners' prior adoption of' the name ''PHILIPS" as part of its corporate
name. Petitioners Philips Electrical and Philips Industrial were incorporated on 29
August 1956 and 25 May 1956, respectively, while Respondent Standard Philips was
issued a Certificate of Registration on 12 April 1982, twenty-six (26) years later
(Rollo, p. 16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical
lamps of all types and their accessories since 30 September 1922, as evidenced by
Certificate of Registration No. 1651.
The second requisite no less exists in this case. In determining the existence of
confusing similarity in corporate names, the test is whether the similarity is such as
to mislead a person, using ordinary care and discrimination. In so doing, the Court
must look to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v.
Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners and
Private Respondent are not identical, a reading of Petitioner's corporate names, to
wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL
DEVELOPMENT, INC., inevitably leads one to conclude that "PHILIPS" is, indeed, the
dominant word in that all the companies affiliated or associated with the principal
corporation, PEBV, are known in the Philippines and abroad as the PHILIPS Group of
Companies.
Respondents maintain, however, that Petitioners did not present an iota of
proof of actual confusion or deception of the public much less a single purchaser of

their product who has been deceived or confused or showed any likelihood of
confusion. It is settled, however, that proof of actual confusion need not be shown. It
suffices that confusion is probably or likely to occur (6 Fletcher [Perm Ed], pp. 107108, enumerating a long line of cases).
It may be that Private Respondent's products also consist of chain rollers, belts,
bearing and the like, while petitioners deal principally with electrical products. It is
significant to note, however, that even the Director of Patents had denied Private
Respondent's application for registration of the trademarks "Standard Philips &
Device" for chain, rollers, belts, bearings and cutting saw. That office held that PEBV,
"had shipped to its subsidiaries in the Philippines equipment, machines and their
parts which fall under international class where "chains, rollers, belts, bearings and
cutting saw," the goods in connection with which Respondent is seeking to register
'STANDARD PHILIPS' . . . also belong" ( Inter Partes Case No. 2010, June 17, 1988,
SEC Rollo).
Furthermore, the records show that among Private Respondent's primary
purposes in its Articles of Incorporation (Annex D, Petition p. 37, Rollo) are the
following:
To buy, sell, barter, trade, manufacture, import, export, or otherwise acquire,
dispose of, and deal in and deal with any kind of goods, wares, and merchandise
such as but not limited to plastics, carbon products, office stationery and supplies,
hardware parts, electrical wiring devices, electrical component parts, and/or
complement of industrial, agricultural or commercial machineries, constructive
supplies, electrical supplies and other merchandise which are or may become
articles of commerce except food, drugs and cosmetics and to carry on such
business as manufacturer, distributor, dealer, indentor, factor, manufacturer's
representative capacity for domestic or foreign companies. (emphasis ours)
For its part, Philips Electrical also includes, among its primary purposes, the
following:
To develop manufacture and deal in electrical products, including electronic,
mechanical and other similar products . . . (p. 30, Record of SEC Case No. 2743)
Given Private Respondent's aforesaid underlined primary purpose, nothing
could prevent it from dealing in the same line of business of electrical devices,
products or supplies which fall under its primary purposes. Besides, there is showing
that Private Respondent not only manufactured and sold ballasts for fluorescent
lamps with their corporate name printed thereon but also advertised the same as,
among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42, June
14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners, [p]rivate
respondent's choice of "PHILIPS" as part of its corporate name [STANDARD PHILIPS
CORPORATION] . . . tends to show said respondent's intention to ride on the
popularity and established goodwill of said petitioner's business throughout the
world" (Rollo, p. 137). The subsequent appropriator of the name or one confusingly
similar thereto usually seeks an unfair advantage, a free ride of another's goodwill
(American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App
DC 269, 191 F 2d 488).
In allowing Private Respondent the continued use of its corporate name, the
SEC maintains that the corporate names of Petitioners PHILIPS ELECTRICAL LAMPS.
INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least two words
different from that of the corporate name of respondent STANDARD PHILIPS
CORPORATION, which words will readily identify Private Respondent from Petitioners
and vice-versa.

True, under the Guidelines in the Approval of Corporate and Partnership Names
formulated by the SEC, the proposed name "should not be similar to one already
used by another corporation or partnership. If the proposed name contains a word
already used as part of the firm name or style of a registered company; the
proposed name must contain two other words different from the company already
registered" (Emphasis ours). It is then pointed out that Petitioners Philips Electrical
and Philips Industrial have two words different from that of Private Respondent's
name.
What is lost sight of, however, is that PHILIPS is a trademark or trade name
which was registered as far back as 1922. Petitioners, therefore, have the exclusive
right to its use which must be free from any infringement by similarity. A corporation
has an exclusive right to the use of its name, which may be protected by injunction
upon a principle similar to that upon which persons are protected in the use of
trademarks and tradenames (18 C.J.S. 574). Such principle proceeds upon 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 (6 Fletcher [Perm Ed], pp. 39-40, citingBorden
Ice Cream Co. v. Borden's Condensed Milk Co., 210 F 510). Notably, too, Private
Respondent's name actually contains only a single word, that is, "STANDARD",
different from that of Petitioners inasmuch as the inclusion of the term "Corporation"
or "Corp." merely serves the Purpose of distinguishing the corporation from
partnerships and other business organizations.
The fact that there are other companies engaged in other lines of business
using the word "PHILIPS" as part of their corporate names is no defense and does
not warrant the use by Private Respondent of such word which constitutes an
essential feature of Petitioners' corporate name previously adopted and registered
and-having acquired the status of a well-known mark in the Philippines and
internationally as well (Bureau of Patents Decision No. 88-35 [TM], June 17, 1988,
SEC Records).
In support of its application for the registration of its Articles of Incorporation
with the SEC, Private Respondent had submitted an undertaking "manifesting its
willingness to change its corporate name in the event another person, firm or entity
has acquired a prior right to the use of the said firm name or one deceptively or
confusingly similar to it." Private respondent must now be held to its undertaking.
As a general rule, parties organizing a corporation must choose a name at their
peril; and the use of a name similar to one adopted by another corporation, whether
a business or a nonbusiness or non-profit organization if misleading and likely to
injure it in the exercise in its corporate functions, regardless of intent, may be
prevented by the corporation having the prior right, by a suit for injunction against
the new corporation to prevent the use of the name (American Gold Star Mothers,
Inc. v. National Gold Star Mothers, Inc., 89 App DC 269, 191 F 2d 488, 27 ALR 2d
948).
WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its
Resolution dated 20 November 1990, are SET ASIDE and a new one entered
ENJOINING private respondent from using "PHILIPS" as a feature of its corporate
name, and ORDERING the Securities and Exchange Commission to amend private
respondent's Articles of Incorporation by deleting the word PHILIPS from the
corporate name of private respondent.
No costs.
SO ORDERED.

LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS,


LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN,
INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM,
CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES,
LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM,
INC., respondents.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED
NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING
CORPORATION, PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED
BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM". The
Articles of Incorporation of a corporation must, among other things, set out the
name of the corporation. Section 18 of the Corporation Code establishes a restrictive

rule insofar as corporate names are concerned: "Section 18. Corporate name. No
corporate name may be allowed by the Securities an Exchange Commission if the
proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of
incorporation under the amended name." The policy underlying the prohibition in
Section 18 against the registration of a corporate name which is "identical or
deceptively or confusingly similar" to that of any existing corporation or which is
"patently deceptive" or "patently confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would have occasion to deal with the
entity concerned, the evasion of legal obligations and duties, and the reduction of
difficulties of administration and supervision over corporations. We do not consider
that the corporate names of private respondent institutions are "identical with, or
deceptively or confusingly similar" to that of the petitioner institution. True enough,
the corporate names of private respondent entities all carry the word "Lyceum" but
confusion and deception are effectively precluded by the appending of geographic
names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri"
can be mistaken by the general public for the Lyceum of the Philippines, or that the
"Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT
ATTENDED WITH EXCLUSIVITY. It is claimed, however, by petitioner that the word
"Lyceum" has acquired a secondary meaning in relation to petitioner with the result
that word, although originally a generic, has become appropriable by petitioner to
the exclusion of other institutions like private respondents herein. The doctrine of
secondary meaning originated in the field of trademark law. Its application has,
however, been extended to corporate names sine the right to use a corporate name
to the exclusion of others is based upon the same principle which underlies the right
to use a particular trademark or tradename. In Philippine Nut Industry, Inc. v.
Standard Brands, Inc., the doctrine of secondary meaning was elaborated in the
following terms: " . . . a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market, because geographically or
otherwise descriptive, might nevertheless have been used so long and so
exclusively by one producer with reference to his article that, in that trade and to
that branch of the purchasing public, the word or phrase has come to mean that the
article was his product." The question which arises, therefore, is whether or not the
use by petitioner of "Lyceum" in its corporate name has been for such length of time
and with such exclusivity as to have become associated or identified with the
petitioner institution in the mind of the general public (or at least that portion of the
general public which has to do with schools). The Court of Appeals recognized this
issue and answered it in the negative: "Under the doctrine of secondary meaning, a
word or phrase originally incapable of exclusive appropriation with reference to an
article in the market, because geographical or otherwise descriptive might
nevertheless have been used so long and so exclusively by one producer with
reference to this article that, in that trade and to that group of the purchasing public,
the word or phrase has come to mean that the article was his produce (Ana Ang vs.
Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the
distinctiveness into which the name or phrase has evolved through the substantial
and exclusive use of the same for a considerable period of time. . . . No evidence
was ever presented in the hearing before the Commission which sufficiently proved
that the word 'Lyceum' has indeed acquired secondary meaning in favor of the
appellant. If there was any of this kind, the same tend to prove only that the
appellant had been using the disputed word for a long period of time. . . . In other
words, while the appellant may have proved that it had been using the word
'Lyceum' for a long period of time, this fact alone did not amount to mean that the
said word had acquired secondary meaning in its favor because the appellant failed

to prove that it had been using the same word all by itself to the exclusion of others.
More so, there was no evidence presented to prove that confusion will surely arise if
the same word were to be used by other educational institutions. Consequently, the
allegations of the appellant in its first two assigned errors must necessarily fail." We
agree with the Court of Appeals. The number alone of the private respondents in the
case at bar suggests strongly that petitioner's use of the word "Lyceum" has not
been attended with the exclusivity essential for applicability of the doctrine of
secondary meaning. Petitioner's use of the word "Lyceum" was not exclusive but was
in truth shared with the Western Pangasinan Lyceum and a little later with other
private respondent institutions which registered with the SEC using "Lyceum" as part
of their corporation names. There may well be other schools using Lyceum or Liceo
in their names, but not registered with the SEC because they have not adopted the
corporate form of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER
THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE
ENTITY'S NAME. petitioner institution is not entitled to a legally enforceable
exclusive right to use the word "Lyceum" in its corporate name and that other
institutions may use "Lyceum" as part of their corporate names. To determine
whether a given corporate name is "identical" or "confusingly or deceptively similar"
with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate names in their
entirety and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
DECISION
FELICIANO, J p:
Petitioner is an educational institution duly registered with the Securities and
Exchange Commission ("SEC"). When it first registered with the SEC on 21
September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has
used that name ever since.
On 24 February 1984, petitioner instituted proceedings before the SEC to
compel the private respondents, which are also educational institutions, to delete
the word "Lyceum" from their corporate names and permanently to enjoin them
from using "Lyceum" as part of their respective names.
Some of the private respondents actively participated in the proceedings
before the SEC. These are the following, the dates of their original SEC registration
being set out below opposite their respective names:
Western Pangasinan Lyceum 27 October 1950
Lyceum of Cabagan 31 October 1962
Lyceum of Lallo, Inc. 26 March 1972
Lyceum of Aparri 28 March 1972
Lyceum of Tuao, Inc. 28 March 1972
Lyceum of Camalaniugan 28 March 1972
The following private respondents were declared in default for failure to file an
answer despite service of summons:
Buhi Lyceum;

Central Lyceum of Catanduanes;


Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included three (3) other
entities:
1. The Lyceum of Malacanay;
2. The Lyceum of Marbel; and
3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of
Malacanay and the Lyceum of Marbel, for failure to serve summons upon these two
(2) entities. The case against the Liceum of Araullo was dismissed when that school
motu proprio change its corporate name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner had
sometime before commenced in the SEC a proceeding (SEC-Case No. 1241) against
the Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt
another name not "similar [to] or identical" with that of petitioner. In an Order dated
20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of
petitioner and that of the Lyceum of Baguio, Inc. were substantially identical
because of the presence of a "dominant" word, i.e., "Lyceum," the name of the
geographical location of the campus being the only word which distinguished one
from the other corporate name. The SEC also noted that petitioner had registered as
a corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 and ordered the
latter to change its name to another name "not similar or identical [with]" the names
of previously registered entities.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme
Court in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14
September 1977, the Court denied the Petition for Review for lack of merit. Entry of
judgment in that case was made on 21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then
wrote all the educational institutions it could find using the word "Lyceum" as part of
their corporate name, and advised them to discontinue such use of "Lyceum." When,
with the passage of time, it became clear that this recourse had failed, petitioner
instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its
proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision
sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The
hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case (SECCase No. 1241) and held that the word "Lyceum" was capable of appropriation and
that petitioner had acquired an enforceable exclusive right to the use of that word.
On appeal, however, by private respondents to the SEC En Banc, the decision
of the hearing officer was reversed and set aside. The SEC En Banc did not consider
the word "Lyceum" to have become so identified with petitioner as to render use
thereof by other institutions as productive of confusion about the identity of the
schools concerned in the mind of the general public. Unlike its hearing officer, the
SEC En Banc held that the attaching of geographical names to the word "Lyceum"
served sufficiently to distinguish the schools from one another, especially in view of
the fact that the campuses of petitioner and those of the private respondents were
physically quite remote from each other. 3

Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28
June 1991, however, the Court of Appeals affirmed the questioned Orders of the SEC
En Banc. 4 Petitioner filed a motion for reconsideration, without success.
Before this Court, petitioner asserts that the Court of Appeals committed the
following errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme
Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this case and
in not holding that said Resolution bound subsequent determinations on the right to
exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western Pangasinan
Lyceum, Inc. was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not acquired
a secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word cannot
be appropriated by the petitioner to the exclusion of others. 5
We will consider all the foregoing ascribed errors, though not necessarily
seriatim. We begin by noting that the Resolution of the Court in G.R. No. L-46595
does not, of course, constitute res adjudicata in respect of the case at bar, since
there is no identity of parties. Neither is stare decisis pertinent, if only because the
SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the
Lyceum of Baguio case. The Minute Resolution of the Court in G.R. No. L-46595 was
not a reasoned adoption of the Sulit ruling.
The Articles of Incorporation of a corporation must, among other things, set out
the name of the corporation. 6 Section 18 of the Corporation Code establishes a
restrictive rule insofar as corporate names are concerned:
"SECTION 18. Corporate name. No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or deceptively
or confusingly similar to that of any existing corporation or to any other name
already protected by law or is patently deceptive, confusing or contrary to existing
laws. When a change in the corporate name is approved, the Commission shall issue
an amended certificate of incorporation under the amended name." (Emphasis
supplied)
The policy underlying the prohibition in Section 18 against the registration of a
corporate name which is "identical or deceptively or confusingly similar" to that of
any existing corporation or which is "patently deceptive" or "patently confusing" or
"contrary to existing laws," is the avoidance of fraud upon the public which would
have occasion to deal with the entity concerned, the evasion of legal obligations and
duties, and the reduction of difficulties of administration and supervision over
corporations. 7
We do not consider that the corporate names of private respondent institutions
are "identical with, or deceptively or confusingly similar" to that of the petitioner
institution. True enough, the corporate names of private respondent entities all carry
the word "Lyceum" but confusion and deception are effectively precluded by the
appending of geographic names to the word "Lyceum." Thus, we do not believe that
the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the
Philippines, or that the "Lyceum of Camalaniugan" would be confused with the
Lyceum of the Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion
which in turn referred to a locality on the river Ilissius in ancient Athens "comprising

an enclosure dedicated to Apollo and adorned with fountains and buildings erected
by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by the
philosopher Aristotle and his followers for teaching." 8 In time, the word "Lyceum"
became associated with schools and other institutions providing public lectures and
concerts and public discussions. Thus today, the word "Lyceum" generally refers to a
school or an institution of learning. While the Latin word "lyceum" has been
incorporated into the English language, the word is also found in Spanish (liceo) and
in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic
schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in
Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay." 9 "Lyceum" is in fact as
generic in character as the word "university." In the name of the petitioner,
"Lyceum" appears to be a substitute for "university;" in other places, however,
"Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college.
It may be (though this is a question of fact which we need not resolve) that the use
of the word "Lyceum" may not yet be as widespread as the use of "university," but it
is clear that a not inconsiderable number of educational institutions have adopted
"Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo"
denotes a school or institution of learning, it is not unnatural to use this word to
designate an entity which is organized and operating as an educational institution.

well-known reputation, and confusion will result by the use of the disputed name (by
the defendant) (Ang Si Heng vs. Wellington Department Store, Inc., 92 Phil. 448).

It is claimed, however, by petitioner that the word "Lyceum" has acquired a


secondary meaning in relation to petitioner with the result that that word, although
originally a generic, has become appropriable by petitioner to the exclusion of other
institutions like private respondents herein.

In other words, while the appellant may have proved that it had been using the
word 'Lyceum' for a long period of time, this fact alone did not amount to mean that
the said word had acquired secondary meaning in its favor because the appellant
failed to prove that it had been using the same word all by itself to the exclusion of
others. More so, there was no evidence presented to prove that confusion will surely
arise if the same word were to be used by other educational institutions.
Consequently, the allegations of the appellant in its first two assigned errors must
necessarily fail." 13 (Underscoring partly in the original and partly supplied)

The doctrine of secondary meaning originated in the field of trademark law. Its
application has, however, been extended to corporate names sine the right to use a
corporate name to the exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename. 10 In Philippine Nut
Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was
elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation with
reference to an article on the market, because geographically or otherwise
descriptive, might nevertheless have been used so long and so exclusively by one
producer with reference to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was his
product." 12
The question which arises, therefore, is whether or not the use by petitioner of
"Lyceum" in its corporate name has been for such length of time and with such
exclusivity as to have become associated or identified with the petitioner institution
in the mind of the general public (or at least that portion of the general public which
has to do with schools). The Court of Appeals recognized this issue and answered it
in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article in the market,
because geographical or otherwise descriptive might nevertheless have been used
so long and so exclusively by one producer with reference to this article that, in that
trade and to that group of the purchasing public, the word or phrase has come to
mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This
circumstance has been referred to as the distinctiveness into which the name or
phrase has evolved through the substantial and exclusive use of the same for a
considerable period of time. Consequently, the same doctrine or principle cannot be
made to apply where the evidence did not prove that the business (of the plaintiff)
has continued for so long a time that it has become of consequence and acquired a
good will of considerable value such that its articles and produce have acquired a

With the foregoing as a yardstick, [we] believe the appellant failed to satisfy
the aforementioned requisites. No evidence was ever presented in the hearing
before the Commission which sufficiently proved that the word 'Lyceum' has indeed
acquired secondary meaning in favor of the appellant. If there was any of this kind,
the same tend to prove only that the appellant had been using the disputed word for
a long period of time. Nevertheless, its (appellant) exclusive use of the word
(Lyceum) was never established or proven as in fact the evidence tend to convey
that the cross-claimant was already using the word 'Lyceum' seventeen (17) years
prior to the date the appellant started using the same word in its corporate name.
Furthermore, educational institutions of the Roman Catholic Church had been using
the same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno,
Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started using
the word 'Lyceum'. The appellant also failed to prove that the word 'Lyceum' has
become so identified with its educational institution that confusion will surely arise in
the minds of the public if the same word were to be used by other educational
institutions.

We agree with the Court of Appeals. The number alone of the private
respondents in the case at bar suggests strongly that petitioner's use of the word
"Lyceum" has not been attended with the exclusivity essential for applicability of the
doctrine of secondary meaning. It may be noted also that at least one of the private
respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum"
seventeen (17) years before the petitioner registered its own corporate name with
the SEC and began using the word "Lyceum." It follows that if any institution had
acquired an exclusive right to the word "Lyceum," that institution would have been
the Western Pangasinan Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan
Lyceum, Inc. failed to reconstruct its records before the SEC in accordance with the
provisions of R.A. No. 62, which records had been destroyed during World War II,
Western Pangasinan Lyceum should be deemed to have lost all rights it may have
acquired by virtue of its past registration. It might be noted that the Western
Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed its
own registration on 21 September 1950. Whether or not Western Pangasinan
Lyceum, Inc. must be deemed to have lost its rights under its original 1933
registration, appears to us to be quite secondary in importance; we refer to this
earlier registration simply to underscore the fact that petitioner's use of the word
"Lyceum" was neither the first use of that term in the Philippines nor an exclusive
use thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in truth
shared with the Western Pangasinan Lyceum and a little later with other private
respondent institutions which registered with the SEC using "Lyceum" as part of their
corporation names. There may well be other schools using Lyceum or Liceo in their
names, but not registered with the SEC because they have not adopted the
corporate form of organization.

We conclude and so hold that petitioner institution is not entitled to a legally


enforceable exclusive right to use the word "Lyceum" in its corporate name and that
other institutions may use "Lyceum" as part of their corporate names. To determine
whether a given corporate name is "identical" or "confusingly or deceptively similar"
with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate names in their
entirety and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
WHEREFORE, the petitioner having failed to show any reversible error on the
part of the public respondent Court of Appeals, the Petition for Review is DENIED for
lack of merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

On August 31, 1955, Selecta Biscuit Company, Inc., hereinafter referred to as


respondent, filed with the Philippine Patent Office a petition for the registration of
the word "SELECTA" as trade-mark to be use in its bakery products alleging that it is
in actual use thereof for not less than two months before said date and that "no
other persons, partnership, corporation or association ... has the right to use said
trade-mark in the Philippines, either in the identical form or in any such near
resemblance thereto, as might be calculated to deceive." Its petition was referred to
an examiner for study who found that the trade-mark sought to be registered
resembles the word "SELECTA" used by the Acre and Sons and Company, hereinafter
referred to as petitioner, in its milk and ice cream products so that its use by
respondent will cause confusion as to the origin of their respective goods.
Consequently, he recommended that the application be refused. However, upon
reconsideration, the Patent Office ordered the publication of the application for
purposes of opposition.
In due time, petitioner filed its opposition thereto on several grounds, among
which are: (1) that the mark "SELECTA" had been continuously used by petitioner in
the manufacture and sale of its products, including cakes, bakery products, milk and
ice cream from the time of its organization and even prior thereto by its
predecessor-in-interest, Ramon Arce; (2) that the mark "SELECTA" has already
become identified with name of the petitioner and its business; (3) that petitioner
had warned respondent not to use said mark because it was already being used by
the former, but that the latter ignored said warning; (4) that respondent is using the
word "SELECTA" as a trade-mark as bakery products in unfair competition with the
products of petitioner thus resulting in confusion in trade; (5) that the mark to which
the application of respondent refers has striking resemblance, both in appearance
and meaning, to petitioner's mark as to be mistaken therefor by the public and
cause respondent's goods to be sold as petitioner's; and (6) that actually a
complaint has been filed by the petitioner against respondent for unfair competition
in the Court of First Instance of Manila asking for damages and for the issuance of a
writ of injunction against respondent enjoining the latter for continuing with the use
of said mark.
On September 28, 1958, the Court of First Instance of Manila rendered decision
in the unfair competition case perpetually enjoining respondent from using the name
"SELECTA" as a trade-mark on the goods manufactured and/or sold by it and
ordering it to pay petitioner by way of damages all the profits it may have realized
by the use of said name, plus the sum of P5,000.00 as attorney's fee and costs of
suit. From this decision, respondent brought the matter on appeal to the Court of
Appeals wherein the case was docketed as CA-G.R. No. 24017-R.

ARCE
SONS
AND
vs.
SELECTA BISCUIT COMPANY, INC., ET AL., respondents.

COMPANY, petitioner,

x---------------------------------------------------------x
G.R. No. L-17981

January 28, 1961

ARCE
SONS
AND
COMPANY, plaintiff-appellee,
vs.
SELECTA BISCUIT COMPANY, INC., defendant-appellant.
Manuel
O.
Chan
and
Ramon
E. Voltaire Garcia for defendant-appellant.
BAUTISTA ANGELO, J.:

S.

Ereeta

for

plaintiff-appellee.

Inasmuch as the issues of the facts in the case of unfair competition are
substantially identical with those raised before the Patent Office, the parties at the
hearing thereof, agreed to submit the evidence they introduced before the Court of
First Instance of Manila to said office, and on the strength thereof, the Director of
Patents, on December 7, 1958, rendered decision dismissing petitioner's opposition
and stating that the registration of the trade-mark "SELECTA" in favor of applicant
Selecta Biscuits Company, Inc. will not cause confusion or mistake nor will deceive
the purchasers as to the cause damage to petitioner. Hence, petitioner interposed
the present petition for review.
On September 7, 1960, this Court issued a resolution of the following tenor:
In G.R. No. L-14761 (Arce Sons and Company vs. Selecta Biscuits Company,
Inc., et al.), considering that the issue raised and evidence presented in this appeal
are the same as those involved and presented in Civil Case No. 32907, entitled Arce
Sons and Company vs. Selecta Biscuit Company, Inc. of the Court of First Instance of
Manila, presently pending appeal in the Court of Appeals, docketed as CA-G.R. No.

24017-R, the Court resolved to require the parties, or their counsel, to inform this
Court why the appeal pending before the Court of Appeals should not be forwarded
to this Court in order that the two cases may be consolidated and jointly decided, to
avoid any conflicting decision, pursuant to the provisions of section 17, paragraph 5,
of the Judiciary Act of 1948 (Republic Act No. 296).
And having both petitioner and respondent manifested in writing that they do
not register any objection that the case they submitted on appeal to the Court of
Appeals be certified to this Court so that it may be consolidated with the present
case, the two cases are now before us for consolidated decision.
The case for petitioner is narrated in the decision of the court a quo as
follows: .
"In 1933, Ramon Arce, predecessor in interest of the plaintiff, started a milk
business in Novaliches, Rizal, using the name 'SELECTA' as a trade-name as well as
a trade-mark. He begun selling and distributing his products to different residences,
restaurants and offices, in bottles on the caps of which were inscribed the words
'SELECTA FRESH MILK.' As his business prospered, he thought of expanding and, in
facts, he expanded his business by establishing a store at Nos. 711-713 Lepanto
Street. While there, he began to cater, in addition to milk, ice cream, sandwiches
and other food products. As his catering and ice cream business prospered in a big
way, he placed a sign signboard in his establishment with the name 'SELECTA'
inscribed thereon. This signboard was place right in front of the said store. For the
sake of efficiency, the Novaliches place was made the pasteurizing plant and its
products were distributed through the Lepanto store. Special containers made of tin
cans with the words 'SELECTA' written on their covers and 'embossed or blown' on
the bottles themselves were used. Similarly, exclusive bottles for milk products were
ordered from Getz Brothers with the word 'SELECTA 'blown on them. The sandwiches
which were sold and distributed were wrapped in carton boxes with covers bearing
the name 'SELECTA.' To the ordinary cars being used for the delivery of his products
to serve outside orders were added to a fleet of five (5) delivery trucks with the word
'SELECTA ' prominently painted on them. Sales were made directly at the Lepanto
store or by means of deliveries to specified addresses, restaurants and offices inside
Manila and its suburbs and sometimes to customers in the provinces. As time
passed, new products were produced for sale, which as cheese (cottage cheese)
with special containers especially ordered from the Philippine Education Company
with the 'SELECTA ' written on their covers.
The war that broke out on December 8, 1941, did not stop Ramon Arce from
continuing with his business. After a brief interruption of about a mouth, that is,
during the end of January, 1942, and early February, 1942, he resumed his business
using the same trade-name and trade-mark, but this time, on a large scale. He
entered the restaurant business. Dairy products ice cream, milk, sandwiches
continued to be sold and distributed by him. However, Ramon Arce was again forced
to discontinue the business on October, 1944, because time was beginning to be
precarious. American planes started to bomb Manila and one of his sons, Eulalio
Arce, who was managing the business, was seized by the Japanese. Liberation came
and immediately thereafter. Ramon Arce once more resumed his business, even
more actively, by adding another store located at the corner of Lepanto and
Azcarraga Streets. Continuing to use the name 'Selecta,' he added bakery products
to his line of business. With a firewood type of oven, about one-half the size of the
courtroom, he made his own bread, cookies, pastries and assorted bakery products.
Incidentally, Arce's bakery was transferred to Balintawak, Quezon City another
expansion of his business where the bakery products are now being baked thru
the use of firewood, electric and gas oven. These bakery products, like his other
products, are being sold the store itself and /or delivered to people ordering them in
Manila and even Baguio. Like the other products, special carton boxes in different

sizes, according to the bakery products, with the name 'Selecta' on top of the covers
are provided for these bakery products. For the cakes, special boxes and labels
reading 'Selecta Cakes for all occasions' are made. For the milk products, special
bottle caps and bottles with the colored words 'Quality Always Selecta Fresh Milk,
One Pint' inscribed and blown on the sides of the bottles - an innovation from the old
bottles and caps used formerly. Similar, special boxes with the name 'Selecta 'are
provided for fried chicken sold to customers.
Business being already well established, Ramon Arce decided to retire, so that
his children can go on with the business. For this purpose, he transferred and leased
to them all his rights, interest and participations in the business, including the use of
the name of 'Selecta,' sometime in the year 1950, at a monthly rental of P10,000.00,
later reduced to P6,500.00. He further wrote the Bureau of Commerce letter dated
February 10, 1950, requesting cancellation of the business name 'Selecta
Restaurant' to give way to the registration of the same 'Selecta' and asked that the
same be registered in the name of Arce Sons & Company, a co-partnership entered
into by and among his children on February 10, 1950. Said co-partnership was
organized, so its articles of co-partnership state, 'conduct a first class restaurant
business; to engage in the manufacture and sale of ice cream, milk, cakes and other
dairy and bakery products; and to carry on such other legitimate business as may
produce profit'; Arce Sons & Company has thus continued the lucrative business of
their predecessor in interest. It is now, and has always been, engaged in the
restaurant business, the sale of milk, and the production and sale of cakes, dairy
products and bakery products. Arce Sons & Company are now making bakery
products like bread rolls, pan de navaro, pan de sal, and other types, of cookies and
biscuit of the round, hard and other types, providing thereof special boxes with the
same "Selecta'.
Pursuing the policy of expansion adopted by their predecessor, Arce Sons &
Company established another store the now famous 'Selecta Dewey Boulevard', with
seven (7) delivery trucks with the 'Selecta ' conspicuously painted on them, to serve,
deliver, and cater to customers in and outside of Manila." .
The case for respondent on the other hand, is expressed as follows:
Defendant was organized and registered as a corporation under the name and
style of Selecta Biscuit Company, Inc. on March 2, 1955 (Exhibit 2-A; p. 3, April 17,
1958) but started operation as a biscuit factory on June 20 1955 (t.s.n. p.3, id). The
name 'Selecta' was chosen by the organizers of defendant who are Chinese citizens
as a translation of the Chinese word 'Ching Suan' which means 'mapili' in Tagalog,
and Selected' in English (t.s.n. p, id.). Thereupon, the Articles of Incorporation of
Selecta Biscuit Company, Inc. were registered with the Securities and Exchange
Commission (t.s.n. P.5. id.), and at the same time registered as a business name with
the Bureau of Commerce which issued certificate of registration No. 55594 (Exhibit
3; Exhibit 3-A). The same name Selecta Biscuit Company, Inc. was also subsequently
registered with the Bureau of Internal Revenue which issued Registration Certificate
No. 35764 (Exhibit 4, t.s.n., p. id.). Inquiries were also made with the Patent Office of
'Selecta'; after an official of the Patent referred to index cards information was
furnished to the effect that defendant could register the name 'Selecta' with the
Bureau of Patents (t.s.n. ,p.7, id). Accordingly, the corresponding petition for
registration of trade-mark was filed (Exhs. 5,5-A, Exhibit 5-B). Defendant actually
operated its business factory on June 20, 1955, while the petition for registration of
trade-mark 'Selecta' was filed with the Philippine Patent Office only on September 1,
1955, for the Philippine Patent Office informed the defendant that the name should
first be used before registration (t.s.n. p.8 ,id.). The factory of defendant is located at
Tuazon Avenue, Northern Hills, Malabon, Rizal, showing plainly on its wall facing the
streets the name 'SELECTA BISCUIT COMPANY, INC.' (Exhs. 6, 6-a 6-B, t.s.n., p. 9,
id.). It is significant to note that Eulalio Arce, Managing Partner of the plaintiff

resided and resides near the defendant's factory, only around 150 meters away ; in
fact, Arce use to pass in front of the factory of defendant while still under
construction and up to the present time (t.s.n., pp. 9, 10, id.). Neither Eulalio Arce
nor any other person in representation of the plaintiff complained to the defendant
about the use of the name 'Selecta Biscuit' until of the present complaint.
There are other factories using 'Selecta as trade-mark for biscuit (t.s.n., p. 12;
Exhs. 7, 7-A,7-B; Exhibit 8, 8-A, 8-B; Exhibits Exhibit 9, 9-A, 9-B); defendant in fact
uses different kinds of trade-mark (Exhibit 10, 10-A, to 10-W, t.s.n., p. 17).
The biscuits, cookies, and crackers manufactured and sold by defendant are
wrapped in cellophane pouches and place inside tin can (Exh. 11; t.s.n. p. 19); the
products of defendant are sold through the length and breadth of the Philippines
through agents with more than one hundred 600 stores as customers buying on
credit (t.s.n.) pp. 19, 20, Exh. 12; t.s.n., p. 10, June 20, 1958). Defendant employs
more than one hundred (100) laborers and employees presently although it started
with around seventy (70) employees and laborers (t.s.n. p. 24); its present
capitalization fully paid is Two Hundred Thirty Four Thousand Pesos
(P234,000.00.)additional capitalization's were duly authorized by the Securities and
Exchange Commission (Exhs. 13, 13-A) there was no complaint whatsoever from
plaintiff saw defendant's business growing bigger and bigger and flourishing (t.s.n.,
p. 21); when plaintiff filed its complaint.
Defendant advertises its products through radio broadcast and spot
announcement (Exhs. 14, 14-A to 14-L; inclusive Exhs. 15, 15-A, 15-B, 15-C; Exh. 16,
16-A, 16-B to 16-E, inclusive; Exhs. 17, 17-B to 17-L, inclusive); the broadcasts
scripts announced therein through the radio clearly show, among others, that
Selecta Biscuit are manufactured by Selecta Company, Inc. at Tuazon Avenue,
Northern Hills, Malabon, Rizal, with Telephone ]No. 2-13-27 (Exhs. 23-A 23-B, 23-D,
23-E, 23-F).
Besides the signboard, 'Selecta Biscuit Company, Inc.' on the building itself,
defendant has installed signboard along the highways to indicate the location of the
factory of defendant (Exhs. 18, 18-A); delivery trucks defendant are plainly carrying
signboards Selecta Biscuit Company, Inc., Tuazon Avenue, Northern Hills Malabon,
Rizal, Telephone No. 2-13-27 (Exhs. 19, 19-A, 19-B, 19-C 19-D,19-E,19-F). Defendant
is using modern machineries in its biscuit factory (Exhs. 20, 20-A, 20-B, 19-C, 20-D,
20-E). The defendant sells its products thoughout 20-C, 20-D,20-E). The defendant
sells its product throughout the Philippines, including Luzon , Visayas, Mindanao; its
customers count, among others, 600 stores buying on credit; its stores buying on
cash number around 50 (t.s.n.), p. 10). Sales in Manila and suburbs are minimal,
(Exh. 12). Defendant is a wholesaler and not a retailer of biscuits, cookies and
crackers. This is the nature of the operation of the business of the defendant."
At the outset one cannot but note that in the two cases appealed before us
which involve the same parties and the same issues of fact and law, the Court a
quo and the Director of Patents have rendered contradictory decisions. While the
former is of the opinion that the word 'SELECTA' has been used by the petitioner, or
its predecessor-in-interest, as a trade-mark in the sale and distribution of its dairy
and bakery products as early as 1933 to the extent that it has acquired a proprietary
connotation so that to allow respondent to use it now as a trade-mark in its business
would be an usurpation of petitioner's goodwill and an infringement of its property
right, the Director of Patents entertained a contrary opinion. He believes that the
word as used by the petitioner functions only to point to the place of business or
location of its restaurant while the same word as used by respondent points to the
origin of the products its manufactures and sells and he predicates this distinction
upon the fact that while the goods of petitioner are only served within its restaurant
or sold only on special orders in the City of Manila, respondent's goods are ready-

made and are for sale throughout the length and breadth of the country. He is of the
opinion that the use of said trade-mark by respondent has not resulted in confusion
in trade contrary to the finding of the court a quo. Which of this opinions is correct is
the issue now for determination.
It appears that Ramon Arce, predecessor-in-interest of petitioner, started his
milk business as early as 1933. He sold his milk products in bottles covered with
caps on which the words 'SELECTA FRESH MILK' were inscribed. Expanding his
business, he established a store at Lepanto Street, City of Manila, where he sold, in
addition to his products, ice cream, sandwiches and other food products, placing
right in front of his establishment a signboard with the name 'SELECTA' inscribed
thereon. Special containers made of tin cans with the word 'SELECTA' written on
their covers were used for his products. Bottle with the same word embossed on
their sides were used for his milk products. The sandwiches he sold and distributed
were wrapped in carton boxes with covers bearing the same name. He used several
cars and trucks for delivery purposes on the sides of which were written the same
word. As new products were produced for sale, the same were placed in containers
with the same name written on their covers. After the war, he added to his business
such items as cakes, bread, cookies, pastries, and assorted bakery products. Then
his business was acquired by petitioner, a co-partnership organized by his sons, the
purposes of which are "to conduct a first class restaurant business; to engage in the
manufacture and sale of ice cream, milk, cakes and other products; and to carry on
such other legitimate business as may produce profit."
The foregoing unmistakably show that petitioner, through its predecessor-ininterest, had made use of the word "SELECTA" not only as a trade-name indicative of
the location of the restaurant where it manufactures and sells its products, but as
trade-mark is used. This is not only in accordance with its general acceptation but
with our law on the matter. "
Trade-mark' or trade-name', distinction being highly technical, is sign, device,
or mark by which articles produced are dealt in by particular person or organization
are distinguished or distinguishable from those produced or dealt in by other."
(Church of God v. Tomlinson Church of God, 247 SW 2d, 63,64)"
A 'trade-mark' is a distinctive mark of authenticity through which the
merchandise of a particular producer or manufacturer may be distinguished from
that of others, and its sole function is to designate distinctively the origin of the
products to which it is attached." (Reynolds & Reynolds Co. v. Nordic, et. al., 114F
2d, 278) "
The term 'trade-mark' includes any word, name, symbol, emblem, sign or
device or any combination thereof adopted and used by a manufacturer or merchant
to identify his goods and distinguish them from those manufactured, sold or dealt in
by others." (Section 38, Republic Act No. 166).
Verily, the word 'SELECTA' has been chosen by petitioner and has been
inscribed on all its products to serve not only as a sign or symbol that may indicate
that they are manufactured and sold by it but as a mark of authenticity that may
distinguish them from the products manufactured and sold by other merchants or
businessmen. The Director of Patents, therefore, erred in holding that petitioner
made use of that word merely as a trade-name and not as a trade-mark within the
meaning of the law.1
The word 'SELECTA', it is true, may be an ordinary or common word in the
sense that may be used or employed by any one in promoting his business or
enterprise, but once adopted or coined in connection with one's business as an
emblem, sign or device to characterize its products, or as a badge of authenticity, it
may acquire a secondary meaning as to be exclusively associated with its products

and business.2 In this sense, its used by another may lead to confusion in trade and
cause damage to its business. And this is the situation of petitioner when it used the
word 'SELECTA' as a trade-mark. In this sense, the law gives its protection and
guarantees its used to the exclusion of all others a (G. & C. Merriam Co. v. Saalfield,
198 F. 369, 373). And it is also in the sense that the law postulates that "The
ownership or possession of a trade-mark, . . . shall be recognized and protected in
the same manner and to the same extent, as are other property rights known to the
law," thereby giving to any person entitled to the exclusive use of such trade-mark
the right to recover damages in a civil action from any person who may have sold
goods of similar kind bearing such trade-mark (Sections 2-A and 23, Republic Act No.
166, as amended).
The term 'SELECTA' may be placed at par with the words "Ang Tibay" which
this Court has considered not merely as a descriptive term within the meaning of the
Trade-mark Law but as a fanciful or coined phrase, or a trade-mark. In that case, this
Court found that respondent has constantly used the term "Ang Tibay" , both as a
trade-mark and a trade-name, in the manufacture and sale of slippers, shoes and
indoor baseballs for twenty-two years before petitioner registered it as a trade-name
for pants and shirts so that it has performed during that period the function of a
trade-mark to point distinctively, or by its own meaning or by association, to the
origin or ownership of the wares to which it applies. And holding that respondent
was entitled to protection in the use of that trade-mark, this Court made the
following comment:
The function of a trade-mark is to point distinctively, either by its own meaning
or by association, to the origin or ownership of the wares to which it is applied. 'Ang
Tibay' as used by the respondent to designate his wares, had exactly performed that
function for twenty-two years before the petitioner adopted it as a trade-mark in her
own business. 'Ang Tibay' shoes and slippers are, by association, known throughout
the Philippines as products of the 'Ang Tibay" factory owned and operated by the
respondent. Even if 'AngTibay', therefore, were not capable of exclusive
appropriation as a trade-mark, the application of the doctrine of secondary meaning
could nevertheless be fully sustained because, in any event, by respondent's long
and exclusive appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have been used so long
and exclusively by one producer with reference to his article that, in that trade and
to that branch of the purchasing public, the word or phrase has come to mean that
article was his product." (Ang v. Teodoro, supra.).
The rationale in the Ang Tibay case applies on all fours to the case of
petitioner.
But respondent claims that it adopted the trade-mark 'SELECTA' in good faith
and not precisely to engage in unfair competition with petitioner. It tried to establish
that respondent was organized as a corporation under the name of Selecta Biscuit
Company, Inc. on March 2, 1955 and started operations as a biscuit factory on June
20, 1955; that the name 'SELECTA' was chosen by the organizers of respondent who
are Chinese citizens as a translation of the Chinese word "Ching Suan" which means
"mapili" in Tagalog, and "Selected" in English; that , thereupon, it registered its
articles of incorporation with the Securities and Exchange Commission and the name
'SELECTA' as a business name with the Bureau of Commerce which issued to it
Certificate of Registration No. 55594; and that it also registered the same tradename with the Bureau of Internal Revenue and took steps to obtain a patent from
the Patent Office by filing with it as application for the registration of said tradename.
The suggestion that the name 'SELECTA' was chosen by the organizers of
respondent merely as a translation from a Chinese word "Ching Suan" meaning

"mapili" in the dialect is betrayed by the very manner of its selection, for if the only
purpose is to make an English translation of that word and not to compete with the
business of petitioner, why chose the word 'SELECTA', a Spanish word, and not
"Selected", the English equivalent thereof, as was done by other well-known
enterprises? In the words of petitioner's counsel, "Why with all the words in the
English dictionary and all the words in the Spanish dictionary and all the phrases
that could be coined, should defendant-appellant (respondent) choose 'SELECTA' if
its purpose was not and is not to fool the people and to damage plaintiff-appellee?"
In this respect, we find appropriate the following comment of the trial court:
Eventually, like the plaintiff, one is tempted to ask as to why with the richness
in words of the English language and with the affluence of the Spanish vocabulary
or, for that matter, of our own dialects, should the defendant choose the
controverted word "Selecta", which has already acquired a secondary meaning by
virtue of plaintiff's prior and continued use of the same as a trade-mark or tradename of its products? The explanation given by Sy Hap, manager of the defendant,
that the word 'Selecta' was chosen for its bakery products by the organizers of said
company from the Chinese word 'Ching Suan' meaning 'mapili', which in English
translation , is to say the least, very weak and untenable. Sy Hap himself admitted
that he had known Eulalio Arce, the person managing plaintiff's business, since
1954; that since he began to reside at 10th Avenue, Grace Park, he had known the
Selecta Restaurant on Azcarraga Street and Dewey Blvd. and that he even had
occasion to eat in one of the restaurants of the plaintiff. All of these circumstances
tend to conspire in inducing one to doubt defendant's motive for using the same
word "Selecta" for its bakery products. To allow the defendant here to use the word
"Selecta" in spite of the fact that this word has already been adopted and exploited
by Ramon Arce and by his family thru the organization of Arce Sons and Company,
for the maintenance of its goodwill, for which said plaintiff and its predecessor have
spent time, effort and fortune, is to permit business pirates and buccaneers to
appropriate for themselves and to their profit and advantage the trade names and
trade marks of well established merchants with all their attendant good will and
commercial benefit. Certainly, this cannot be allowed, and it becomes the duty of
the court to protect the legitimate owners of said trade-names and trade-marks, for
under the law, the same constitute one kind of property right entitled to the
necessary legal protection.
Other points raised by respondent to show that the trial court erred in holding
that the adoption by it of the word 'SELECTA' is tantamount to unfair competition
are: (1) that its products are biscuits, crackers, and cookies, wrapped in cellophane
packages, place in tin containers, and that its products may last a year with out
spoilage, while the ice cream, milk, cakes and other bakery products which
petitioner manufactures last only for two or three days; (2) that the sale and
distribution of petitioner's products are on retail basis, limited to the City of Manila
and suburbs, and its place of business is localized at Azcarraga, corner of Lepanto
Street and at Dewey Blvd., Manila, while that of respondent is on a wholesale basis,
extending throughout the length and breadth of the Philippines; (3) that petitioner's
signboard on its place of business reads 'SELECTA' and on its delivery trucks
"Selecta, Quality Always, Restaurant and Caterer, Azcarraga, Dewey Blvd.,
Balintawak and Telephone number," in contrast with respondent's signboard on its
factory which reads "Selecta Biscuit Company, Inc.," and on its delivery trucks
"Selecta Biscuit Company, Inc., Tuason Avenue, Malabon, Rizal, Telephone No. 2-1327; (4) that the business name of petitioner is different from the business name of
respondent; (5) that petitioner has only a capital investment of P25,000.00 whereas
respondent has a fully paid-up stock in the amount of P234,000.00 out of the
P500,000.00 authorized capital, (6) that the use of the name 'SELECTA' by
respondent cannot lead to confusion in the business operation of the parties.

We have read carefully the reasons advanced in support of the points raised by
counsel in an effort to make inroads into the findings of the court a quo on unfair
competition, but we believe them to be substantial and untenable. They appear to
be well answered and refuted by counsel for petitioner in his brief, which refutation
we do not need to repeat here. Suffice it to state that we agree with the authorities
and reasons advanced therein which incidentally constitute the best support of the
decision of the court a quo.
With regard to the claim that petitioner failed to present sufficient evidence on
the contract of lease of the business from its predecessor-in-interest, we find that
under the circumstances secondary evidence is admissible.
In view of the foregoing, we hold that the Director of Patents committed an
error in dismissing the opposition of petitioner and in holding that the registration of
the trade-mark 'SELECTA' in favor of respondent will not cause damage to petitioner,
and consequently, we hereby reverse his decision.
Consistently with this finding, we hereby affirm the decision of the court a
quo rendered in G.R. No. L-17981. No costs.
Footnotes
1
A trade-mark is generally described as a sign , device, or mark by which the
articles produced or dealt in by a particular person or organization are distinguished
or distinguishable from those produced or dealt in by others,and must be affixed to
the goods or articles, while a trade-name is descriptive of the manufacturer or
dealer himself as much as his own name is and frequently includes the name of the
placewhere the business is located; it involves the individuality of the maker or
dealer for protection in trade, and to avoid confusion in business, and to secure the
advantages of a good reputation; it is more popularly applied to the good will of a
business,and need not be affixed to the goods sold. In other words it is not regarded
as a trade-mark in the strict technical sense. 52 Am. Jur., p. 507, et seq, 63 C.J.,
p.322, et seq." (Katz Drug Co. V. Katz, 217 2d. 286,289)
2
This doctrine is to the effect that a word or phrase originally incapable of
exclusive appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have been used so long
and so exclusively by one producer with reference to his article that , in that trade
and to that branch of the purchasing public, the word or phrase has come to mean
that the article was his product. (G& C Merriam Co. vs. Saalfield, 198 F. 369, 373.)
(Ang v. Teodoro, 74 Phil. 50, 53)

COFFEE PARTNERS v. SAN FRANCISCO COFFEE


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 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.

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.

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 BLAIPO 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 quasijudicial 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]

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).

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.[10] (Emphasis supplied)

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
THEREGISTRATION 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 GENERAL-INTELLECTUAL
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.

CRISANTA Y. GABRIEL, petitioner,


vs.
DR. JOSE R. PEREZ and HONORABLE TIBURCIO EVALLE as Director of
Patents, respondents.

Petition for review of the decision dated July 18, 1964 of the respondent Director of
Patents denying the petition of herein petitioner Crisanta Y. Gabriel to cancel and
revoke certificate of registration No. SR-389 covering the trademark "WONDER" used
on beauty soap issued on May 11, 1961 to herein private respondent Dr. Jose R.
Perez..
On October 19, 1962, petitioner Crisanta Y. Gabriel filed with the Patent Office a
petition for cancellation of the trademark "WONDER from the supplemental register
alleging that the registrant was not entitled to register the said trademark at the
time of his application for registration; that the trademark was not used and has not
been actually used by registrant at the time he applied for its registration; that it
was thru fraud and misrepresentation that the registration was procured by the
registrant; and that it was she who has been actually using the said trademark since
March, 1959, and as such is the rightful and recognized owner thereof and therefore
entitled to its registration. In support of her petition, she further alleged the written
contract between her and the registrant (respondent) wherein, according to her, the
latter has recognized her right of use and ownership of said trademark; and that the
labels submitted by the registrant are the very containers bearing the trademark
"WONDER" which are owned by her and which she has been exclusively and
continuously using in commerce (pp. 24-25, Vol. I, rec.).
Respondent Dr. Jose R. Perez, in due time, duly filed his answer denying each and
every ground for cancellation alleged in the said petition, and further averring that
there is pending in the Court of First Instance of Bulacan a civil case (No. 2422) for
unfair competition with injunction and damages filed by him against herein
petitioner involving the manufacture of beauty soap and the use of the trademark
"WONDER"; that a writ of preliminary injunction has been issued on September 7,
1961 by the said court against herein petitioner restraining her "from making,
manufacturing and producing 'Wonder Bleaching Beauty Soap' with the same labels
and chemical ingredients as those of the plaintiff, and from advertising, selling and
distributing the same products"; and that no right of petitioner had been violated
and therefore no cause of action exists in favor of petitioner (pp. 28-32, Vol. I, rec.).
Issues having been joined, the case was heard and thereafter, respondent Director
of Patents rendered his decision denying the petition to cancel the certificate of
registration (pp. 139-150, Vol. 1, rec.).
Petitioner filed a motion for reconsideration on the ground that the decision is
contrary to law and the evidence; but the same was denied on January 15, 1965 by
respondent Director of Patents for lack of merit (p. 158, Vol. rec.).
Hence, this petition for review filed on January 28, 1965 by herein petitioner (pp. 15, Vol. IV, rec.). Respondents were required to answer the same, and respondent
Director Tiburcio Evalle filed his answer on August 6, 1965 (pp. 29-32, Vol. IV, rec.).
Private respondent Dr. Jose R. Perez did not file an answer. Thereafter, both parties
were required to file their respective briefs and petitioner filed one on September
28, 1965 (p. 38, Vol. IV, rec.), while respondent Director Evalle filed his brief on
February 23, 1966 (p. 53, Vol. IV, rec.). Again, private respondent Perez did not file a
brief as his counsel's motion for an extension of time within which to file one was
denied by this Court for being late (pp. 41-42, Vol. IV, rec.). Consequently, the case
was submitted for decision on May 22, 1966.
On May 22, 1973, counsel for private respondent filed a motion for the early
resolution of the case alleging among others that "respondent Dr. Jose R. Perez had
died already and still Crisanta Y. Gabriel, the petitioner in this case, has been
continuously harassing the rights of the late Dr. Jose R. Perez as far as the ownership
and use of the trademark are concerned." (Pp. 59-61, Vol. IV, rec.) [No motion been
filed for substitution of the heirs in lieu of the deceased private respondent.]

By way of factual background, herein private respondent Dr. Jose R. Perez filed with
the Patents Office on February 23, 1961 an application for registration of the
trademark "WONDER" in the Supplemental Register. After due and proper
proceedings, the said petition was approved and the trademark "WONDER" was
registered, as prayed for, in the Supplemental Register. Thereafter, Certificate of
Registration No. SR-389 was issued to and in the name of herein private respondent
Dr. Jose R. Perez. Said trademark "WONDER" is used by said private respondent on
bleaching beauty soap (Medicated and Special) which under the Official
Classification of Merchandise (Rule 82) of the Board of Patents falls under Class 51.
Private respondent Dr. Perez, in his petition for registration, claimed March 10, 1953
as the date of first use of said trademark and August 1, 1953 as the date of first use
of said trademark in commerce in the Philippines (see pp. 1-7, Vol. I, rec.).
Petitioner Crisanta Y. Gabriel on the other hand, earlier filed on October 3, 1960 with
the Patent Office a petition to register the same trademark "WONDER" and claimed
March 7, 1959 as the date of first use of said trademark in commerce. Said petition
was dismissed on November 18, 1960 by the Patents Office (thru its examiner) on
the ground that said petitioner was not the owner of the trademark sought to be
registered, informing at the same time petitioner that "as shown on the labels
submitted, it appear that Dr. Jose R. Perez is the owner of the present mark ... ."
Subsequently, on March 23, 1961, the said application was considered abandoned
under Rules 97 and 98 of the Revised Rules of Practice in Trademark Cases for failure
of petitioner to comply with Rule 93 of the same Revised Rules (see p. 8, Vol. I, rec.;
pp. 79-86, Vol. III, rec.). Later, said applicant was revived, but further consideration
thereof was suspended by the Patents Office until final determination of the present
case wondering that the matter of ownership of the trademark "WONDER" is in
dispute (see p. 9, Vol. I, rec.).
The main facts of this case as substantially supported by the evidence on record, are
related by respondent Director of Patents in the decision now under review, thus:
... Way back in 1953, the Respondent who claims to be a medical researcher and
manufacturer, was experimenting on the creation of a beauty soap. Having
discovered a workable formula he applied from the Bureau of Health for the issuance
of a Certificate of Label Approval and on June 6, 1958 he was issued such certificate.
It covers a beauty soap for bleaching, which whitens or sometimes softens the skin.
(t.s.n., p. 48, Aug. 27, 1963). This certificate (Exh. "5") particularly describes and
mentions "Dr. Perez" Wonder Beauty Soap. He continued experimenting until he was
able to discover an improved soap formula which he claims that aside from
bleaching or whitening the skin it also allegedly removes pimples, freckles, dandruff,
scabies, itching, head lice(s), rashes, falling of hair, and shallow wrinkles (t.s.n. p.
49, Aug. 27, 1963). For such product he obtained another certificate of label
approval from the Bureau of Health on August 10, 1959 (Exh. "6"). This document
also particularly describes "Dr. Perez Wonder Beauty Soap (Improved Formula)."
In January, 1959 he made an agreement with a certain company named "Manserco"
for the distribution of his soap. It was then being managed by Mariano S. Yangga
who happens to be the brother of the Petitioner Crisanta Y. Gabriel (t.s.n., pp. 3-4,
Aug. 27, 1963). This was corroborated by Mr. August Cesar Espiritu who testified in
favor of the Respondent. Mr. Espiritu claims to be the organizer and one of the
incorporators of "Manserco," although really no document of its corporate existence
was introduced as evidence in this case (t.s.n., pp. 55-57, Sept. 23, 1963). However,
this fact had never been disputed by the Petitioner.
Because the corporation was allegedly going bankrupt and the members were
deserting, the Respondent terminated the agreement in July, 1959, and thereafter
he asked the Petitioner to become the distributor of his products (t.s.n., pp. 4-5, Aug.
27, 1963) and on September 1, 1959, a contract of "Exclusive Distributorship" was

executed between the Petitioner and the Respondent. (Exh. "7"; "F-l" to "F-2".) The
agreement is hereunder reproduced, to wit:
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
KNOW ALL MEN BY THESE PRESENT:
THIS AGREEMENT made and executed by and between DR. JOSE R. PEREZ, Filipino,
of legal age, a resident of Sta. Maria, Bulacan, now and hereinafter called the Party
of the First Part,
AND
CRISANTA Y. GABRIEL, likewise Filipino, of legal age, a resident of 1558 Camarines
St., Manila, now and hereinafter called the Party of the Second Part,
WITNESSETH
1. That the Party of the First Part hereby agrees and binds himself to make the Party
of the Second Part the sole and exclusive distributor of his product called and
popularly known as "Dr. Perez" Wonder Medicated Beauty Soap' for the whole
Philippines for a period of five (5) years from date of perfection of this agreement,
renewable for another five (5) years at the mutual agreement of both parties;
2. That the Party of the First Part hereby agrees to sell to the Party of the Second
Part the abovementioned merchandise at the rate of sixty (P.60) centavos a piece
which shall have a minimum weight of eighty (80) grams; PROVIDED however that
said price may be subject to change in cases of deflation and inflation of the peso;
3. That the Party of the First Part hereby binds himself to make delivery of the
merchandise under contract at 1558 Camarines St., Manila, the cost of the same
being for the account of the former;
4. That the Party of the First Part hereby agrees to extend to the Party of the Second
Part a credit line of TWO THOUSAND (P2,000.00) PESOS with accounts due and
payable on the 5th and 20th of each month with a maximum of sixty days from date
of receipt of the merchandise by the Party of the Second Part;
5. That the Party of the First Part guarantees the production of the full quantity of Dr.
Perez Wonder Medicated Beauty Soap that the Party of the Second Part could sell
and distribute; with the latter giving the former a written notice of the same;
6. That the Party of the Second Part has the exclusive right of ownership of the
packages and that said party is responsible for the costs as well as the design and
the manner of packing the same;
7. That the Party of the First Part hereby binds himself not to give or sell to any
person or entity the same product or any similar product or products of the same
name during the term and duration of this contract;
8. That this contract is binding upon the administrator, heirs and assigns of both
parties during the term and duration of this agreement;
9. That this contract will take effect upon the signing thereof.
IN WITNESS WHEREOF, the parties and their witnesses have hereunder set their
hands at Manila this 1st day of September, 1959. (See pp. 11-13, Vol. IV, rec.).
At this juncture, mention should be made of the Petitioner's commercial background,
as it appears in the record. Her documentary exhibits show that she was registered
as a bona fide Filipino retailer as of April 8, 1958 (Exh. "C"); that she was doing

business under the name "Gabriel Grocery and Cold Store" as of March 20, 1958
(Exh. "A"); and that on September 24, 1959 she obtained another certificate of
registration for the firm name "Wonder Commercial Co., Inc.," she being the
Manager thereof (Exh. "B"). (Pp. 10-13, Vol. IV, rec.).
Respondent Director of Patents set forth the evidence of the petitioner as follows:
From the evidence presented by her, she endeavors to prove that even before the
execution of the agreement (Exh "F-1") or particularly on March 11, 1959 she hired
the services of Eriberto Flores (t.s.n., pp. 43-52, May 23, 1963) who allegedly
designed the packages for which she paid him the sum of P50.00 (Exh. "FF").
Thereafter she allegedly started the sales promotion of the Respondent's product by
extensive advertisement through some magazines (Exhs. "G"; "G-l"; and "H"), the
radio
(Exhs.
"I"-"18"), and the cinema by means of projector "slides" (Exhs. "M" and "N") in
various neighborhood theatres in the Philippines (Exhs. "O" to "-48"). She also
allegedly caused the printing of thousands of boxes and literature accompanying the
soap with printing companies (Exhs. "P", "Q", "R", "S", "T", "U", "V", "W", and "X" to
"X-8"). She also presented a few sales invoices, the earliest of which was issued on
November 4, 1959 by the Wonder Commercial Co., Inc., showing sales of the
"Wonder Soap." (Exh. "Y"). Another booklet of sales invoices under the firm name
"C.Y. Gabriel" showing sales of the same soap, the earliest of which was August 13,
1960 was also presented (Exhs. "Z" and "AA"). All the while the packages (Exhs. "D"
and "E") and literature (Exh. "W") indicate that the soap is known as "Dr. Perez
Bleaching Beauty Soap" manufactured by Dr. Jose R. Perez Cosmetic Laboratory and
that the exclusive distributor is "Crisanta Y. Gabriel (C.Y Gabriel)", the herein
Petitioner.
As further evidence of sale, the Petitioner presented as witness Pedro Alvero, a
businessman from San Pablo City who, as alleged dealer in medicinal products,
toiletries, etc., testified as having purchased from her "Wonder" soap in 1959 up to
1961 (t.s.n., pp. 43-52, May 23, 1963). (See pp. 13-14, Vol IV, rec.).
I
The determination that Dr. Perez is the rightful owner of the disputed trademark
"WONDER" and the consequent denial by the respondent Director of Patents of the
petition to cancel certificate of registration No. SR-389 covering said trademark
issued to and in the name of Dr. Jose R. Perez, were based mainly on his finding that
Dr. Perez had priority of adoption and use of the said trademark. And such finding of
fact is conclusive on this Court. As stated by Justice Fernando in Lim Kiah vs. Kaynee
Company (25 SCRA 485) and reiterated by him in the subsequent case of Sy Ching
vs. Gaw Liu (44 SCRA 150-151): "It is well-settled that we are precluded from making
an inquiry as the finding of facts of the Director of Patents in the absence of any
showing that there was grave abuse of discretion is binding on us. As set forth
by Justice Makalintal in Chung Te vs. Ng Kian Giab (18 SCRA 747): 'The rule is that
findings of facts by the Director of Patents are conclusive on the Supreme Court
provided
that
they
are
supported
by
substantial
evidence.' " In the present case, the findings of fact of the respondent Director of
Patents are substantially supported by evidence and no grave abuse of discretion
was committed by said respondent.
1. At the time of the analysis of the soap product of private respondent Dr. Jose R.
Perez, there was already a label or trademark known as "Dr. Perez' WONDER Beauty
Soap" as shown and supported by Exhibit "5" which is a Certificate of Label Approval
dated June 6, 1958 (p. 103, Vol. III, rec.) and Exhibit "6" another Certificate of Label
Approval dated August 10, 1959 (p. 104, Vol. III, rec.) both issued by the Bureau of
Health to Dr. Jose R. Perez as manager of the Dr. Jose R. Perez Cosmetic Laboratory.
Both certificates identified the product covered as "Dr. Perez' Wonder Beauty Soap"

and further indicated that said product emanated from the Dr. Jose R. Perez
Cosmetic Laboratory. Furthermore, the certificates show that the Bureau of Health
referred to and relied on the said label or trademark of the product as the basis for
its certification that the same (product) "was found not adulterated nor
misbranded."
2. It is not denied that private respondent Dr. Jose R. Perez was the originator,
producer and manufacturer of the soap product identified as "DR. JOSE R. PEREZ
WONDER BEAUTY SOAP." This fact, furthermore, is clearly shown in Exhibits "5" and
"6" which, as already adverted to, point out that said product emanated from the Dr.
Jose R. Perez Cosmetic Laboratory.<re||an1w> The very boxes-containers used
in packing the said product also exhibit this fact (Exhs. "DD", "EE", "LL", "HH" also
marked as Exh. "7", "JJ" and "KK", pp. 94-96, 98-101, Vol. III, rec.).
On the other hand, petitioner Crisanta Y. Gabriel appears to be a mere distributor of
the product by contract with the manufacturer, respondent Dr. Jose R. Perez (Exhs.
"7", "F-1" to "F-2", p. 13, Vol. III, rec.) and the same was only for a term. This fact is
also clearly shown by the containers-boxes used in packing the product (Exhs. "E",
"D" and "II" also marked as Exh. "8", pp. 10, 11 and 99, Vol. III, rec.) which indicate
and describe Crisanta Y. Gabriel as the exclusive distributor of the product.
Thus, as stated in the decision under review: "Therefore, it cannot be denied that the
Respondent is the originator and manufacturer of the so-called "Dr.
Perez Wonder Beauty Soap," a phrase clearly coined by, and associated with, the
Respondent. As such, the connotation in itself is sufficient to clothe the product as
an item or a commodity emanating from a particularly identified source who is none
other than Dr. Jose R. Perez. The words serve as an indication of origin, and the
product identified by the words can never be regarded as having emanated or
originated from another individual, typical of which is the Petitioner, mere
distributor." (P. 15, Vol. IV, rec.). Under Section 2 and 2-A of the Trademark Law,
Republic Act No. 166, amended, the right to register trademark is based on
ownership and a mere distributor of a product bearing a trademark, even if
permitted to use said trademark, has right to and cannot register the said trademark
(Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., 18 SCR 1178; Operators, Inc.
vs. Director of Patents, et al., 15 SCRA 148).
II
1. Petitioner urges that the agreement of exclusive distributorship executed by and
between her and respondent vested in her the exclusive ownership of the trademark
"WONDER". But a scrutiny of the provisions of said contract does not yield any right
in favor of petitioner other than that expressly granted to her to be the sole and
exclusive distributor of respondent Dr. Perez' product.
The fact that paragraph 6 (Exh. "F-2") of the agreement provides that the petitioner
"has the exclusive right of ownership of the packages and that said party is
responsible for the costs as well as the design and manner of packing the same" did
not necessarily grant her the right to the exclusive use of the trademark; because
the agreement never mentioned transfer of ownership of the trademark. It merely
empowers the petitioner as exclusive distributor to own the package and to create a
design at her pleasure, but not the right to appropriate unto herself the sole
ownership of the trademark so as to entitle her to registration in the Patent Office. In
fact, the agreement does not even grant her the right to register the mark, as
correctly stated in the appealed decision, which further held that:
The statute provides that "the owner of a trademark use in commerce may register
his trademark ... ." By statutory definition a trademark is "any word, name, symbol
or device or any combination thereof adopted and used by a manufacture or
merchant to identify his goods and distinguish them from those manufactured by

others. (Emphasis added). There is nothing in the statute which remotely suggests
that one who merely sells a manufacturer's goods bearing the manufacturer's mark
acquires any rights in the mark; nor is there anything in the statute which suggests
that such a person may register a mark which his supplier has adopted and used to
identify his goods. Ex parte E. Leitz, Inc., (Comr Pats) 105 USPQ 480. (Pp. 16-17, Vol.
IV, rec.).
2. The exclusive distributor does not acquire any proprietary interest in the
principal's trademark.
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. (87 CJS
258-259, citing cases.)
III
It has been repeatedly said that the objects of a trademark are "to point out
distinctly the origin or ownership of the goods to which it is affixed, to secure to him,
who has been instrumental in bringing into market a superior article of merchandise,
the fruit of his industry and skill, and to prevent fraud and imposition. 52 Am. Jur., p.
50, citing cases." (Etepha vs. Director of Patents, et al., 16 SCRA 495). Necessarily,
therefore, a trademark can only be used in connection with the sale of the identical
article that has been sold under the trademark or tradename to the extent
necessary to establish them as such (Note 1 L.R.A. [N.S.] 704; A.I.M. Percolating
Corporation vs. Ferrodine Chemical Corporation, et al., 124 S.E. 446).
In this instant case, the trademark "WONDER" has long been identified and
associated with the product manufactured and produced by the Dr. Jose R. Perez
Cosmetic Laboratory. It would thus appear that the decision under review is but in
consonance with the sound purposes or objects of a trademark. Indeed, a contrary
ruling would have resulted in the cancellation of the trademark in question and in
granting the pending application of herein petitioner to register the same trademark
in her favor to be used on her bleaching soap, which is of the same class as that of
respondent (bleaching and beauty soap) [see pp. 222, 265-276, Vol. I, rec.; also Exh.
"9", p. 105, Vol. III, rec.]. And the effect on the public as well as on respondent Dr.
Jose R. Perez would have been disastrous. Such a situation would sanction a false
implication that the product to be sold by her (petitioner) is still that manufactured
by respondent.
IV
Petitioner would also anchor her claim of exclusive ownership of the trademark in
question on the fact that she defrayed substantial expenses in the promotion of
respondent's soap as covered by the trademark "WONDER" and the printing of the
packages which she further claimed have been designed thru her efforts as she was
the one who hired the services of an artist who created the designed of the said
packages and trademark. Such claim was disposed correctly by respondent Director
of Patents, thus:
Petitioner's act in defraying substantial expenses in the promotion of the
Respondent's goods and the printing of the packages are the necessary or essential
consequences of Paragraph 6 of the agreement because, anyway, those activities
are normal in the field of sale and distribution, as it would redound to her own
benefit as distributor, and those acts are incumbent upon her to do. While it may be
argued that sale by the Petitioner may be regarded as trademark use by her,
nevertheless it should also be regarded that such sale is a consequence of the

"Exclusive Distributorship Agreement" and it inured to the benefit of the Respondent


because it was his trademark that was being used. But this does not result in the
Respondent's surrender in her favor of the right to register the trademark in her own
name. What would happen if the first five years' period terminates and the
Respondent decide not to continue with the agreement under Paragraph 1 thereof?
What trademark would he use if he himself assumes the distribution thereof or if he
contracts with another, entity or person for exclusive distributorship? (P. 17, Vol. IV,
rec.).
It is true that she has been dealing with the product "Wonder Soap" even before the
execution of the Exclusive Distributorship Agreement on September 1, 1959,
evidence by her agreement with Grace Trading Co., Inc. dated June 23, 1959 for the
printing of boxes-containers for the "Wonder Soap" and the literature accompanying
the same (Exhs. "Q" and "W", pp. 58, 68, Vol. III, rec.), as well as by another contract
dated July 22, 1959 with the Philippine Broadcasting Corporation for spot
announcement of the product "Wonder Soap" showing her as the sponsor (Exh. "I-1"
or "5-A", p. 18, Vol. III, rec.). But this was because Manserco, Inc., which handled first
the distribution of the product "Wonder Soap" from January, 1959 to July, 1959,
employed her (petitioner) to help precisely in the marketing and distribution of the
said product, she being the sister of Mariano Yangga who was then the general
manager of said Manserco, Inc., as testified to by Mr. Augusto Cesar Espiritu, who, as
earlier adverted to, was the organizer and one of the incorporators of the Manserco,
Inc.(pp. 480-481, Vol. III, rec.).
V
From the records, it further appears that pursuant to the Exclusive Distributorship
Agreement between petitioner and respondent, the latter manufactured "WONDER"
soap and delivered them to the former who in turn handled the distribution thereof.
This continued for sometime until January, 1961, when the arrangement was
stopped because as claimed and alleged by herein respondent, he discovered that
petitioner began manufacturing her own soap and placed them in the boxes which
contained his name and trademark, and for which reason respondent Dr. Perez filed
an unfair competition case against her (petitioner) [see pp. 29-31, Vol. I, rec.; pp.
379-380, Vol. II, rec.] with the Court of First Instance of Bulacan, which issued a writ
of preliminary injunction against her. These claims of respondent were never denied,
much less refuted by petitioner in her rebuttal testimony. Earlier in her direct
testimony, petitioner stated that her occupation was merchant and manufacturer of
bleaching soap (p. 222, Vol. II, rec.) and on cross-examination she stated that she
manufactured Marvel and Dahlia Bleaching Beauty Soap as well as C.Y. GABRIEL
WONDER BEAUTY SOAP, although she claimed to have manufactured the same only
from February, 1961 to September, 1961 (pp. 265-270, Vol. II, rec.). Her use of the
mark "Wonder" on the soap manufactured by her is patently shown by Exhibit "9"
consisting of a cake of soap with the inscription C.Y. GABRIEL WONDER SPECIAL and
an accompanying literature wherein appear, among others, the following words: C.Y.
Gabriel WONDER MEDICATED Beauty Soap, Manufactured by: C.Y. GABRIEL
COSMETIC LABORATORY (see Exh. "9", p. 105, Vol. III, rec.; pp. 440-441, Vol. II, rec.).
VI
OUR examination of the entire records of the present case likewise revealed
petitioner's disregard of the rudiments of fair dealing. Mr. Justice Fernando, in behalf
of the Court, stated in Lim Kiah vs. Kaynee Company, thus:
... The decision of the Director of Patents is not only sound in law but also
commendable for its consonance with the appropriate ethical standard which by no
means should be excluded from the business world as alien, if not a hostile, force.
While in the fierce competitive jungle which at time constitutes the arena of
commercial transactions, shrewdness and ingenuity are at a premium, the law is by

no means called upon to yield invariably its nod of approval to schemes frowned
upon by the concept of fairness. Here, petitioner engaged in manufacturing and
selling the same kind of products would rely on a trademark, which undeniably was
previously registered abroad and which theretofore had been used and advertised
extensively by one of the leading department stores in the Philippines. (25 SCRA
490.)
To our mind, the situation of herein petitioner is worse.
WHEREFORE, THE DECISION SOUGHT TO BE REVIEWED IS HEREBY AFFIRMED AND
THE PETITION IS HEREBY DISMISSED. WITH COSTS AGAINST PETITIONER.

G.R. No. 91385 January 4, 1994

HEIRS OF CRISANTA Y. GABRIEL-ALMORADIE, herein represented by


the special administrator LORENZO B. ALMORADIE of the Intestate Estate
of
the
Late
Crisanta
Y.
Gabriel-Almoradie
and
LORENZO
B.
ALMORADIE, petitioners,
vs.
COURT OF APPEALS and EMILIA M. SUMERA, herein sued in her capacity as
special administratrix of the Testate Estate of the late DR. JOSE R.
PEREZ, respondents.
Romeo Lagman, Valdecantos, Evangelista Law Offices for petitioners.
Jesus I. Santos Law Office for private respondent.

NOCON, J.:
Just for the record, the present case, involving the same parties and the same
trademark has been twice before the Director of Patents, twice before the trial
courts, four times before the Court of Appeals and twice before this Court.
On review before us is the decision of the Court of Appeals in the case entitled
"Emilia M. Sumera v. Crisanta Y. Gabriel, CA-G.R. CV No. 12866" 1 which reversed and
set aside the order of the Regional Trial Court in Civil Case No. C-8147, 2 dismissing
the complaint filed by private respondent, Emilia M. Sumera against Crisanta Y.
Gabriel for Infringement of Trademarks and Damages with Prayer for Issuance of a
Writ of Preliminary Injunction.
Historical antecedents of the case at bar relate as far back as 1953 when the
late Dr. Jose Perez discovered a beauty soap for bleaching, which whitens or
sometimes softens the skin. A certificate of label approval was issued in his name by
the Bureau of Health on June 6, 1958 for the said product with the label reading " Dr.
Perez' Wonder Beauty Soap." Not surprisingly, he later developed an improved
formula for his soap after continued laboratory experimentation, for which he
obtained another certificate of label approval from the Bureau of Health on August
10, 1959, also describing the product as "Dr. Perez Wonder Beauty Soap (Improved
Formula)." 3
Needing a marketing firm for wider distribution of his soap, he entered into an
agreement on January 1959 with a certain company named "Manserco," owned and
managed by Mariano S. Yangga, for the distribution of his soap.
This venture, however, did not last long, as the corporation allegedly went
bankrupt. He then terminated his agreement with Manserco and forged an
"Exclusive Distributorship Agreement" with Crisanta Y. Gabriel, who happened to be
the sister of Mariano S. Yangga. What could have been a good business relation
turned sour; instead a series of legal battles transpired thereafter between them in
the Patent and Trademark Office, the trial court, the Court of Appeals and this Court.
I. On October 3, 1960, Gabriel filed an application with the Patent Office to
register the trademark "WONDER." Said application was denied on November 18,
1960 on the ground that Gabriel was not the owner of the trademark sought to be
registered and that as shown in the labels submitted, it appeared that Dr. Jose R.
Perez is the owner of the said mark. On the other hand, on May 11, 1961, Perez
obtained in his name a certificate of registration No. SR-389 covering the same
trademark "WONDER" for beauty soap. 4
II. Thereafter, Perez filed a complaint for Unfair Competition with Injunction and
Damages,
dated
August
8,
1961,
docketed
as
Civil
Case
No. 2422, against Gabriel. In the said complaint, Perez alleged that Gabriel, without

just cause and in violation of the terms of the distributorship agreement, stopped
selling and distributing "WONDER" soap, and instead on October 3, 1960 Gabriel
tried to register the trademark "WONDER" in her name.
On September 7, 1961, a writ of preliminary injunction was issued against
Gabriel, restraining her "from making, manufacturing, and producing 'Wonder
Bleaching Beauty Soap' with the same labels and chemical ingredients as those of
the plaintiff, and from advertising, selling and distributing the same products." 5 As
to what happened to this civil suit, or whether the case was ever terminated remains
unknown and is not on record.
III. Meanwhile, on October 19, 1962, Gabriel, in Inter Partes Case
No. 280, filed a Petition to Cancel Certificate of Registration No. SR-389 covering the
trademark "WONDER" for beauty soap in the name of Dr. Perez. On July 15, 1964, a
decision was rendered by Director of Patents Tiburcio S. Evalle denying said petition.
Her motion for reconsideration thereof having been denied, Gabriel filed a petition
for review before this Court, entitled "Crisanta Y. Gabriel v. Dr. Jose R. Perez and
Hon. Tiburcio Evalle as Director of Patents," G.R. No. L-24075. 6
The above case was decided in favor of Perez since the court found out that:
. . . the trademark "WONDER" has long been identified and associated with the
product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It
would thus appear that the decision under review is but in consonance with the
sound purposes or objects of a trademark. Indeed, a contrary ruling would have
resulted in the cancellation of the trademark in question and in granting the pending
application of herein petitioner to register the same trademark in her favor to be
used on her bleaching soap, which is of the same class as that of respondent. And
the effect on the public as well as on respondent Dr. Jose R. Perez would have been
disastrous. Such a situation would sanction a false implication that the product to be
sold by her (Gabriel) is still that manufactured by respondent 7
xxx xxx xxx
On the claim of Gabriel that the exclusive ownership of the trademark
"WONDER" is vested in her by virtue of her agreement with Perez, the court further
said:
The fact that paragraph 6 (Exh. "F-2") of the (Distributorship) agreement
provides that the petitioner 'has the exclusive right of ownership of the packages
and that said party is responsible for the costs as well as the design and manner of
packaging the same' did not necessarily grant her the right to the exclusive use of
the trademark; because the agreement never mentioned transfer of ownership of
the trademark. It merely empowers the petitioner as exclusive distributor to own the
package and to create a design at her pleasure, but not the right to appropriate
unto herself the sole ownership of the trademark so as to entitle her to registration
in the Patent Office. . . . (emphasis supplied)
The exclusive distributor does not acquire any proprietary interest in the
principal's trademark.
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 interest in the mark which will extinguish the 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. (87 CJS 258-259, citing cases.) 8
IV. The issue of ownership of the trademark "WONDER" having been settled as
pronounced in the above decision, Emilia M. Sumera, in her capacity as special

administratrix of the estate of Dr. Jose R. Perez, who died on October 9, 1971, filed
on January 31, 1975, with the Philippine Patent Office an application for registration
of the trademark "WONDER" for beauty soap in the Principal Register. The
application was later amended to change the name of the applicant to "The Testate
of the late Dr. Jose R. Perez, represented by Emilia Sumera as Special
Administratrix." Gabriel opposed anew the application alleging among others that 1)
she is the owner of the trademark "WONDER" used for beauty soap and had been
using it prior to the alleged date of first use of applicant (Sumera); 2) that the
trademark "WONDER" which she created and adopted is well known throughout the
Philippines and even abroad, that the use thereof by the applicant (Sumera) would
result in confusion in her business to her damage and prejudice. 9

As a consequence, on March 28, 1980, Sumera filed a motion to reinstate the


restraining order issued on February 28, 1980, while Gabriel filed a reply to the
opposition on April 15, 1980 and on April 25, 1980, she filed her answer with
counterclaim and a prayer for the issuance of a writ of preliminary injunction. In her
answer, she again alleged that 1) the registrations of the trademark "WONDER" (SR2138 and Reg. No. 25610) in the name of Dr. Perez were unlawfully, irregularly and
fraudulently procured; 2) that the trademark "WONDER" has been registered with
the Patents Office in the name of a certain Go hay as early as 1959, which
registration was assigned to her and as successor-in-interest, her right to the
trademark dates back from 1959; 3) and that she created and developed the
package bearing the trademark "WONDER" and is the true and lawful owner thereof.

The Director of Patents dismissed the opposition on the ground of res judicata,
the issues having been resolved in G.R. No. L-24075. The application was approved
and Certificate of Registration No. 25610 in the Principal Register was issued for the
trademark "WONDER" in the name of "The Testate Estate of Dr. Jose R. Perez." 10

In an order dated September 15, 1980, the trial court issued a writ of
preliminary injunction against Sumera and the estate of Dr. Jose R. Perez. 15 This
prompted Sumera to elevate the matter to the Court of Appeals in a petition
forcertiorari questioning the court's order. Initially, the appellate court sustained the
order of the trial court. Nevertheless, upon motion for reconsideration of Sumera,
the appellate court on September 8, 1961 16 modified its earlier decision of February
24, 1981 and said:

The foregoing decision of the Director of Patents was appealed before the
Court of Appeals and the appellate court in CA-G.R. SP-07446-R 11 said:
Appellant Gabriel's insistence that there is no identity of parties between G.R.
No. L-24075 and the case at bar is untenable. The fact that Emilia Sumera was not a
party in the first case is of no moment, inasmuch as her participation in the case at
bar is merely as representative of the estate of the late Dr. Perez, being the Special
Administratrix. It should be noted that the application for registration of the
trademark filed by Emilia Sumera was amended and the name of the applicant was
changed to the Testate Estate of the late Dr. Jose R. Perez, who is deemed the owner
of the trademark.
xxx xxx xxx
It should be noted that appellant Gabriel's petition for cancellation of the
trademark in the supplemental register in the name of Dr. Perez was based on her
claim of ownership of said trademark. The decision in said case, (G.R. No. L-24075)
shows that both parties endevored to prove their rights of ownership of the
trademark "Wonder". In the case at bar, the same parties again assert their rights of
ownership of the same trademark. It is clear, therefore, that between the two suits,
there is identity of cause of action, i.e., the same parties' claim of ownership of the
trademark "Wonder." What is different here only is the form of action. But the
employment of two different forms of action does not enable one to escape the
operation of the principle that one and the same cause of action shall not be twice
litigated. (Yusingco v. Ong Hing Lian, G.R. No. L-26523, Dec. 24, 1971, 42 SCRA 589,
605). 12
V. Despite the foregoing, Gabriel continued distributing and selling beauty soap
products using the mark "Wonder." Thus, on December 18, 1979, Sumera filed an
action against Gabriel for Infringement of Trademark with Damages and a Prayer for
a Writ of Preliminary Injunction before the Regional Trial Court (Civil Case No. C8147, case at bar under our review). The trial court granted a temporary restraining
order and in the Order of February 28, 1980, Gabriel was enjoined from using the
trademark "Wonder." 13 Subsequently, Gabriel filed a motion to quash the temporary
restraining order invoking as a ground res judicata, alleging the pendency of Civil
Case
No. 2422, filed before the Court of First Instance of Bulacan, Branch III, involving the
same parties and trademark. Perhaps unaware of the events prior to the filing of the
present complaint, 14 or so we would like to think, the court, on March 17, 1980,
ordered the lifting of the temporary restraining order issued on February 28, 1980.

While it is true that it is not Our role in this present posture of the case to
decide who of the parties is entitled (to) the use of the trademark "Wonder" for that
has to be decided by respondent Court on the merits of the case before it, the fact
remains that the Patent Office had issued in favor of petitioner a certificate of
registration for the use of the trademark "Wonder" for the manufacture, sale, etc.
ofbleaching and beauty soap in the same way that the Patent Office had also issued
a certificate of registration in favor of Go Hay, private respondents' assignor, for the
use of the trademark "Wonder" in the manufacture, sale, etc. of laundry soap in bars
and cakes. Private respondents, however, claimed that they are entitled to the use
of said trademark not only on laundry soaps in cakes and bars but to all goods falling
under Classification No. 3 which includes 'bleaching preparations and other
substances for laundry use; cleaning, polishing, scouring abrasive preparations;
soap, perfumery, essential oils, cosmetics, hair lotions, dentifrices which, according
to private respondents, includes bleaching and beauty soap and, therefore, under
the patent which was issued on June 30, 1959 prior to one issued to Dr. Perez on
May 11, 1961, private respondents were entitled to the exclusive use of said
trademark and to restrain petitioner from the use of said trademark even on
bleaching soap. (emphasis ours).
On the other hand, petitioner claimed that the right of the Estate of Dr. Perez to
use the said trademark, especially as against private respondents, had been
sustained by the Supreme Court in its decision in Gabriel vs. Perez, 55 SCRA 406.
While We maintain Our original position that We should not decide in the case
before Us who is better entitled to the use of said trademark, We are bound to
accord prima facie validity to the certificates of registration issued to both petitioner
and private respondents until the certificates of registration issued by the Patent
Office in favor of petitioner or to private respondents as assignee of Go Hay are
annulled or set aside in a proper proceedings. Accordingly, We find it necessary to
reconsider Our decision sustaining the order of respondent Court issuing a
preliminary injunction against petitioner, for an injunction against petitioner
preventing her to avail of the right to the use of the trademark "Wonder" under the
certificate of registration issued by the Patent Office in favor of Dr. Perez which until
now remained valid as it had not been set aside by competent authority, would be
clearly iniquitous and unjust. In the same manner, private respondents should not
be restrained from availing of their rights to the use of the trademark "Wonder." The
end result would be, during the pendency of the case before the lower Court, both

petitioner and private respondents should be permitted to manufacture and


distribute articles which are covered by their respective trademarks.
IN VIEW OF THE FOREGOING, Our decision of February 24, 1981 is hereby
MODIFIED in the sense that the order of respondent Court of September 15, 1980 to
the extent that it granted the issuance of a preliminary injunction restraining
petitioner from using the trademark "Wonder" in the manufacture, advertisement,
packing, marketing, distribution and sale of beauty soap is hereby SET ASIDE and
the preliminary injunction issued pursuant to said order declared NULL and VOID. 17
VI. While Civil Case No. C-8147 was still pending, Luis M. Duka, Jr., Assistant to
the
Director,
Philippine
Patent
Office,
in
an
order
dated
November 16, 1984, cancelled Certificate of Registration No. SR-2138 in the
Supplemental Registrar and No. 25610 in the Principal Registrar, of the trademark
"WONDER" both in the name of the "Testate Estate of Dr. Jose R. Perez," for failure to
file the required Fifth Anniversary Affidavit of Use/Non Use. 18 Gabriel then, alleging
the above cancellation, filed an "Omnibus Motion" on December 19, 1984, for the
issuance of a restraining order, 19 which was granted by the trial court on January 4,
1985. 20
However, on June 5, 1985, upon motion for reconsideration of Sumera, the
court lifted its order of January 4, 1985 and ordered the Sheriff to return to
respondent the equipment, machineries and products seized. 21Nevertheless, on July
17, 1985, the trial court, upon motion for reconsideration of Gabriel and despite the
opposition of Sumera to said motion, lifted its Order of June 5, 1985, reinstated its
Order of January 4, 1985, and ordered anew the seizing of respondent's equipment,
machineries and products. 22
Hence, Sumera sought again the intervention of the Court of Appeals and filed
a petition for review on certiorari. On July 25, 1986, the appellate court in AC-G.R. SP
No. 06915 23 granted the petition of Sumera and said:
The only issue this Court has to resolve is whether or not the respondent Judge
acted with grave abuse of discretion amounting to want or absence of jurisdiction in
issuing the questioned order dated January 4, 1985, ordering the confiscation of the
equipments of the petitioners and the Order dated July 17, 1985, ordering the
reinstatement of his Order of January 4, 1985, after it was recalled in his Order of
June 5, 1985.
In fact, the issue raised in the instant case, appears to be the same as the
issue raised in the above quoted decision of the Court of Appeals in CA-G.R. SP
07446-R, where the trademark already registered already registered in the name of
Dr. Jose R. Perez was also cancelled for failure to file an affidavit of use within one
year following the fifth anniversary of the date of issue of the certificate of
registration, as required under Section 12 of Republic Act No. 166. The petition for
registration of Emilia M. Sumera, in her capacity as Special Administratrix of the
estate of Dr. Jose R. Perez, was also opposed by Crisanta Y. Gabriel. And in said case,
the Court of Appeals decided against the opposition of Crisanta Gabriel of the
registration of the application filed by Emilia M. Sumera, in representation of the
testate estate of Dr. Jose R. Perez, for the registration of the trademark "WONDER"
for beauty soap, granted by the Director of Patents. The Court of Appeals, and as
already above quoted, held that the question of ownership of the trademark
"WONDER"
having
been
decided
in
G.R. No. L-24075, the employment of two different forms of action shall not be twice
litigated.
Furthermore, the Former Third Division of the Appellate Court (in CA-G.R. No
SP-1167-R 24 [sic]) in its decision dated February 4, 1981, as amended by its
Resolution dated September 8, 1981, declared null and void the Order of the same

respondent Judge ordering a preliminary injunction, restraining Sumera from using


the trademark "WONDER" in the manufacture, advertisements, packaging,
marketing, distribution and sale of beauty soap. 25
xxx xxx xxx
We find merit in the petition. Considering the previous decisions not only of the
former Court of Appeals but of the Supreme Court, the questioned Order in effect
pre-judged the very issues raised in the pleadings of the parties, without the benefit
of a full blown trial or hearing as required by the Rules. The sole justification of the
respondent Judge in issuing the Order of July 17, 1985 reinstating its Order of
January 4, 1985 is the alleged cancellation of the trademark of petitioner by the
Bureau of Patents on November 16, 1984. Such, however, is without legal basis, as
the cancellation Order was not yet final, considering the filing of a motion to set
aside the order of cancellation based on the ground that the period for filing of the
affidavit of use had not yet expired. Until such time that the motion to set aside the
order of cancellation is final, trademark of petitioners was prematurely deemed or
non-existent. The only effect of said cancellation, assuming it to be valid, is that it
would deprive the registrant of the protection afforded him by law, which is the
protection from infringement of trademark, and it was erroneous and a grave abuse
of discretion for the respondent Judge to assume that when the registration of
petitioner was cancelled, private respondent became exclusive owner of the
exclusion of plaintiff Sumera, of the trademark 'WONDER' and thus, plaintiff Sumera
in pending case Civil Case No. C-8147 should, during the pendency of said case, be
preliminary enjoined, as provided in the questioned order of July 17, 1985 in relation
to the Order of January 4, 1985.
Private respondents (sic) claim that, "(p)petitioner's invocation of the decision
in G.R. No. L-24075 (Crisanta Y. Gabriel v. Dr. Jose R. Perez, et al) wherein she alleged
that the ownership of the trademark "WONDER" for beauty soap in favor of
petitioner was upheld," as well as the decision of the hen Court of Appeals in CA-G.R.
No. SP No. 07746-R is now of no moment because after the promulgation of the
decisions in said cases the circumstances between the parties (petitioner and
private respondents herein) have changed materially with the private respondent
Gabriel's acquisition of Go Hay's prior trademark "Wonder." Thus under existing
jurisprudence, the said decisions could not be enforced or made applicable as this
would produce inequity and injustice to private respondent Gabriel." . . . is without
merit, considering that she merely stepped into the shoes of Go Hay, and thus, could
have no better right than Go Hay as against Emilia Sumera (in her capacity as
Special Administratrix of the Estate of the late Dr. Jose R. Perez). 26
VII. Unfortunately, even before the foregoing decision was rendered, petitioner
Gabriel on August 13, 1985, filed with the Court a Manifestation and Motion to
Dismiss Plaintiff's Complaint for having been Rendered Moot and Academic. 27 In the
said
motion,
petitioner
reiterated
that
since
Certificate
No. SR-2138 and Certificate No. 25610 both of the registration of the trademark
"WONDER" in the name of the Estate of Dr. Jose R. Perez, had been cancelled in
Cancellation Order No. 143, dated November 16, 1984, respondent Sumera's cause
of action had become non-existent, as she no longer had rights to protect and
interest to pursue. Thus, finally, on December 24, 1985, the court without waiting for
the resolution of the Court of Appeals in AC-G.R. SP No. 06915, resolved to dismiss
the case. 28
Once more respondent Sumera pleaded before the Court of Appeals to review
and set aside the order of the trial court dismissing Civil Case
No. C-8147. The Court of Appeals granted the petition and in its considered opinion,
said:

The court a quo in dismissing the complaint for "Infringement of Trademark,


Damages and with a prayer for Issuance of a Writ of Preliminary Injunction," only
considered the injunctive relief which was issued to protect the present right of the
defendants confining as basis for dismissal the second paragraph of Section 23 of RA
166, as amended, providing that "the complaining party upon proper showing may
also be granted injunction," but it failed to consider the main paragraph of
Section 23, supra, providing that any person entitled to the exclusive use of a
trademark "may recover damages in a civil action from any person who infringes his
right . . . ." This section is clear. It allows a party to file "actions; and damages and
injunction for infringement." 29
xxx xxx xxx
The order is half-baked because the court a quo failed to make a definite ruling
on the pivotal question of whether or not plaintiff is entitled to damages as a
consequence of the infringement of the trademark which she claims to be the
registered owner at the very least from the time the (trademark) was registered in
her (predecessor's) name up to the time that it was cancelled on November 19,
1984.
Indeed, this Court already interdicted to the same presiding judge
in Emilia M. Sumera, etc. vs. Hon.Alfredo
M. Gorgonio
etc., Et
Al.,
AC-G.R. SP No. 06915, July 25, 1986, of the necessity of a "full blown trial" or hearing
of the issues raised in the pleadings as required by the Rules to avoid any
conception of judgment without hearing of full examination. 30
Petitioner now comes to us arguing that our decision in the case of Gabriel v.
Perez, supra, has become functus officio on account of the prior registration of the
trademark "WONDER" by Go Hay and its subsequent assignment to petitioner's
predecessors; and that the Cancellation No. 143, dated November 16, 1984
involving private respondent's trademark rendered the Civil Case No. C-8147 moot
and academic.
We are not convinced. Suffice it to say that these issues herein raised have
been
squarely
met
in
the
decisions
(CA-G.R.
SP-07446-R;
CA-G.R.
No. SP-11670-R; AC-G.R. SP No. 06915 and CA-G.R.R. CV No. 12886) rendered by the
appellate court, all of which we agree with. We find that the trial court erred in
dismissing the complaint of private respondent, Sumera, without determining
whether there was indeed infringement. Because, contrary to the presumption of the
trial court, the complaint in Civil Case No. C-8147 is not merely for preliminary
injunction, but for infringement of trademark and for damages.
In the interest of the public and for the expeditious administration of justice the
issue on infringement shall be resolved by the court considering that this case has
dragged on for years and has gone from one forum to another.
It is a rule of procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of
future litigation. No useful purpose will be served if the case or the determination of
an issue in a case is remanded to the trial court only to have its decision raised
again to the Court of Appeals and from there to the Supreme Court. 31
We laid down the rule that the remand of the case or of an issue to the lower
court for further reception of evidence is not necessary where the Court is in position
to resolve the dispute based on the records before it and particularly where the ends
of justice would not be subserved by the remand thereof. 32 Moreover, the Supreme
Court is clothed with ample authority to review matters, even though those not
raised on appeal if it finds that their consideration is necessary in arriving at a just
disposition of the case. 33

R.A. 166 describes what constitutes infringement:


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.
The law also provides that any person whose trademark or trade name is
infringed may recover damages in a civil action, and upon proper showing, may also
be granted injunction. 34
We cannot help but note Gabriel's propensity to infringe Dr. Perez' trademark,
an act which she has been doing since 1960. Assuming arguendo that she was able
to obtain a valid assignment of the trademark "Wonder GH" from Go Hay, still there
is no reason to believe that Gabriel, or her assigns, has been infringing respondent's
trademark since 1960, when she violated the distributorship agreement and
appropriated the mark as her own and went on, even when the trademark "Wonder
GH" was allegedly assigned to her.
The records at hand, show the two marks as registered in the Patents Office as
follows:
DRAWING
Glaring is the fact that the only difference in the above figures is the "supposed
origin" of the product ("Dr. Perez" as against "C.Y. Gabriel") which are not even as
eye catching as the word "WONDER" itself. Apparently, Gabriel never used or
adopted the trademark of Go Hay in her products, instead she has all along been
using the trademark registered in the name of Perez.
Petitioner's continued use of respondent's trademark on her product, instead of
the assigned mark "WONDER GH" is a clear act of abandonment due to non-use,
which is in fact a ground for cancellation of registration under Sec. 17 (b) of R.A.
166. What is worse is that there is obvious bad faith on the part of Gabriel in
acquiring the mark "Wonder GH." Undoubtedly her intent in having the mark
assigned to her is merely to give color to the use of the mark "WONDER" on her
products. Particularly so since the Director of Patents in October 1960, denied the
registration to Gabriel of the trademark "WONDER" because it was found that the
mark was already in use and is owned by Dr. Jose Perez. And then again i 1978,
petitioner failed to convince the Director of Patents and the Court of Appeals that
she has a right over the same trademark.
Petitioner's argument that the word "Wonder" could not be appropriated
exclusively as a trademark by private respondent has no leg to stand on. The matter
restricting the exclusive use of a trademark is only true overunrelated goods. The
law requires that in the adoption of a mark there should not be any likelihood of
confusion, mistake or deception to the consumer. 35 Records show that the
trademark Gabriel claims to own, through assignment from Go Hay, with certificate
of registration no. 33957 in the Principal Register and registration no. SR-4217 in the
Supplemental Register is principally for laundry soap in bars and cakes. 36 On the
other hand, the mark "WONDER" registered to the testate estate of Jose R. Perez
was registered principally for beauty soap. 37 This fact would not have been relevant

if no confusion results thereby. In the case at bar, although the presentation of the
marks as registered appears to be different, still confusion is bound to result, since
the marks are used on related goods (bleaching beauty soap as against laundry
soap).
There is likewise no merit in petitioner's assertion that Cancellation Order No.
143, dated November 16, 1984, rendered Civil Case No. C-8147 moot and academic.
We
reiterate
the
findings
of
the
Court
of
Appeals
in
AC
G.R.
Sp. 06915, supra. The cancellation order was issued allegedly due to respondent's
failure to file the affidavit of use as required by Sec. 12 of
R.A. 166. It is not, however, clear whether such order has become final as
respondent filed a motion to set aside the order, alleging that it was issued
prematurely.
Even assuming that the order has become final, still petitioner could not have
acquired an exclusive right over the mark "WONDER" as a matter of course. The
only effect of cancellation is that it would deprive the registrant protection from
infringement. Sec. 22 of R.A. 166, states that only a registrant of a mark can file a
case for infringement. On the other hand, Sec. 19 states that any right conferred
upon the registrant under the provisions of R.A. 166 terminates/only when judgment
or order of cancellation has become final. The present complaint was filed sometime
in December 1979, almost 5 years prior to the alleged cancellation order. Thus, until
the time that the right is finally terminated, respondent still has a cause of action
against petitioners.
Ultimately, what draws the axe against petitioners is the principle of
"first to use" on which our Trademark Law is based. We have said and reiterated in
the case of La Chemise Lacoste v. Fernandez, that:
The purpose of the law protecting a trademark cannot be overemphasized.
They are to point out distinctly the origin of ownership of the article to which it is
affixed, to secure to him, who has been instrumental in bringing into market a
superior article of merchandise, the fruit of his industry and skill, and to prevent
fraud and imposition. 38 (emphasis ours)
Sec. 2 of R.A. 166 states that as a condition precedent to registration the
trademark, trade name or service marks should have been in actual use in
commerce in the Philippines before the time of the filing of the application. A careful
perusal of the record shows that although Go Hay, assignor of Gabriel, first
registered the trademark "Wonder GH" on October 17, 1958 39 while the registration
of the trademark "WONDER" in the name of Dr. Perez was registered in the
Supplemental Register on May 11, 1961 and then the Principal Register on January
3, 1978, the certificate of registration issued to Go Hay showed that the mark
"Wonder GH" was first used on July 1, 1958, 40 while that of the mark "WONDER" in
favor of Dr. Perez was recorded to have been in use since March 3, 1953, 41 or five
(5) years prior to Go Hay's use. Thus, all things being equal, it is then safe to
conclude that Dr. Perez had a better right to the mark "WONDER." The registration of
the mark "Wonder GH" should have been cancelled in the first place because its use
in commerce was much later and its existence would likely cause confusion to the
consumer being attached on the product of the same class as that of the mark
"WONDER."
Considering the foregoing, we find that petitioners have been infringing the
trademark "WONDER" which rightfully belongs to respondent. However since the
original complaint calls for a determination of damages as a result of the
infringement, the trial court is ordered to receive evidence to ascertain the amount
thereof. As an incident thereto, the trial court will also have to find out whether the
cancellation order has become final and if it did, when it became final. On the other
hand the registration of the trademark "Wonder G.H." assigned to C.Y. Gabriel should

be and is hereby ordered cancelled since we found that: a) its procurement was
tainted with bad faith; b) its continued existence would cause confusion to the
consumers; and c) it is not being used by the assignees. 42
WHEREFORE, the petition is hereby DISMISSED for lack of merit. Petitioners,
having been found to be infringing the mark "WONDER", are permanently enjoined
from using the mark. This case is hereby REMANDED to the trial court only for the
purpose of determining the amount of damages due to the respondent. Finally, the
registration of the trademark "Wonder G.H." is hereby ORDERED cancelled. Let a
certification of this case be issued to the Director of Patents for appropriate action.
SO ORDERED.

UNNO COMMERCIAL ENTERPRISES, INCORPORATED, petitioner,


vs.
GENERAL MILLING CORPORATION and TIBURCIO S. EVALLE, in his capacity
as Director of Patents,respondents.
The Court affirms respondent Director of Patent's decision declaring respondent
General Milling Corporation as the prior user of the trademark "All Montana" on
wheat flour in the Philippines and ordering the cancellation of the certificate of
registration for the same trademark previously issued in favor of petitioner Unno
Commercial Enterprises, Incorporated, it appearing that Unno Commercial
Enterprises, Inc. merely acted as exclusive distributor of All Montana wheat flour in
the Philippines. Only the owner of a trademark, trade name or service mark may
applly for its registration and an importer, broker, indentor or distributor acquires no
rights to the trademark of the goods he is dealing with in the absence of a valid
transfer or assignment of the trade mark.
On December 11, 1962, respondent General Milling Corporation filed an
application for the registration of the trademark "All Montana" to be used in the sale
of wheat flour. In view of the fact that the same trademark was previously,
registered in favor of petitioner Unno Commercial Enterprises, Inc., the Chief
Trademark Examiner of the Philippines Patent Office declared an interference
proceeding 1 between respondent corporation's application (Serial No. 9732), as
Junior - Party-Applicant and petitioner company's registration (Registration No.
9589), as Senior Party-Applicant, docketed in the Philippines Patent Office as Inter
Partes Case No. 313, to determine which party has previously adopted and used the
trademark "All Montana".
Respondent General Milling Corporation, in its application for registration,
alleged that it started using the trademark "All Montana" on August 31, 1955 and
subsequently was licensed to use the same by Centennial Mills, Inc. by virtue of a
deed of assignment executed on September 20, 1962. On the other hand petitioner
Unno Commercial Enterprises, Inc. argued that the same trademark had been
registered in its favor on March 8, 1962 asserting that it started using the trademark
on June 30, 1956, as indentor or broker for S.H. Huang Bros. & Co., a local firm.
The Director of Patents, after hearing, ruled in favor of respondent General
Milling Corporation and rendered its decision as follows:
However, there is testimony in the record (t.s.n., pp. 11-12, Jan.17,1967,
testimony of Jose Uy) to the effect that, indispensable, "ALL MONTANA" wheat flour
is a premium flour produced from premium wheat coming from the State of
Montana, U.S.A. It is apparent that the trademark is primarily geographically
descriptive of the goods. It is therefore a matter overlooked by the Trademark
Examiner, and it is incumbent upon him to determine if the applicant should claim

and is qualified to claim distinctiveness under Section 4(f) of the Trademark Statute.
Otherwise, it is registrable on the Supplemental Register and should thus be
registered therein.
WHEREFORE, the Junior Party-Applicant is adjudged prior -user of the
trademark ALL MONTANA, but 'because it is primarily geographically descriptive, the
application is herein remanded to the Chief Trademark Examiner for proper
proceeding before issuance of the certificate of registration.
The certificate of registration issued to the Senior Party is ordered cancelled.
IT IS SO ORDERED.
After its motion for reconsideration was denied, petitioner brought the instant
petition seeking the reversal of the decision and praying that it be declared the
owner and prior user of the trademark "All Montana" on wheat flour.
Petitioner based its claim of ownership over the trademark in question by the
fact that it acted as an indentor or broker for S. H. Huang Bros. & Co., a local
importer of wheat flour, offering as evidence the various shipments, documents,
invoices and other correspondence of Centennial Mills, Inc., shipping thousand of
bags of wheat flour bearing the trademark "All Montana" to the Philippines.
Petitioner argued that these documents, invoices and correspondence proved the
fact that it has been using the trademark "All Montana" as early as 1955 in the
concept of an owner and maintained that anyone, whether he is only an importer,
broker or indentor can appropriate, use and own a particular mark of its own choice
although he is not the manufacturer of the goods he deals with. Relying on the
provisions of Section 2-A of the Trademarks Law 2 (Republic Act 166), petitioner
insists that "the appropriation and ownership of a particular trademark is not merely
confined to producers or manufacturers but likewise to anyone who lawfully deals in
merchandise who renders any lawful service in commerce, like petitioner in the case
at bar. 3
The right to register trademark is based on ownership. 4 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. 5 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. 6
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. A local importer, however, may make application for the registration of a
foreign trademark, trade name or service mark if he is duly authorized by the actual
owner of the name or other mark of ownership. 7
Thus, this Court, has on several occasions ruled that where the applicant's
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. 8
Moreover, the provision relied upon by petitioner (Sec. 2-A, Rep. Act No. 166)
allows one "who lawfully produces or deals in merchandise ... or who engages in any
lawful business or who renders any lawful service in commerce, by actual use
thereof . . . (to) appropriate to his exclusive use a trademark, or a service mark not
so appropriated by another. " In the case at bar, the evidence showed that the
trademark "All Montana" was owned and registered in the name of Centennial Mills,
Inc. which later transferred it to respondent General Milling Corporation by way of a

deed of assignment. It is undisputed that way back in March, 1955, Centennial Mills,
Inc. under the tradename Wenatchee Milling Co., exported flour to the Philippines,
through its distributor, herein petitioner Unno Commercial Enterprises, Inc. which
acted as indentor or broker for the firm S. H. Huang Bros. & Co. However, because of
increased taxes and subsidies, Centennial Mills discontinued shipments of flour in
the Philippines and eventually sold its brands for wheat flour, including "All
Montana" brand to respondent General Milling Corporation in consideration of 1,000
shares of stock of respondent corporation with a par value of P100.00 per share or a
total of P100,000.00. Respondent General Milling Corporation, since the start of the
operation in 1961 of its flour mills located in Lapu-lapu City, Cebu has been
manufacturing and selling "All Montana" flour in the Philippines.
As against petitioner's argument that respondent failed to establish
convincingly the ownership of the trademark "All Montana" by its assignor
Centennial Mills, Inc., the Director of Patents correctly found that ample evidence
was presented that Centennial Mills, Inc. was the owner and prior user in the
Philippines of the trademark "All Montana" through a local importer and broker. The
Deed of Assignment itself constitutes sufficient proof of its ownership of the
trademark "All Montana," showing that Centennial Mills was a corporation duly
organized and existing under and by virtue of the laws of the State of Oregon, U.S.A.
with principal place and business at Portland, Oregon, U.S.A. and the absolute and
registered owner of several trademarks for wheat flour, i.e. (Imperial, White Lily,
Duck, General, Swan, White Horse, Vinta, El Paro, Baker's Joy, Choice, Red Bowl All
Montana and Dollar.) all of which were assigned by it to respondent General Milling
Corporation. The deed of assignment was signed by its president, Dugald
MacGregor, duly acknowledged before James Hunt, a notary public for the State of
Oregon, accompanied by a certification issued by the Secretary of State of the State
of Oregon stating that the said James Hunt is a duly qualified Notary Public with full
power and authority to take acknowledgments of all oaths and that full faith and
credit should be given to his official acts as notary public.
The Director of Patents likewise correctly rejected petitioner's contention that
in a 1954 conference in Manila the ownership and use by petitioner of the brand "All
Montana" was agreed upon, on the contrary finding that "Details of that meeting
were, however, explained by Mr. Dugald MacGregor, President of Centennial Mills,
Inc., as the Junior Party's rebuttal witness. Mr. MacGregor confirmed holding such
conference in a restaurant in Manila with representatives of the Senior Party,
namely; Messrs. Jose Uy, Francisco Gonzales and S. H. Huang although he could not
remember the name of the restaurant. He further explained that his company owned
the trademark; that it had been using the mark in the United States; and that
ownership of the mark had never been conferred upon any other company, much
less the Senior Party"; and "Inasmuch as it was not the owner of the trademark, the
Senior Party could not be regarded as having used and adopted it, and had no right
to apply for its registration. It acknowledged that it was a mere importer of flour, and
a mere importer and distributor acquires no rights in the mark used on the imported
goods by the foreign exporter in the absence of an assignment of any kind ...
Trademarks used and adopted on goods manufactured or packed in a foreign
country in behalf of a domestic importer, broker, or indentor and distributor are
presumed to be owned by the manufacturer or packer, unless there is a written
agreement clearly showing that ownership vests in the importer, broker, indentor or
distributor.
Thus, petitioner's contention that it is the owner of the mark "All Montana"
because of its certificate of registration issued by the Director of Patents, must fail,
since ownership of a trademark is not acquired by the mere fact of registration
alone. 9 Registration merely creates a prima facie presumption of the validity of the
registration, of the registrant's ownership of the trademark and of the exclusive right
to the use thereof. 10 Registration does not perfect a trademark right. 11 As conceded

itself by petitioner, evidence may be presented to overcome the presumption. Prior


use by one will controvert a claim of legal appropriation, by subsequent users. In the
case at bar, the Director of Patents found that "ample evidence was presented in the
record that Centennial Mills, Inc. was the owner and prior user in the Philippines of
the trademark 'All Montana' through a local importer and broker. Use of a trademark
by a mere importer, indentor or exporter (the Senior Party herein) inures to the
benefit of the foreign manufacturer whose goods are Identified by the trademark.
The Junior Party has hereby established a continuous chain of title and,
consequently, prior adoption and use" and ruled that "based on the facts
established, it is safe to conclude that the Junior Party has satisfactorily discharged
the burden of proving priority of adoption and use and is entitled to registration." It
is well-settled that we are precluded from making further inquiry, since the findings
of fact of the Director of Patents in the absence of any showing that there was grave
abuse of discretion is binding on us 12 and the findings of facts by the Director of
Patents are deemed conclusive in the Supreme Court provided that they are
supported by substantial evidence. 13 Petitioner has failed to show that the findings
of fact of the Director of Patents are not substantially supported by evidence nor
that any grave abuse of discretion was committed.
Finally, the Court finds without merit petitioner's argument that the Director of
Patents could not order the cancellation of' its certificate of registration in an
interference proceeding and that the question of whether or not a certificate of
registration is to be cancelled should have been brought in cancellation proceedings.
Under Rule 178 of the Rules of the Patent Office in Trademark Cases, 14 the Director
of Patents is expressly authorized to order the cancellation of a registered mark or
trade name or name or other mark of ownership in an inter partes case, such as the
interference proceeding at bar. 15
WHEREFORE, the appealed decision is hereby affirmed. No costs.

EY INDUSTRIAL SALES v. SHEN DAR

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.

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]

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,
SD-32, 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]

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;
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

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. 4-1997121492 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:

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
1.

Whether Shen Dar is guilty of forum shopping;

2.

Whether the first-to-file rule applies to the instant case;

3.

Whether Shen Dar presented evidence of actual use;

4.

Whether EYIS is the true owner of the mark VESPA;

5.
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]

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.

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. 4-1999005393 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]

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.

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 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 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 Bureau of Legal Affairs shall have the
following functions:

xxxx
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.

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

Second Issue:
Whether evidence presented before the BLA must be formally offered
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.

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.

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and
9 which, in turn, provide:

Third Issue:

Section 7. Filing of Petition or Opposition

Whether the IPO Director General can


validly cancel Shen Dars Certificate of Registration

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.

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.
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.

Office Order No. 79, Series of 2005, provides under its Sec. 5 that:

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.

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;

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.

(8) when the findings of fact are themselves conflicting;


The BLA ruled on the same issue, as follows:
(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

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.

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.

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 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 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

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.

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]

Fifth Issue:

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.

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 markthe prior
and continuous user.

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]

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 hereby REVERSEDand 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.

BIRKENSTOCK ORTHOPAEDIE GMBH AND CO. KG (formerly BIRKENSTOCK


ORTHOPAEDIE
GMBH),Petitioner,
vs.
PHILIPPINE SHOE EXPO MARKETING CORPORATION, Respondent.
DECISION
PERLAS-BERNABE, J.:

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]

Assailed in this Petition for Review on Certiorari 1 are the Court of Appeals (CA)
Decision2 dated June 25, 2010 and Resolution 3 dated October 27, 2010 in CA-G.R. SP
No. 112278 which reversed and set aside the Intellectual Property Office (IPO)
Director Generals Decision 4 dated December 22, 2009 that allowed the registration
of various trademarks in favor of petitioner Birkenstock Orthopaedie GmbH & Co.
KG.
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 4-1994-095043 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. 6 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).7 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, 8 thereby resulting in the
cancellation of such mark.9 Accordingly, the cancellation case was dismissed for
being moot and academic.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. 11 In
response, respondent filed three (3) separate verified notices of oppositions to the
subject applications docketed as Inter Partes Case Nos. 14-2007-00108, 14-200700115, and 14-2007-00116,12 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; 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. 56334.13 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).14
The Ruling of the BLA
In its Decision15 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.16
Aggrieved, petitioner appealed to the IPO Director General.
The Ruling of the IPO Director General
In his Decision17 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. 18 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. 19 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.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 Decision21 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. 22 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." 23 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.24 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).
Dissatisfied, petitioner filed a Motion for Reconsideration 25 dated July 20, 2010,
which was, however, denied in a Resolution 26 dated October 27, 2010. Hence, this
petition.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 Comment28 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. 29 As such, they should be deemed
inadmissible.
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." 30"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." 31 This is especially true with quasi-judicial
and administrative bodies, such as the IPO, which are not bound by technical rules
of procedure.32 On this score, Section 5 of the Rules on Inter Partes Proceedings
provides:
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) 166,34 the governing law for Registration No. 56334, requires
the filing of a DAU on specified periods,35 to wit:
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 tradename 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 37 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.
Besides, petitioner has duly established its true and lawful ownership of the mark
"BIRKENSTOCK."
Under Section 238 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 39 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.40
It must be emphasized that registration of a trademark, by itself, is not a mode of
acquiring ownership.1wphi1 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. 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 42 is
instructive on this point:
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.43 (Emphasis and underscoring supplied)
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.

FOOTNOTES:

29

Section 8.1 of the Rules on Inter Partes Proceedings states:

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 substituted in lieu of the
originals. The affidavits and documents shall be marked consecutively as "exhibits"
beginning with the number "1."

In the same manner, Rules 204 and 801 of the Rules and Regulations on Trademarks
provide: Rule 204. Declaration of Actual Use. The Office will not require any proof
of use in commerce in the processing of trademark applications. However, without
need of any notice from the Office, all applicants or registrants shall file a
declaration of actual use of the mark with evidence to that effect within three years,
without possibility of extension, from the filing date of the application. Otherwise,
the application shall be refused or the mark shall be removed from the register by
the Director motu proprio.
Rule 801. Duration. A certificate of registration shall remain in force for ten (10)
years, Provided, That without need of any notice from the Office, the registrant shall
file a declaration of actual use and evidence to that effect, or shall show valid
reasons based on the existence of obstacles to such use, as prescribed by these
Regulations, within one (1) year from the fifth anniversary of the date of the
registration of the mark. Otherwise, the Office shall remove the mark from the
Register. Within one (1) month from receipt of the declaration of actual use or reason
for nonuse, the Examiner shall notify the registrant of the action taken thereon such
as acceptance or refusal.
36

See Mattel, Inc. v. Francisco, G.R. No. 166886, July 30, 2008, 560 SCRA 504, 513514.
37

Section 236 of the IP Code provides:

Alcantara v. Philippine Commercial and International Bank, G.R. No. 151349,


October 20, 2010, 634 SCRA 48, 61.

Sec. 236. Preservation of Existing Rights. Nothing herein shall adversely affect the
rights on the enforcement of rights in patents, utility models, industrial designs,
marks and works, acquired in good faith prior to the effective date of this Act.

31

38

30

Asia United Bank v. Goodland Company, Inc., G.R. No. 188051, November 22,
2010, 635 SCRA 637, 645.
32

See E.Y. Industrial Sales, Inc. v. Shen Dar Electricity and Machinery Co., Ltd., G.R.
No. 184850, October 20, 2010, 634 SCRA 363, 378.
33

See id. at 378-381.

34

Entitled, "AN ACT TO PROVIDE FOR THE REGISTRATION AND PROTECTION OF


TRADE-MARKS,
TRADE-NAMES
AND
SERVICE-MARKS,
DEFINING
UNFAIR
COMPETITION AND FALSE MARKING AND PROVIDING REMEDIES AGAINST THE SAME,
AND FOR OTHER PURPOSES."
35

Such rule was carried over in Sections 124.2 and 145 of RA 8293, otherwise known
as the Intellectual Property Code of the Philippines (IP Code), viz.:

Section 2 of RA 166 provides:

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

Sec. 124. Requirements of Application. x x x

39

xxxx

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

124.2. The applicant or the registrant shall file a declaration of actual use of the
mark with evidence to that effect, as prescribed by the Regulations within three (3)
years from the filing date of the application. Otherwise, the application shall be
refused or the mark shall be removed from the Register by the Director.
Sec.145. Duration. A certificate of registration shall remain in force for ten (10)
years: Provided, That the registrant shall file a declaration of actual use and
evidence to that effect, or shall show valid reasons based on the existence of
obstacles to such use, as prescribed by the Regulations, within one (1) year from the
fifth anniversary of the date of the registration of the mark. Otherwise, the mark
shall be removed from the Register by the Office.

40

Section 2-A, which was added by RA 638 to RA 166, provides:

Ecole de Cuisine Manill

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