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G.R. No.

118295 May 2, 1997 To hasten worldwide recovery from the devastation wrought by the qualified Filipinos (and to) promote the preferential use of Filipino
Second World War, plans for the establishment of three multilateral labor, domestic materials and locally produced goods."
WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as institutions — inspired by that grand political body, the United
members of the Philippine Senate and as taxpayers; GREGORIO Nations — were discussed at Dumbarton Oaks and Bretton Woods. Simply stated, does the Philippine Constitution prohibit Philippine
ANDOLANA and JOKER ARROYO as members of the House of The first was the World Bank (WB) which was to address the participation in worldwide trade liberalization and economic
Representatives and as taxpayers; NICANOR P. PERLAS and rehabilitation and reconstruction of war-ravaged and later globalization? Does it proscribe Philippine integration into a global
HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES developing countries; the second, the International Monetary Fund economy that is liberalized, deregulated and privatized? These are
UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, (IMF) which was to deal with currency problems; and the third, the the main questions raised in this petition for certiorari, prohibition
CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, International Trade Organization (ITO), which was to foster order and mandamus under Rule 65 of the Rules of Court praying (1) for
LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE and predictability in world trade and to minimize unilateral the nullification, on constitutional grounds, of the concurrence of
RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG protectionist policies that invite challenge, even retaliation, from the Philippine Senate in the ratification by the President of the
KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE other states. However, for a variety of reasons, including its non- Philippines of the Agreement Establishing the World Trade
PEASANT INSTITUTE, in representation of various taxpayers ratification by the United States, the ITO, unlike the IMF and WB, Organization (WTO Agreement, for brevity) and (2) for the
and as non-governmental organizations, petitioners, never took off. What remained was only GATT — the General prohibition of its implementation and enforcement through the
vs. Agreement on Tariffs and Trade. GATT was a collection of treaties release and utilization of public funds, the assignment of public
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS- governing access to the economies of treaty adherents with no officials and employees, as well as the use of government properties
SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO institutionalized body administering the agreements or dependable and resources by respondent-heads of various executive offices
BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, system of dispute settlement. concerned therewith. This concurrence is embodied in Senate
GLORIA. MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS Resolution No. 97, dated December 14, 1994.
OPLE, JOHN OSMEÑA, SANTANINA RASUL, RAMON REVILLA, After half a century and several dizzying rounds of negotiations,
RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their principally the Kennedy Round, the Tokyo Round and the Uruguay The Facts
respective capacities as members of the Philippine Senate who Round, the world finally gave birth to that administering body —
concurred in the ratification by the President of the Philippines the World Trade Organization — with the signing of the "Final Act" On April 15, 1994, Respondent Rizalino Navarro, then Secretary of
of the Agreement Establishing the World Trade Organization; in Marrakesh, Morocco and the ratification of the WTO Agreement The Department of Trade and Industry (Secretary Navarro, for
SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget by its members.1 brevity), representing the Government of the Republic of the
and Management; CARIDAD VALDEHUESA, in her capacity as Philippines, signed in Marrakesh, Morocco, the Final Act Embodying
National Treasurer; RIZALINO NAVARRO, in his capacity as Like many other developing countries, the Philippines joined WTO the Results of the Uruguay Round of Multilateral Negotiations (Final
Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his as a founding member with the goal, as articulated by President Act, for brevity).
capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in Fidel V. Ramos in two letters to the Senate (infra), of improving
his capacity as Secretary of Finance; ROBERTO ROMULO, in his "Philippine access to foreign markets, especially its major trading By signing the Final Act,2 Secretary Navarro on behalf of the
capacity as Secretary of Foreign Affairs; and TEOFISTO T. partners, through the reduction of tariffs on its exports, particularly Republic of the Philippines, agreed:
GUINGONA, in his capacity as Executive Secretary, respondents. agricultural and industrial products." The President also saw in the
WTO the opening of "new opportunities for the services sector . . . , (a) to submit, as appropriate, the WTO Agreement for the
PANGANIBAN, J.: (the reduction of) costs and uncertainty associated with exporting . . consideration of their respective competent authorities, with a
. , and (the attraction of) more investments into the country." view to seeking approval of the Agreement in accordance with
The emergence on January 1, 1995 of the World Trade Organization, Although the Chief Executive did not expressly mention it in his their procedures; and
abetted by the membership thereto of the vast majority of countries letter, the Philippines — and this is of special interest to the legal
has revolutionized international business and economic relations profession — will benefit from the WTO system of dispute (b) to adopt the Ministerial Declarations and Decisions.
amongst states. It has irreversibly propelled the world towards settlement by judicial adjudication through the independent WTO
trade liberalization and economic globalization. Liberalization, settlement bodies called (1) Dispute Settlement Panels and (2) On August 12, 1994, the members of the Philippine Senate received
globalization, deregulation and privatization, the third-millennium Appellate Tribunal. Heretofore, trade disputes were settled mainly a letter dated August 11, 1994 from the President of the
buzz words, are ushering in a new borderless world of business by through negotiations where solutions were arrived at frequently on Philippines,3 stating among others that "the Uruguay Round Final
sweeping away as mere historical relics the heretofore traditional the basis of relative bargaining strengths, and where naturally, Act is hereby submitted to the Senate for its concurrence pursuant
modes of promoting and protecting national economies like tariffs, weak and underdeveloped countries were at a disadvantage. to Section 21, Article VII of the Constitution."
export subsidies, import quotas, quantitative restrictions, tax
exemptions and currency controls. Finding market niches and The Petition in Brief On August 13, 1994, the members of the Philippine Senate received
becoming the best in specific industries in a market-driven and another letter from the President of the Philippines4 likewise dated
export-oriented global scenario are replacing age-old "beggar-thy- Arguing mainly (1) that the WTO requires the Philippines "to place August 11, 1994, which stated among others that "the Uruguay
neighbor" policies that unilaterally protect weak and inefficient nationals and products of member-countries on the same footing as Round Final Act, the Agreement Establishing the World Trade
domestic producers of goods and services. In the words of Peter Filipinos and local products" and (2) that the WTO "intrudes, limits Organization, the Ministerial Declarations and Decisions, and the
Drucker, the well-known management guru, "Increased and/or impairs" the constitutional powers of both Congress and the Understanding on Commitments in Financial Services are hereby
participation in the world economy has become the key to domestic Supreme Court, the instant petition before this Court assails the submitted to the Senate for its concurrence pursuant to Section 21,
economic growth and prosperity." WTO Agreement for violating the mandate of the 1987 Constitution Article VII of the Constitution."
to "develop a self-reliant and independent national economy
Brief Historical Background effectively controlled by Filipinos . . . (to) give preference to
On December 9, 1994, the President of the Philippines certified the Annexes one (1), two (2) and three (3) of that Agreement September 16, 1996, the Solicitor General submitted a printed copy
necessity of the immediate adoption of P.S. 1083, a resolution which are integral parts thereof, signed at Marrakesh, of the 36-volume Uruguay Round of Multilateral Trade Negotiations,
entitled "Concurring in the Ratification of the Agreement Morocco on 15 April 1994, do hereby ratify and confirm the and in another Compliance dated October 24, 1996, he listed the
Establishing the World Trade Organization."5 same and every Article and Clause thereof. various "bilateral or multilateral treaties or international
instruments involving derogation of Philippine sovereignty."
On December 14, 1994, the Philippine Senate adopted Resolution To emphasize, the WTO Agreement ratified by the President of the Petitioners, on the other hand, submitted their Compliance dated
No. 97 which "Resolved, as it is hereby resolved, that the Senate Philippines is composed of the Agreement Proper and "the January 28, 1997, on January 30, 1997.
concur, as it hereby concurs, in the ratification by the President of associated legal instruments included in Annexes one (1), two (2)
the Philippines of the Agreement Establishing the World Trade and three (3) of that Agreement which are integral parts thereof." The Issues
Organization."6 The text of the WTO Agreement is written on pages On the other hand, the Final Act signed by Secretary Navarro
137 et seq. of Volume I of the 36-volume Uruguay Round of embodies not only the WTO Agreement (and its integral annexes In their Memorandum dated March 11, 1996, petitioners
Multilateral Trade Negotiations and includes various agreements aforementioned) but also (1) the Ministerial Declarations and summarized the issues as follows:
and associated legal instruments (identified in the said Agreement Decisions and (2) the Understanding on Commitments in Financial
as Annexes 1, 2 and 3 thereto and collectively referred to as Services. In his Memorandum dated May 13, 1996,8 the Solicitor A. Whether the petition presents a political question or is
Multilateral Trade Agreements, for brevity) as follows: General describes these two latter documents as follows: otherwise not justiciable.

ANNEX 1 The Ministerial Decisions and Declarations are twenty-five B. Whether the petitioner members of the Senate who
Annex 1A: Multilateral Agreement on Trade in Goods declarations and decisions on a wide range of matters, such as participated in the deliberations and voting leading to the
General Agreement on Tariffs and Trade 1994 measures in favor of least developed countries, notification concurrence are estopped from impugning the validity of the
Agreement on Agriculture procedures, relationship of WTO with the International Agreement Establishing the World Trade Organization or of the
Agreement on the Application of Sanitary and Monetary Fund (IMF), and agreements on technical barriers to validity of the concurrence.
Phytosanitary Measures trade and on dispute settlement.
Agreement on Textiles and Clothing C. Whether the provisions of the Agreement Establishing the
Agreement on Technical Barriers to Trade The Understanding on Commitments in Financial Services dwell World Trade Organization contravene the provisions of Sec. 19,
Agreement on Trade-Related Investment Measures on, among other things, standstill or limitations and Article II, and Secs. 10 and 12, Article XII, all of the 1987
Agreement on Implementation of Article VI of he qualifications of commitments to existing non-conforming Philippine Constitution.
General Agreement on Tariffs and Trade measures, market access, national treatment, and definitions of
1994 non-resident supplier of financial services, commercial D. Whether provisions of the Agreement Establishing the World
Agreement on Implementation of Article VII of the presence and new financial service. Trade Organization unduly limit, restrict and impair Philippine
General on Tariffs and Trade 1994 sovereignty specifically the legislative power which, under Sec.
Agreement on Pre-Shipment Inspection On December 29, 1994, the present petition was filed. After careful 2, Article VI, 1987 Philippine Constitution is "vested in the
Agreement on Rules of Origin deliberation on respondents' comment and petitioners' reply Congress of the Philippines";
Agreement on Imports Licensing Procedures thereto, the Court resolved on December 12, 1995, to give due
Agreement on Subsidies and Coordinating course to the petition, and the parties thereafter filed their E. Whether provisions of the Agreement Establishing the World
Measures respective memoranda. The court also requested the Honorable Trade Organization interfere with the exercise of judicial
Agreement on Safeguards Lilia R. Bautista, the Philippine Ambassador to the United Nations power.
Annex 1B: General Agreement on Trade in Services and stationed in Geneva, Switzerland, to submit a paper, hereafter
Annexes referred to as "Bautista Paper,"9 for brevity, (1) providing a F. Whether the respondent members of the Senate acted in
Annex 1C: Agreement on Trade-Related Aspects of historical background of and (2) summarizing the said agreements. grave abuse of discretion amounting to lack or excess of
Intellectual During the Oral Argument held on August 27, 1996, the Court jurisdiction when they voted for concurrence in the ratification
Property Rights directed: of the constitutionally-infirm Agreement
ANNEX 2 Establishing the World Trade Organization.
Understanding on Rules and Procedures Governing (a) the petitioners to submit the (1) Senate Committee Report
the Settlement of Disputes on the matter in controversy and (2) the transcript of G. Whether the respondent members of the Senate acted in
ANNEX 3 proceedings/hearings in the Senate; and grave abuse of discretion amounting to lack or excess of
Trade Policy Review Mechanism jurisdiction when they concurred only in the ratification of the
(b) the Solicitor General, as counsel for respondents, to file (1) a Agreement Establishing the World Trade Organization, and not
On December 16, 1994, the President of the Philippines signed7 the list of Philippine treaties signed prior to the Philippine with the Presidential submission which included the Final Act,
Instrument of Ratification, declaring: adherence to the WTO Agreement, which derogate from Ministerial Declaration and Decisions, and the Understanding
Philippine sovereignty and (2) copies of the multi-volume WTO on Commitments in Financial Services.
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, Agreement and other documents mentioned in the Final Act, as
President of the Republic of the Philippines, after having soon as possible. On the other hand, the Solicitor General as counsel for respondents
seen and considered the aforementioned Agreement "synthesized the several issues raised by petitioners into the
Establishing the World Trade Organization and the After receipt of the foregoing documents, the Court said it would following": 10
agreements and associated legal instruments included in consider the case submitted for resolution. In a Compliance dated
1. Whether or not the provisions of the "Agreement Establishing that the substantive issues be met head on and decided on the branch or instrumentality of government including Congress. It is
the World Trade Organization and the Agreements and merits, rather than skirted or deflected by procedural matters. 11 an innovation in our political law. 16 As explained by former Chief
Associated Legal Instruments included in Annexes one (1), two Justice Roberto Concepcion, 17 "the judiciary is the final arbiter on
(2) and three (3) of that agreement" cited by petitioners To recapitulate, the issues that will be ruled upon shortly are: the question of whether or not a branch of government or any of its
directly contravene or undermine the letter, spirit and intent of officials has acted without jurisdiction or in excess of jurisdiction or
Section 19, Article II and Sections 10 and 12, Article XII of the (1) DOES THE PETITION PRESENT A JUSTICIABLE so capriciously as to constitute an abuse of discretion amounting to
1987 Constitution. CONTROVERSY? OTHERWISE STATED, DOES THE PETITION excess of jurisdiction. This is not only a judicial power but a duty to
INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT pass judgment on matters of this nature."
2. Whether or not certain provisions of the Agreement unduly HAS NO JURISDICTION?
limit, restrict or impair the exercise of legislative power by As this Court has repeatedly and firmly emphasized in many cases,
Congress. (2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS 18 it will not shirk, digress from or abandon its sacred duty and

THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. authority to uphold the Constitution in matters that involve grave
3. Whether or not certain provisions of the Agreement impair 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION? abuse of discretion brought before it in appropriate cases,
the exercise of judicial power by this Honorable Court in committed by any officer, agency, instrumentality or department of
promulgating the rules of evidence. (3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS the government.
ANNEXES LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF
4. Whether or not the concurrence of the Senate "in the LEGISLATIVE POWER BY CONGRESS? As the petition alleges grave abuse of discretion and as there is no
ratification by the President of the Philippines of the Agreement other plain, speedy or adequate remedy in the ordinary course of
establishing the World Trade Organization" implied rejection of (4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE law, we have no hesitation at all in holding that this petition should
the treaty embodied in the Final Act. WITH THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN be given due course and the vital questions raised therein ruled
PROMULGATING RULES ON EVIDENCE? upon under Rule 65 of the Rules of Court. Indeed, certiorari,
By raising and arguing only four issues against the seven presented prohibition and mandamus are appropriate remedies to raise
by petitioners, the Solicitor General has effectively ignored three, (5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO constitutional issues and to review and/or prohibit/nullify, when
namely: (1) whether the petition presents a political question or is AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID, proper, acts of legislative and executive officials. On this, we have no
otherwise not justiciable; (2) whether petitioner-members of the CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, equivocation.
Senate (Wigberto E. Tañada and Anna Dominique Coseteng) are MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
estopped from joining this suit; and (3) whether the respondent- UNDERSTANDING ON COMMITMENTS IN FINANCIAL We should stress that, in deciding to take jurisdiction over this
members of the Senate acted in grave abuse of discretion when they SERVICES? petition, this Court will not review the wisdom of the decision of the
voted for concurrence in the ratification of the WTO Agreement. The President and the Senate in enlisting the country into the WTO, or
foregoing notwithstanding, this Court resolved to deal with these The First Issue: Does the Court Have Jurisdiction Over the pass upon the merits of trade liberalization as a policy espoused by
three issues thus: Controversy? said international body. Neither will it rule on the propriety of the
government's economic policy of reducing/removing tariffs, taxes,
(1) The "political question" issue — being very fundamental and In seeking to nullify an act of the Philippine Senate on the ground subsidies, quantitative restrictions, and other import/trade
vital, and being a matter that probes into the very jurisdiction of this that it contravenes the Constitution, the petition no doubt raises a barriers. Rather, it will only exercise its constitutional duty "to
Court to hear and decide this case — was deliberated upon by the justiciable controversy. Where an action of the legislative branch is determine whether or not there had been a grave abuse of
Court and will thus be ruled upon as the first issue; seriously alleged to have infringed the Constitution, it becomes not discretion amounting to lack or excess of jurisdiction" on the part of
only the right but in fact the duty of the judiciary to settle the the Senate in ratifying the WTO Agreement and its three annexes.
(2) The matter of estoppel will not be taken up because this defense dispute. "The question thus posed is judicial rather than political.
is waivable and the respondents have effectively waived it by not The duty (to adjudicate) remains to assure that the supremacy of Second Issue: The WTO Agreement and Economic Nationalism
pursuing it in any of their pleadings; in any event, this issue, even if the Constitution is upheld." 12 Once a "controversy as to the This is the lis mota, the main issue, raised by the petition.
ruled in respondents' favor, will not cause the petition's dismissal as application or interpretation of a constitutional provision is raised
there are petitioners other than the two senators, who are not before this Court (as in the instant case), it becomes a legal issue Petitioners vigorously argue that the "letter, spirit and intent" of the
vulnerable to the defense of estoppel; and which the Court is bound by constitutional mandate to decide." 13 Constitution mandating "economic nationalism" are violated by the
The jurisdiction of this Court to adjudicate the matters 14 raised in so-called "parity provisions" and "national treatment" clauses
(3) The issue of alleged grave abuse of discretion on the part of the the petition is clearly set out in the 1987 Constitution, 15 as follows: scattered in various parts not only of the WTO Agreement and its
respondent senators will be taken up as an integral part of the annexes but also in the Ministerial Decisions and Declarations and
disposition of the four issues raised by the Solicitor General. Judicial power includes the duty of the courts of justice to in the Understanding on Commitments in Financial Services.
settle actual controversies involving rights which are legally
During its deliberations on the case, the Court noted that the demandable and enforceable, and to determine whether or Specifically, the "flagship" constitutional provisions referred to are
respondents did not question the locus standi of petitioners. Hence, not there has been a grave abuse of discretion amounting to Sec 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution,
they are also deemed to have waived the benefit of such issue. They lack or excess of jurisdiction on the part of any branch or which are worded as follows:
probably realized that grave constitutional issues, expenditures of instrumentality of the government.
public funds and serious international commitments of the nation Article II
are involved here, and that transcendental public interest requires The foregoing text emphasizes the judicial department's duty and DECLARATION OF PRINCIPLES AND STATE POLICIES
power to strike down grave abuse of discretion on the part of any
xxx xxx xxx Illustrative List transport and not on the nationality of the
1. TRIMS that are inconsistent with the obligation of product." (Article III, GATT 1947, as amended by
Sec. 19. The State shall develop a self-reliant and national treatment provided for in paragraph 4 of Article III the Protocol Modifying Part II, and Article XXVI of
independent national economy effectively controlled by of GATT 1994 include those which are mandatory or GATT, 14 September 1948, 62 UMTS 82-84 in
Filipinos. enforceable under domestic law or under administrative relation to paragraph 1(a) of the General
rulings, or compliance with which is necessary to obtain an Agreement on Tariffs and Trade 1994, Vol. 1,
xxx xxx xxx advantage, and which require: Uruguay Round, Legal Instruments p. 177,
emphasis supplied).
Article XII (a) the purchase or use by an enterprise of products of
NATIONAL ECONOMY AND PATRIMONY domestic origin or from any domestic source, whether (b) In the area of trade related aspects of intellectual
specified in terms of particular products, in terms of property rights (TRIPS, for brevity):
xxx xxx xxx volume or value of products, or in terms of proportion
of volume or value of its local production; or Each Member shall accord to the nationals of other
Sec. 10. . . . The Congress shall enact measures that will Members treatment no less favourable than that it
encourage the formation and operation of enterprises (b) that an enterprise's purchases or use of imported accords to its own nationals with regard to the
whose capital is wholly owned by Filipinos. products be limited to an amount related to the volume protection of intellectual property. . . (par. 1 Article
In the grant of rights, privileges, and concessions covering or value of local products that it exports. 3, Agreement on Trade-Related Aspect of
the national economy and patrimony, the State shall give Intellectual Property rights, Vol. 31, Uruguay
preference to qualified Filipinos. 2. TRIMS that are inconsistent with the obligations of Round, Legal Instruments, p. 25432 (emphasis
general elimination of quantitative restrictions provided for supplied)
xxx xxx xxx in paragraph 1 of Article XI of GATT 1994 include those
which are mandatory or enforceable under domestic laws (c) In the area of the General Agreement on Trade in
Sec. 12. The State shall promote the preferential use of or under administrative rulings, or compliance with which Services:
Filipino labor, domestic materials and locally produced is necessary to obtain an advantage, and which restrict: National Treatment
goods, and adopt measures that help make them
competitive. (a) the importation by an enterprise of products used in 1. In the sectors inscribed in its schedule, and
or related to the local production that it exports; subject to any conditions and qualifications set out
Petitioners aver that these sacred constitutional principles are therein, each Member shall accord to services and
desecrated by the following WTO provisions quoted in their (b) the importation by an enterprise of products used service suppliers of any other Member, in respect
memorandum: 19 in or related to its local production by restricting its of all measures affecting the supply of services,
access to foreign exchange inflows attributable to the treatment no less favourable than it accords to its
a) In the area of investment measures related to trade in enterprise; or own like services and service suppliers.
goods (TRIMS, for brevity):
(c) the exportation or sale for export specified in terms 2. A Member may meet the requirement of
Article 2 of particular products, in terms of volume or value of paragraph I by according to services and service
National Treatment and Quantitative Restrictions. products, or in terms of a preparation of volume or suppliers of any other Member, either formally
value of its local production. (Annex to the Agreement suppliers of any other Member, either formally
1. Without prejudice to other rights and obligations on Trade-Related Investment Measures, Vol. 27, identical treatment or formally different treatment
under GATT 1994, no Member shall apply any Uruguay Round Legal Documents, p. 22125, emphasis to that it accords to its own like services and
TRIM that is inconsistent with the provisions of supplied). service suppliers.
Article II or Article XI of GATT 1994.
The paragraph 4 of Article III of GATT 1994 referred to 3. Formally identical or formally different
2. An illustrative list of TRIMS that are inconsistent is quoted as follows: treatment shall be considered to be less favourable
with the obligations of general elimination of if it modifies the conditions of completion in favour
quantitative restrictions provided for in paragraph The products of the territory of any contracting of services or service suppliers of the Member
I of Article XI of GATT 1994 is contained in the party imported into the territory of any other compared to like services or service suppliers of
Annex to this Agreement." (Agreement on Trade- contracting party shall be accorded treatment no any other Member. (Article XVII, General
Related Investment Measures, Vol. 27, Uruguay less favorable than that accorded to like products of Agreement on Trade in Services, Vol. 28, Uruguay
Round, Legal Instruments, p. 22121, emphasis national origin in respect of laws, regulations and Round Legal Instruments, p. 22610 emphasis
supplied). requirements affecting their internal sale, offering supplied).
for sale, purchase, transportation, distribution or
The Annex referred to reads as follows: use, the provisions of this paragraph shall not It is petitioners' position that the foregoing "national treatment"
prevent the application of differential internal and "parity provisions" of the WTO Agreement "place nationals and
ANNEX transportation charges which are based exclusively products of member countries on the same footing as Filipinos and
on the economic operation of the means of local products," in contravention of the "Filipino First" policy of the
Constitution. They allegedly render meaningless the phrase directives addressed to the executive and to the has been a grave abuse of discretion amounting to
"effectively controlled by Filipinos." The constitutional conflict legislature. If the executive and the legislature lack or excess of jurisdiction on the part of any
becomes more manifest when viewed in the context of the clear failed to heed the directives of the article, the branch or instrumentality of the Government.
duty imposed on the Philippines as a WTO member to ensure the available remedy was not judicial but political. The (Emphasis supplied)
conformity of its laws, regulations and administrative procedures electorate could express their displeasure with the
with its obligations as provided in the annexed agreements. 20 failure of the executive and the legislature through When substantive standards as general as "the right to
Petitioners further argue that these provisions contravene the language of the ballot. (Bernas, Vol. II, p. 2). a balanced and healthy ecology" and "the right to
constitutional limitations on the role exports play in national health" are combined with remedial standards as broad
development and negate the preferential treatment accorded to The reasons for denying a cause of action to an alleged infringement ranging as "a grave abuse of discretion amounting to
Filipino labor, domestic materials and locally produced goods. of board constitutional principles are sourced from basic lack or excess of jurisdiction," the result will be, it is
considerations of due process and the lack of judicial authority to respectfully submitted, to propel courts into the
On the other hand, respondents through the Solicitor General wade "into the uncharted ocean of social and economic policy uncharted ocean of social and economic policy making.
counter (1) that such Charter provisions are not self-executing and making." Mr. Justice Florentino P. Feliciano in his concurring At least in respect of the vast area of environmental
merely set out general policies; (2) that these nationalistic portions opinion in Oposa vs. Factoran, Jr., 26 explained these reasons as protection and management, our courts have no claim
of the Constitution invoked by petitioners should not be read in follows: to special technical competence and experience and
isolation but should be related to other relevant provisions of Art. professional qualification. Where no specific, operable
XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the My suggestion is simply that petitioners must, before norms and standards are shown to exist, then the
cited WTO clauses do not conflict with Constitution; and (4) that the the trial court, show a more specific legal right — a policy making departments — the legislative and
WTO Agreement contains sufficient provisions to protect right cast in language of a significantly lower order of executive departments — must be given a real and
developing countries like the Philippines from the harshness of generality than Article II (15) of the Constitution — effective opportunity to fashion and promulgate those
sudden trade liberalization. that is or may be violated by the actions, or failures to norms and standards, and to implement them before
act, imputed to the public respondent by petitioners so the courts should intervene.
We shall now discuss and rule on these arguments. that the trial court can validly render judgment grating
all or part of the relief prayed for. To my mind, the Economic Nationalism Should Be Read with
Declaration of Principles Not Self-Executing court should be understood as simply saying that such Other Constitutional Mandates to Attain
a more specific legal right or rights may well exist in Balanced Development of Economy
By its very title, Article II of the Constitution is a "declaration of our corpus of law, considering the general policy
principles and state policies." The counterpart of this article in the principles found in the Constitution and the existence On the other hand, Secs. 10 and 12 of Article XII, apart from merely
1935 Constitution 21 is called the "basic political creed of the nation" of the Philippine Environment Code, and that the trial laying down general principles relating to the national economy and
by Dean Vicente Sinco. 22 These principles in Article II are not court should have given petitioners an effective patrimony, should be read and understood in relation to the other
intended to be self-executing principles ready for enforcement opportunity so to demonstrate, instead of aborting the sections in said article, especially Secs. 1 and 13 thereof which read:
through the courts. 23 They are used by the judiciary as aids or as proceedings on a motion to dismiss.
guides in the exercise of its power of judicial review, and by the Sec. 1. The goals of the national economy are a more
legislature in its enactment of laws. As held in the leading case of It seems to me important that the legal right which is an equitable distribution of opportunities, income, and wealth;
Kilosbayan, Incorporated vs. Morato, 24 the principles and state essential component of a cause of action be a specific, a sustained increase in the amount of goods and services
policies enumerated in Article II and some sections of Article XII are operable legal right, rather than a constitutional or produced by the nation for the benefit of the people; and an
not "self-executing provisions, the disregard of which can give rise statutory policy, for at least two (2) reasons. One is that expanding productivity as the key to raising the quality of
to a cause of action in the courts. They do not embody judicially unless the legal right claimed to have been violated or life for all especially the underprivileged.
enforceable constitutional rights but guidelines for legislation." disregarded is given specification in operational terms,
In the same light, we held in Basco vs. Pagcor 25 that broad defendants may well be unable to defend themselves The State shall promote industrialization and full
constitutional principles need legislative enactments to implement intelligently and effectively; in other words, there are employment based on sound agricultural development and
the, thus: due process dimensions to this matter. agrarian reform, through industries that make full and
On petitioners' allegation that P.D. 1869 violates efficient use of human and natural resources, and which are
Sections 11 (Personal Dignity) 12 (Family) and 13 The second is a broader-gauge consideration — where competitive in both domestic and foreign markets.
(Role of Youth) of Article II; Section 13 (Social Justice) a specific violation of law or applicable regulation is not However, the State shall protect Filipino enterprises against
of Article XIII and Section 2 (Educational Values) of alleged or proved, petitioners can be expected to fall unfair foreign competition and trade practices.
Article XIV of the 1987 Constitution, suffice it to state back on the expanded conception of judicial power in
also that these are merely statements of principles and the second paragraph of Section 1 of Article VIII of the In the pursuit of these goals, all sectors of the economy and
policies. As such, they are basically not self-executing, Constitution which reads: all regions of the country shall be given optimum
meaning a law should be passed by Congress to clearly opportunity to develop. . . .
define and effectuate such principles. Sec. 1. . . .
Judicial power includes the duty of the courts of xxx xxx xxx
In general, therefore, the 1935 provisions were not justice to settle actual controversies involving
intended to be self-executing principles ready for rights which are legally demandable and
enforcement through the courts. They were rather enforceable, and to determine whether or not there
Sec. 13. The State shall pursue a trade policy that serves the practices that are unfair. 32 In other words, the Constitution did not respective needs and concerns at different levels of economic
general welfare and utilizes all forms and arrangements of intend to pursue an isolationist policy. It did not shut out foreign development,
exchange on the basis of equality and reciprocity. investments, goods and services in the development of the
Philippine economy. While the Constitution does not encourage the Recognizing further that there is need for positive efforts
As pointed out by the Solicitor General, Sec. 1 lays down the basic unlimited entry of foreign goods, services and investments into the designed to ensure that developing countries, and
goals of national economic development, as follows: country, it does not prohibit them either. In fact, it allows an especially the least developed among them, secure a share
exchange on the basis of equality and reciprocity, frowning only on in the growth in international trade commensurate with the
1. A more equitable distribution of opportunities, income and foreign competition that is unfair. needs of their economic development,
wealth;
WTO Recognizes Need to Protect Weak Economies Being desirous of contributing to these objectives by
2. A sustained increase in the amount of goods and services entering into reciprocal and mutually advantageous
provided by the nation for the benefit of the people; and Upon the other hand, respondents maintain that the WTO itself has arrangements directed to the substantial reduction of
some built-in advantages to protect weak and developing tariffs and other barriers to trade and to the elimination of
3. An expanding productivity as the key to raising the quality of life economies, which comprise the vast majority of its members. Unlike discriminatory treatment in international trade relations,
for all especially the underprivileged. in the UN where major states have permanent seats and veto
powers in the Security Council, in the WTO, decisions are made on Resolved, therefore, to develop an integrated, more viable
With these goals in context, the Constitution then ordains the ideals the basis of sovereign equality, with each member's vote equal in and durable multilateral trading system encompassing the
of economic nationalism (1) by expressing preference in favor of weight to that of any other. There is no WTO equivalent of the UN General Agreement on Tariffs and Trade, the results of past
qualified Filipinos "in the grant of rights, privileges and concessions Security Council. trade liberalization efforts, and all of the results of the
covering the national economy and patrimony" 27 and in the use of Uruguay Round of Multilateral Trade Negotiations,
"Filipino labor, domestic materials and locally-produced goods"; (2) WTO decides by consensus whenever possible, otherwise,
by mandating the State to "adopt measures that help make them decisions of the Ministerial Conference and the General Determined to preserve the basic principles and to further
competitive; 28 and (3) by requiring the State to "develop a self- Council shall be taken by the majority of the votes cast, the objectives underlying this multilateral trading system, .
reliant and independent national economy effectively controlled by except in cases of interpretation of the Agreement or (emphasis supplied.)
Filipinos." 29 In similar language, the Constitution takes into account waiver of the obligation of a member which would require
the realities of the outside world as it requires the pursuit of "a three fourths vote. Amendments would require two thirds Specific WTO Provisos Protect Developing Countries
trade policy that serves the general welfare and utilizes all forms vote in general. Amendments to MFN provisions and the
and arrangements of exchange on the basis of equality ad Amendments provision will require assent of all members. So too, the Solicitor General points out that pursuant to and
reciprocity"; 30 and speaks of industries "which are competitive in Any member may withdraw from the Agreement upon the consistent with the foregoing basic principles, the WTO Agreement
both domestic and foreign markets" as well as of the protection of expiration of six months from the date of notice of grants developing countries a more lenient treatment, giving their
"Filipino enterprises against unfair foreign competition and trade withdrawals. 33 domestic industries some protection from the rush of foreign
practices." competition. Thus, with respect to tariffs in general, preferential
Hence, poor countries can protect their common interests more treatment is given to developing countries in terms of the amount of
It is true that in the recent case of Manila Prince Hotel vs. effectively through the WTO than through one-on-one negotiations tariff reduction and the period within which the reduction is to be
Government Service Insurance System, et al., 31 this Court held that with developed countries. Within the WTO, developing countries spread out. Specifically, GATT requires an average tariff reduction
"Sec. 10, second par., Art. XII of the 1987 Constitution is a can form powerful blocs to push their economic agenda more rate of 36% for developed countries to be effected within a period of
mandatory, positive command which is complete in itself and which decisively than outside the Organization. This is not merely a matter six (6) years while developing countries — including the Philippines
needs no further guidelines or implementing laws or rule for its of practical alliances but a negotiating strategy rooted in law. Thus, — are required to effect an average tariff reduction of only 24%
enforcement. From its very words the provision does not require the basic principles underlying the WTO Agreement recognize the within ten (10) years.
any legislation to put it in operation. It is per se judicially need of developing countries like the Philippines to "share in the
enforceable." However, as the constitutional provision itself states, growth in international trade commensurate with the needs of their In respect to domestic subsidy, GATT requires developed countries to
it is enforceable only in regard to "the grants of rights, privileges economic development." These basic principles are found in the reduce domestic support to agricultural products by 20% over six
and concessions covering national economy and patrimony" and not preamble 34 of the WTO Agreement as follows: (6) years, as compared to only 13% for developing countries to be
to every aspect of trade and commerce. It refers to exceptions The Parties to this Agreement, effected within ten (10) years.
rather than the rule. The issue here is not whether this paragraph of
Sec. 10 of Art. XII is self-executing or not. Rather, the issue is Recognizing that their relations in the field of trade and In regard to export subsidy for agricultural products, GATT requires
whether, as a rule, there are enough balancing provisions in the economic endeavour should be conducted with a view to developed countries to reduce their budgetary outlays for export
Constitution to allow the Senate to ratify the Philippine concurrence raising standards of living, ensuring full employment and a subsidy by 36% and export volumes receiving export subsidy by
in the WTO Agreement. And we hold that there are. large and steadily growing volume of real income and 21% within a period of six (6) years. For developing countries,
effective demand, and expanding the production of and however, the reduction rate is only two-thirds of that prescribed for
All told, while the Constitution indeed mandates a bias in favor of trade in goods and services, while allowing for the optimal developed countries and a longer period of ten (10) years within
Filipino goods, services, labor and enterprises, at the same time, it use of the world's resources in accordance with the which to effect such reduction.
recognizes the need for business exchange with the rest of the objective of sustainable development, seeking both to
world on the bases of equality and reciprocity and limits protection protect and preserve the environment and to enhance the Moreover, GATT itself has provided built-in protection from unfair
of Filipino enterprises only against foreign competition and trade means for doing so in a manner consistent with their foreign competition and trade practices including anti-dumping
measures, countervailing measures and safeguards against import The Constitution has not really shown any unbalanced bias in favor strength and finally achieve its substance. In fine, the
surges. Where local businesses are jeopardized by unfair foreign of any business or enterprise, nor does it contain any specific Constitution cannot, like the goddess Athena, rise full-
competition, the Philippines can avail of these measures. There is pronouncement that Filipino companies should be pampered with a grown from the brow of the Constitutional Convention,
hardly therefore any basis for the statement that under the WTO, total proscription of foreign competition. On the other hand, nor can it conjure by mere fiat an instant Utopia. It must
local industries and enterprises will all be wiped out and that respondents claim that WTO/GATT aims to make available to the grow with the society it seeks to re-structure and march
Filipinos will be deprived of control of the economy. Quite the Filipino consumer the best goods and services obtainable anywhere apace with the progress of the race, drawing from the
contrary, the weaker situations of developing nations like the in the world at the most reasonable prices. Consequently, the vicissitudes of history the dynamism and vitality that will
Philippines have been taken into account; thus, there would be no question boils down to whether WTO/GATT will favor the general keep it, far from becoming a petrified rule, a pulsing,
basis to say that in joining the WTO, the respondents have gravely welfare of the public at large. living law attuned to the heartbeat of the nation.
abused their discretion. True, they have made a bold decision to
steer the ship of state into the yet uncharted sea of economic Will adherence to the WTO treaty bring this ideal (of favoring the Third Issue: The WTO Agreement and Legislative Power
liberalization. But such decision cannot be set aside on the ground general welfare) to reality?
of grave abuse of discretion, simply because we disagree with it or The WTO Agreement provides that "(e)ach Member shall ensure the
simply because we believe only in other economic policies. As Will WTO/GATT succeed in promoting the Filipinos' general welfare conformity of its laws, regulations and administrative procedures
earlier stated, the Court in taking jurisdiction of this case will not because it will — as promised by its promoters — expand the with its obligations as provided in the annexed Agreements." 39
pass upon the advantages and disadvantages of trade liberalization country's exports and generate more employment? Petitioners maintain that this undertaking "unduly limits, restricts
as an economic policy. It will only perform its constitutional duty of and impairs Philippine sovereignty, specifically the legislative
determining whether the Senate committed grave abuse of Will it bring more prosperity, employment, purchasing power and power which under Sec. 2, Article VI of the 1987 Philippine
discretion. quality products at the most reasonable rates to the Filipino public? Constitution is vested in the Congress of the Philippines. It is an
The responses to these questions involve "judgment calls" by our assault on the sovereign powers of the Philippines because this
Constitution Does Not Rule Out Foreign Competition policy makers, for which they are answerable to our people during means that Congress could not pass legislation that will be good for
appropriate electoral exercises. Such questions and the answers our national interest and general welfare if such legislation will not
Furthermore, the constitutional policy of a "self-reliant and thereto are not subject to judicial pronouncements based on grave conform with the WTO Agreement, which not only relates to the
independent national economy" 35 does not necessarily rule out the abuse of discretion. trade in goods . . . but also to the flow of investments and money . . .
entry of foreign investments, goods and services. It contemplates as well as to a whole slew of agreements on socio-cultural matters . .
neither "economic seclusion" nor "mendicancy in the international Constitution Designed to Meet Future Events and . 40
community." As explained by Constitutional Commissioner Contingencies More specifically, petitioners claim that said WTO proviso derogates
Bernardo Villegas, sponsor of this constitutional policy: from the power to tax, which is lodged in the Congress. 41 And while
No doubt, the WTO Agreement was not yet in existence when the the Constitution allows Congress to authorize the President to fix
Economic self-reliance is a primary objective of a developing Constitution was drafted and ratified in 1987. That does not mean tariff rates, import and export quotas, tonnage and wharfage dues,
country that is keenly aware of overdependence on external however that the Charter is necessarily flawed in the sense that its and other duties or imposts, such authority is subject to "specified
assistance for even its most basic needs. It does not mean framers might not have anticipated the advent of a borderless world limits and . . . such limitations and restrictions" as Congress may
autarky or economic seclusion; rather, it means avoiding of business. By the same token, the United Nations was not yet in provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs
mendicancy in the international community. Independence existence when the 1935 Constitution became effective. Did that Code.
refers to the freedom from undue foreign control of the necessarily mean that the then Constitution might not have Sovereignty Limited by International Law and Treaties
national economy, especially in such strategic industries as contemplated a diminution of the absoluteness of sovereignty when
in the development of natural resources and public utilities. the Philippines signed the UN Charter, thereby effectively This Court notes and appreciates the ferocity and passion by which
36 surrendering part of its control over its foreign relations to the petitioners stressed their arguments on this issue. However, while
The WTO reliance on "most favored nation," "national treatment," decisions of various UN organs like the Security Council? sovereignty has traditionally been deemed absolute and all-
and "trade without discrimination" cannot be struck down as encompassing on the domestic level, it is however subject to
unconstitutional as in fact they are rules of equality and reciprocity It is not difficult to answer this question. Constitutions are designed restrictions and limitations voluntarily agreed to by the Philippines,
that apply to all WTO members. Aside from envisioning a trade to meet not only the vagaries of contemporary events. They should expressly or impliedly, as a member of the family of nations.
policy based on "equality and reciprocity," 37 the fundamental law be interpreted to cover even future and unknown circumstances. It Unquestionably, the Constitution did not envision a hermit-type
encourages industries that are "competitive in both domestic and is to the credit of its drafters that a Constitution can withstand the isolation of the country from the rest of the world. In its Declaration
foreign markets," thereby demonstrating a clear policy against a assaults of bigots and infidels but at the same time bend with the of Principles and State Policies, the Constitution "adopts the
sheltered domestic trade environment, but one in favor of the refreshing winds of change necessitated by unfolding events. As one generally accepted principles of international law as part of the law
gradual development of robust industries that can compete with the eminent political law writer and respected jurist 38 explains: of the land, and adheres to the policy of peace, equality, justice,
best in the foreign markets. Indeed, Filipino managers and Filipino freedom, cooperation and amity, with all nations." 43 By the doctrine
enterprises have shown capability and tenacity to compete The Constitution must be quintessential rather than of incorporation, the country is bound by generally accepted
internationally. And given a free trade environment, Filipino superficial, the root and not the blossom, the base and principles of international law, which are considered to be
entrepreneurs and managers in Hongkong have demonstrated the frame-work only of the edifice that is yet to rise. It is automatically part of our own laws. 44 One of the oldest and most
Filipino capacity to grow and to prosper against the best offered but the core of the dream that must take shape, not in a fundamental rules in international law is pacta sunt servanda —
under a policy of laissez faire. twinkling by mandate of our delegates, but slowly "in international agreements must be performed in good faith. "A treaty
the crucible of Filipino minds and hearts," where it will engagement is not a mere moral obligation but creates a legally
Constitution Favors Consumers, Not Industries or Enterprises in time develop its sinews and gradually gather its binding obligation on the parties . . . A state which has contracted
valid international obligations is bound to make in its legislations their obligations under any other international agreement, their visitor visas for a sojourn in the Philippines not exceeding
such modifications as may be necessary to ensure the fulfillment of obligation under the present charter shall prevail," thus 59 days.
the obligations undertaken." 45 unquestionably denying the Philippines — as a member — the (i) Bilateral agreement with France exempting French
By their inherent nature, treaties really limit or restrict the sovereign power to make a choice as to which of conflicting nationals from the requirement of obtaining transit and
absoluteness of sovereignty. By their voluntary act, nations may obligations, if any, to honor. visitor visa for a sojourn not exceeding 59 days.
surrender some aspects of their state power in exchange for greater
benefits granted by or derived from a convention or pact. After all, Apart from the UN Treaty, the Philippines has entered into many (j) Multilateral Convention on Special Missions, where the
states, like individuals, live with coequals, and in pursuit of mutually other international pacts — both bilateral and multilateral — that Philippines agreed that premises of Special Missions in the
covenanted objectives and benefits, they also commonly agree to involve limitations on Philippine sovereignty. These are Philippines are inviolable and its agents can not enter said
limit the exercise of their otherwise absolute rights. Thus, treaties enumerated by the Solicitor General in his Compliance dated premises without consent of the Head of Mission
have been used to record agreements between States concerning October 24, 1996, as follows: concerned. Special Missions are also exempted from
such widely diverse matters as, for example, the lease of naval customs duties, taxes and related charges.
bases, the sale or cession of territory, the termination of war, the (a) Bilateral convention with the United States regarding
regulation of conduct of hostilities, the formation of alliances, the taxes on income, where the Philippines agreed, among (k) Multilateral convention on the Law of Treaties. In this
regulation of commercial relations, the settling of claims, the laying others, to exempt from tax, income received in the convention, the Philippines agreed to be governed by the
down of rules governing conduct in peace and the establishment of Philippines Vienna Convention on the Law of Treaties.
international organizations. 46 The sovereignty of a state therefore .
cannot in fact and in reality be considered absolute. Certain (b) Bilateral agreement with Belgium, providing, among (l) Declaration of the President of the Philippines accepting
restrictions enter into the picture: (1) limitations imposed by the others, for the avoidance of double taxation with respect to compulsory jurisdiction of the International Court of
very nature of membership in the family of nations and (2) taxes on income. Justice. The International Court of Justice has jurisdiction in
limitations imposed by treaty stipulations. As aptly put by John F. all legal disputes concerning the interpretation of a treaty,
Kennedy, "Today, no nation can build its destiny alone. The age of (c) Bilateral convention with the Kingdom of Sweden for any question of international law, the existence of any fact
self-sufficient nationalism is over. The age of interdependence is the avoidance of double taxation. which, if established, would constitute a breach "of
here." 47 international obligation."
UN Charter and Other Treaties Limit Sovereignty (d) Bilateral convention with the French Republic for the
avoidance of double taxation. In the foregoing treaties, the Philippines has effectively agreed to
Thus, when the Philippines joined the United Nations as one of its limit the exercise of its sovereign powers of taxation, eminent
51 charter members, it consented to restrict its sovereign rights (e) Bilateral air transport agreement with Korea where the domain and police power. The underlying consideration in this
under the "concept of sovereignty as auto-limitation."47-A Under Philippines agreed to exempt from all customs duties, partial surrender of sovereignty is the reciprocal commitment of the
Article 2 of the UN Charter, "(a)ll members shall give the United inspection fees and other duties or taxes aircrafts of South other contracting states in granting the same privilege and
Nations every assistance in any action it takes in accordance with Korea and the regular equipment, spare parts and supplies immunities to the Philippines, its officials and its citizens. The same
the present Charter, and shall refrain from giving assistance to any arriving with said aircrafts, inspection fees and other reciprocity characterizes the Philippine commitments under WTO-
state against which the United Nations is taking preventive or similar duties, taxes or charges fuel, lubricating oils, spare GATT.
enforcement action." Such assistance includes payment of its parts, regular equipment, stores on board Japanese aircrafts International treaties, whether relating to nuclear
corresponding share not merely in administrative expenses but also while on Philippine soil. disarmament, human rights, the environment, the law of
in expenditures for the peace-keeping operations of the the sea, or trade, constrain domestic political sovereignty
organization. In its advisory opinion of July 20, 1961, the (f) Bilateral air service agreement with Japan, where the through the assumption of external obligations. But unless
International Court of Justice held that money used by the United Philippines agreed to exempt from customs duties, excise anarchy in international relations is preferred as an
Nations Emergency Force in the Middle East and in the Congo were taxesby, among others, the Federal Reserve Bank of the alternative, in most cases we accept that the benefits of the
"expenses of the United Nations" under Article 17, paragraph 2, of United States, the Export/Import Bank of the United States, reciprocal obligations involved outweigh the costs
the UN Charter. Hence, all its members must bear their the Overseas Private Investment Corporation of the United associated with any loss of political sovereignty. (T)rade
corresponding share in such expenses. In this sense, the Philippine States. Likewise, in said convention, wages, salaries and treaties that structure relations by reference to durable,
Congress is restricted in its power to appropriate. It is compelled to similar remunerations paid by the United States to its well-defined substantive norms and objective dispute
appropriate funds whether it agrees with such peace-keeping citizens for labor and personal services performed by them resolution procedures reduce the risks of larger countries
expenses or not. So too, under Article 105 of the said Charter, the as employees or officials of the United States are exempt exploiting raw economic power to bully smaller countries,
UN and its representatives enjoy diplomatic privileges and from income tax by the Philippines. by subjecting power relations to some form of legal
immunities, thereby limiting again the exercise of sovereignty of ordering. In addition, smaller countries typically stand to
members within their own territory. Another example: although (g) Bilateral air service agreement with Belgium where the gain disproportionately from trade liberalization. This is
"sovereign equality" and "domestic jurisdiction" of all members are Philippines granted Belgian air carriers the same privileges due to the simple fact that liberalization will provide access
set forth as underlying principles in the UN Charter, such provisos as those granted to Japanese and Korean air carriers under to a larger set of potential new trading relationship than in
are however subject to enforcement measures decided by the separate air service agreements. case of the larger country gaining enhanced success to the
Security Council for the maintenance of international peace and smaller country's market. 48
security under Chapter VII of the Charter. A final example: under (h) Bilateral notes with Israel for the abolition of transit
Article 103, "(i)n the event of a conflict between the obligations of and visitor visas where the Philippines exempted Israeli The point is that, as shown by the foregoing treaties, a portion of
the Members of the United Nations under the present Charter and nationals from the requirement of obtaining transit or sovereignty may be waived without violating the Constitution,
based on the rationale that the Philippines "adopts the generally such product obtained by the patented product is new, or (2) where So too, since the Philippine is a signatory to most international
accepted principles of international law as part of the law of the there is "substantial likelihood" that the identical product was made conventions on patents, trademarks and copyrights, the adjustment
land and adheres to the policy of . . . cooperation and amity with all with the use of the said patented process but the owner of the in legislation and rules of procedure will not be substantial. 52
nations." patent could not determine the exact process used in obtaining such
identical product. Hence, the "burden of proof" contemplated by Fifth Issue: Concurrence Only in the WTO Agreement and
Fourth Issue: The WTO Agreement and Judicial Power Article 34 should actually be understood as the duty of the alleged Not in Other Documents Contained in the Final Act
Petitioners aver that paragraph 1, Article 34 of the General patent infringer to overthrow such presumption. Such burden,
Provisions and Basic Principles of the Agreement on Trade-Related properly understood, actually refers to the "burden of evidence" Petitioners allege that the Senate concurrence in the WTO
Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the (burden of going forward) placed on the producer of the identical Agreement and its annexes — but not in the other documents
power of the Supreme Court to promulgate rules concerning (or fake) product to show that his product was produced without referred to in the Final Act, namely the Ministerial Declaration and
pleading, practice and procedures. 50 the use of the patented process. Decisions and the Understanding on Commitments in Financial
To understand the scope and meaning of Article 34, TRIPS, 51 it will Services — is defective and insufficient and thus constitutes abuse
be fruitful to restate its full text as follows: The foregoing notwithstanding, the patent owner still has the of discretion. They submit that such concurrence in the WTO
"burden of proof" since, regardless of the presumption provided Agreement alone is flawed because it is in effect a rejection of the
Article 34 under paragraph 1 of Article 34, such owner still has to introduce Final Act, which in turn was the document signed by Secretary
evidence of the existence of the alleged identical product, the fact Navarro, in representation of the Republic upon authority of the
Process Patents: Burden of Proof that it is "identical" to the genuine one produced by the patented President. They contend that the second letter of the President to
process and the fact of "newness" of the genuine product or the fact the Senate 53 which enumerated what constitutes the Final Act
1. For the purposes of civil proceedings in respect of the of "substantial likelihood" that the identical product was made by should have been the subject of concurrence of the Senate.
infringement of the rights of the owner referred to in the patented process.
paragraph 1 (b) of Article 28, if the subject matter of a "A final act, sometimes called protocol de cloture, is an instrument
patent is a process for obtaining a product, the judicial The foregoing should really present no problem in changing which records the winding up of the proceedings of a diplomatic
authorities shall have the authority to order the defendant the rules of evidence as the present law on the subject, conference and usually includes a reproduction of the texts of
to prove that the process to obtain an identical product is Republic Act No. 165, as amended, otherwise known as the treaties, conventions, recommendations and other acts agreed upon
different from the patented process. Therefore, Members Patent Law, provides a similar presumption in cases of and signed by the plenipotentiaries attending the conference." 54 It
shall provide, in at least one of the following circumstances, infringement of patented design or utility model, thus: is not the treaty itself. It is rather a summary of the proceedings of a
that any identical product when produced without the Sec. 60. Infringement. — Infringement of a design patent or protracted conference which may have taken place over several
consent of the patent owner shall, in the absence of proof to of a patent for utility model shall consist in unauthorized years. The text of the "Final Act Embodying the Results of the
the contrary, be deemed to have been obtained by the copying of the patented design or utility model for the Uruguay Round of Multilateral Trade Negotiations" is contained in
patented process: purpose of trade or industry in the article or product and in just one page 55 in Vol. I of the 36-volume Uruguay Round of
the making, using or selling of the article or product Multilateral Trade Negotiations. By signing said Final Act, Secretary
(a) if the product obtained by the patented process copying the patented design or utility model. Identity or Navarro as representative of the Republic of the Philippines
is new; substantial identity with the patented design or utility model undertook:
shall constitute evidence of copying. (emphasis supplied)
(b) if there is a substantial likelihood that the (a) to submit, as appropriate, the WTO Agreement for
identical product was made by the process and the Moreover, it should be noted that the requirement of Article 34 to the consideration of their respective competent
owner of the patent has been unable through provide a disputable presumption applies only if (1) the product authorities with a view to seeking approval of the
reasonable efforts to determine the process obtained by the patented process in NEW or (2) there is a Agreement in accordance with their procedures; and
actually used. substantial likelihood that the identical product was made by the
process and the process owner has not been able through (b) to adopt the Ministerial Declarations and Decisions.
2. Any Member shall be free to provide that the burden of reasonable effort to determine the process used. Where either of
proof indicated in paragraph 1 shall be on the alleged these two provisos does not obtain, members shall be free to The assailed Senate Resolution No. 97 expressed concurrence in
infringer only if the condition referred to in subparagraph determine the appropriate method of implementing the provisions exactly what the Final Act required from its signatories, namely,
(a) is fulfilled or only if the condition referred to in of TRIPS within their own internal systems and processes. concurrence of the Senate in the WTO Agreement.
subparagraph (b) is fulfilled.
By and large, the arguments adduced in connection with our The Ministerial Declarations and Decisions were deemed adopted
3. In the adduction of proof to the contrary, the legitimate disposition of the third issue — derogation of legislative power — without need for ratification. They were approved by the ministers
interests of defendants in protecting their manufacturing will apply to this fourth issue also. Suffice it to say that the by virtue of Article XXV: 1 of GATT which provides that
and business secrets shall be taken into account. reciprocity clause more than justifies such intrusion, if any actually representatives of the members can meet "to give effect to those
exists. Besides, Article 34 does not contain an unreasonable burden, provisions of this Agreement which invoke joint action, and
From the above, a WTO Member is required to provide a rule of consistent as it is with due process and the concept of adversarial generally with a view to facilitating the operation and furthering the
disputable (not the words "in the absence of proof to the contrary") dispute settlement inherent in our judicial system. objectives of this Agreement." 56
presumption that a product shown to be identical to one produced
with the use of a patented process shall be deemed to have been The Understanding on Commitments in Financial Services also
obtained by the (illegal) use of the said patented process, (1) where approved in Marrakesh does not apply to the Philippines. It applies
only to those 27 Members which "have indicated in their respective Organization by the final act of the Uruguay Round which is By signing the present Final Act, the representatives agree:
schedules of commitments on standstill, elimination of monopoly, not the same as the agreement establishing the World (a) to submit as appropriate the WTO Agreement for the
expansion of operation of existing financial service suppliers, Trade Organization? And on that basis, Senator Tolentino consideration of the respective competent authorities with a
temporary entry of personnel, free transfer and processing of raised a point of order which, however, he agreed to view to seeking approval of the Agreement in accordance
information, and national treatment with respect to access to withdraw upon understanding that his suggestion for an with their procedures.
payment, clearing systems and refinancing available in the normal alternative solution at that time was acceptable. That
course of business."57 suggestion was to treat the proceedings of the Committee In other words, it is not the Final Act that was agreed to be
as being in the nature of briefings for Senators until the submitted to the governments for ratification or acceptance
On the other hand, the WTO Agreement itself expresses what question of the submission could be clarified. as whatever their constitutional procedures may provide but
multilateral agreements are deemed included as its integral parts, 58 it is the World Trade Organization Agreement. And if that is
as follows: And so, Secretary Romulo, in effect, is the President the one that is being submitted now, I think it satisfies both
submitting a new . . . is he making a new submission which the Constitution and the Final Act itself .
Article II improves on the clarity of the first submission?
Thank you, Mr. Chairman.
Scope of the WTO MR. ROMULO: Mr. Chairman, to make sure that it is clear
cut and there should be no misunderstanding, it was his THE CHAIRMAN. Thank you, Senator Tolentino, May I call
1. The WTO shall provide the common institutional frame- intention to clarify all matters by giving this letter. on Senator Gonzales.
work for the conduct of trade relations among its Members
in matters to the agreements and associated legal THE CHAIRMAN: Thank you. SEN. GONZALES. Mr. Chairman, my views on this matter are
instruments included in the Annexes to this Agreement. already a matter of record. And they had been adequately
Can this Committee hear from Senator Tañada and later on reflected in the journal of yesterday's session and I don't see
2. The Agreements and associated legal instruments Senator Tolentino since they were the ones that raised this any need for repeating the same.
included in Annexes 1, 2, and 3, (hereinafter referred to as question yesterday?
"Multilateral Agreements") are integral parts of this Now, I would consider the new submission as an act ex
Agreement, binding on all Members. Senator Tañada, please. abudante cautela.

3. The Agreements and associated legal instruments SEN. TAÑADA: Thank you, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Gonzales. Senator
included in Annex 4 (hereinafter referred to as "Plurilateral Lina, do you want to make any comment on this?
Trade Agreements") are also part of this Agreement for Based on what Secretary Romulo has read, it would now
those Members that have accepted them, and are binding clearly appear that what is being submitted to the Senate for SEN. LINA. Mr. President, I agree with the observation just
on those Members. The Plurilateral Trade Agreements do ratification is not the Final Act of the Uruguay Round, but made by Senator Gonzales out of the abundance of question.
not create either obligation or rights for Members that have rather the Agreement on the World Trade Organization as Then the new submission is, I believe, stating the obvious and
not accepted them. well as the Ministerial Declarations and Decisions, and the therefore I have no further comment to make.
Understanding and Commitments in Financial Services.
4. The General Agreement on Tariffs and Trade 1994 as Epilogue
specified in annex 1A (hereinafter referred to as "GATT I am now satisfied with the wording of the new submission of
1994") is legally distinct from the General Agreement on President Ramos. In praying for the nullification of the Philippine ratification of the
Tariffs and Trade, dated 30 October 1947, annexed to the WTO Agreement, petitioners are invoking this Court's
Final Act adopted at the conclusion of the Second Session of SEN. TAÑADA. . . . of President Ramos, Mr. Chairman. constitutionally imposed duty "to determine whether or not there
the Preparatory Committee of the United Nations has been grave abuse of discretion amounting to lack or excess of
Conference on Trade and Employment, as subsequently THE CHAIRMAN. Thank you, Senator Tañada. Can we hear jurisdiction" on the part of the Senate in giving its concurrence
rectified, amended or modified (hereinafter referred to as from Senator Tolentino? And after him Senator Neptali therein via Senate Resolution No. 97. Procedurally, a writ of
"GATT 1947"). Gonzales and Senator Lina. certiorari grounded on grave abuse of discretion may be issued by
the Court under Rule 65 of the Rules of Court when it is amply
It should be added that the Senate was well-aware of what it was SEN. TOLENTINO, Mr. Chairman, I have not seen the new shown that petitioners have no other plain, speedy and adequate
concurring in as shown by the members' deliberation on August 25, submission actually transmitted to us but I saw the draft of remedy in the ordinary course of law.
1994. After reading the letter of President Ramos dated August 11, his earlier, and I think it now complies with the provisions of
1994, 59 the senators of the Republic minutely dissected what the the Constitution, and with the Final Act itself . The By grave abuse of discretion is meant such capricious and whimsical
Senate was concurring in, as follows: 60 Constitution does not require us to ratify the Final Act. It exercise of judgment as is equivalent to lack of jurisdiction. 61 Mere
requires us to ratify the Agreement which is now being abuse of discretion is not enough. It must be grave abuse of
THE CHAIRMAN: Yes. Now, the question of the validity of submitted. The Final Act itself specifies what is going to be discretion as when the power is exercised in an arbitrary or
the submission came up in the first day hearing of this submitted to with the governments of the participants. despotic manner by reason of passion or personal hostility, and
Committee yesterday. Was the observation made by must be so patent and so gross as to amount to an evasion of a
Senator Tañada that what was submitted to the Senate was In paragraph 2 of the Final Act, we read and I quote: positive duty or to a virtual refusal to perform the duty enjoined or
not the agreement on establishing the World Trade 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 makers. After all, the WTO Agreement allows withdrawal of That opposer will be damaged by the registration of the
dismissal of the petition. 63 membership, should this be the political desire of a member. mark BARBIZON and its business reputation and
goodwill will suffer great and irreparable injury.
In rendering this Decision, this Court never forgets that the Senate, The eminent futurist John Naisbitt, author of the best seller That the respondent-applicant's use of the said mark
whose act is under review, is one of two sovereign houses of Megatrends, predicts an Asian Renaissance 65 where "the East will BARBIZON which resembles the trademark used and
Congress and is thus entitled to great respect in its actions. It is become the dominant region of the world economically, politically owned by opposer, constitutes an unlawful
itself a constitutional body independent and coordinate, and thus its and culturally in the next century." He refers to the "free market" appropriation of a mark previously used in the
actions are presumed regular and done in good faith. Unless espoused by WTO as the "catalyst" in this coming Asian ascendancy. Philippines and not abandoned and therefore a
convincing proof and persuasive arguments are presented to There are at present about 31 countries including China, Russia and statutory violation of Section 4 (d) of Republic Act No.
overthrow such presumptions, this Court will resolve every doubt Saudi Arabia negotiating for membership in the WTO. 166, as amended. 1
in its favor. Using the foregoing well-accepted definition of grave Notwithstanding objections against possible limitations on national
abuse of discretion and the presumption of regularity in the sovereignty, the WTO remains as the only viable structure for This was docketed as Inter Partes Case No. 686 (IPC No.
Senate's processes, this Court cannot find any cogent reason to multilateral trading and the veritable forum for the development of 686). After filing of the pleadings, the parties submitted the
impute grave abuse of discretion to the Senate's exercise of its international trade law. The alternative to WTO is isolation, case for decision.
power of concurrence in the WTO Agreement granted it by Sec. 21 stagnation, if not economic self-destruction. Duly enriched with
of Article VII of the Constitution. 64 original membership, keenly aware of the advantages and On June 18, 1974, the Director of Patents rendered judgment
disadvantages of globalization with its on-line experience, and dismissing the opposition and giving due course to Escobar's
It is true, as alleged by petitioners, that broad constitutional endowed with a vision of the future, the Philippines now straddles application, thus:
principles require the State to develop an independent national the crossroads of an international strategy for economic prosperity
economy effectively controlled by Filipinos; and to protect and/or and stability in the new millennium. Let the people, through their WHEREFORE, the opposition should be, as it is hereby,
prefer Filipino labor, products, domestic materials and locally duly authorized elected officers, make their free choice. DISMISSED. Accordingly, Application Serial No. 19010
produced goods. But it is equally true that such principles — while WHEREFORE, the petition is DISMISSED for lack of merit. for the registration of the trademark BARBIZON, of
serving as judicial and legislative guides — are not in themselves respondent Lolita R. Escobar, is given due course.
sources of causes of action. Moreover, there are other equally SO ORDERED.
fundamental constitutional principles relied upon by the Senate IT IS SO ORDERED. 2
which mandate the pursuit of a "trade policy that serves the general G.R. No. 114508 November 19, 1999
welfare and utilizes all forms and arrangements of exchange on the This decision became final and on September 11, 1974,
basis of equality and reciprocity" and the promotion of industries PRIBHDAS J. MIRPURI, petitioner, Lolita Escobar was issued a certificate of registration for the
"which are competitive in both domestic and foreign markets," vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the trademark "Barbizon." The trademark was "for use in
thereby justifying its acceptance of said treaty. So too, the alleged BARBIZON CORPORATION, respondents. "brassieres and lady's underwear garments like panties." 3
impairment of sovereignty in the exercise of legislative and judicial
powers is balanced by the adoption of the generally accepted PUNO, J.: Escobar later assigned all her rights and interest over the trademark
principles of international law as part of the law of the land and the to petitioner Pribhdas J. Mirpuri who, under his firm name then, the
adherence of the Constitution to the policy of cooperation and amity The Convention of Paris for the Protection of Industrial Property is a "Bonito Enterprises," was the sole and exclusive distributor of
with all nations. multi-lateral treaty which the Philippines bound itself to honor and Escobar's "Barbizon" products.
enforce in this country. As to whether or not the treaty affords
That the Senate, after deliberation and voting, voluntarily and protection to a foreign corporation against a Philippine applicant for In 1979, however, Escobar failed to file with the Bureau of Patents
overwhelmingly gave its consent to the WTO Agreement thereby the registration of a similar trademark is the principal issue in this the Affidavit of Use of the trademark required under Section 12 of
making it "a part of the law of the land" is a legitimate exercise of its case. Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to
sovereign duty and power. We find no "patent and gross" this failure, the Bureau of Patents cancelled Escobar's certificate of
arbitrariness or despotism "by reason of passion or personal On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of registration.
hostility" in such exercise. It is not impossible to surmise that this petitioner Pribhdas J. Mirpuri, filed an application with the Bureau
Court, or at least some of its members, may even agree with of Patents for the registration of the trademark "Barbizon" for use in On May 27, 1981, Escobar reapplied for registration of the cancelled
petitioners that it is more advantageous to the national interest to brassieres and ladies undergarments. Escobar alleged that she had trademark. Mirpuri filed his own application for registration of
strike down Senate Resolution No. 97. But that is not a legal reason been manufacturing and selling these products under the firm name Escobar's trademark. Escobar later assigned her application to
to attribute grave abuse of discretion to the Senate and to nullify its "L & BM Commercial" since March 3, 1970. herein petitioner and this application was opposed by private
decision. To do so would constitute grave abuse in the exercise of Private respondent Barbizon Corporation, a corporation organized respondent. The case was docketed as Inter Partes Case No. 2049
our own judicial power and duty. Ineludably, what the Senate did and doing business under the laws of New York, U.S.A., opposed the (IPC No. 2049).
was a valid exercise of its authority. As to whether such exercise application. It claimed that:
was wise, beneficial or viable is outside the realm of judicial inquiry In its opposition, private respondent alleged that:
and review. That is a matter between the elected policy makers and The mark BARBIZON of respondent-applicant is
the people. As to whether the nation should join the worldwide confusingly similar to the trademark BARBIZON which (a) The Opposer has adopted the trademark BARBIZON
march toward trade liberalization and economic globalization is a opposer owns and has not abandoned. (word), sometime in June 1933 and has then used it on
matter that our people should determine in electing their policy various kinds of wearing apparel. On August 14, 1934,
Opposer obtained from the United States Patent Office a
more recent registration of the said mark under Certificate Norway, Sweden, Switzerland, Syria, El Salvador, South name with the Department of Trade and Industry (DTI) for which a
of Registration No. 316,161. On March 1, 1949, Opposer Africa, Zambia, Egypt, and Iran, among others; certificate of registration was issued in 1987.
obtained from the United States Patent Office a more recent
registration for the said trademark under Certificate of (f) To enhance its international reputation for quality goods Forthwith, private respondent filed before the Office of Legal Affairs
Registration No. 507,214, a copy of which is herewith and to further promote goodwill over its name, marks and of the DTI a petition for cancellation of petitioner's business name.
attached as Annex "A." Said Certificate of Registration products, Opposer has extensively advertised its products, On November 26, 1991, the DTI, Office of Legal Affairs, cancelled
covers the following goods — wearing apparel: robes, trademarks and name in various publications which are petitioner's certificate of registration, and declared private
pajamas, lingerie, nightgowns and slips; circulated in the United States and many countries around respondent the owner and prior user of the business name
the world, including the Philippines; "Barbizon International." Thus:
(b) Sometime in March 1976, Opposer further adopted the
trademark BARBIZON and Bee design and used the said (g) The trademark BARBIZON was fraudulently registered WHEREFORE, the petition is hereby GRANTED and
mark in various kinds of wearing apparel. On March 15, in the Philippines by one Lolita R. Escobar under petitioner is declared the owner and prior user of the
1977, Opposer secured from the United States Patent Office Registration No. 21920, issued on September 11, 1974, in business name "BARBIZON INTERNATIONAL" under
a registration of the said mark under Certificate of violation of Article 189 (3) of the Revised Penal Code and Certificate of Registration No. 87-09000 dated March 10,
Registration No. 1,061,277, a copy of which is herein Section 4 (d) of the Trademark Law. Herein respondent 1987 and issued in the name of respondent, is [sic] hereby
enclosed as Annex "B." The said Certificate of Registration applicant acquired by assignment the "rights" to the said ordered revoked and cancelled. . . . . 6
covers the following goods: robes, pajamas, lingerie, mark previously registered by Lolita Escobar, hence
nightgowns and slips; respondent-applicant's title is vitiated by the same fraud Meanwhile, in IPC No. 2049, the evidence of both parties were
and criminal act. Besides, Certificate of Registration No. received by the Director of Patents. On June 18, 1992, the Director
(c) Still further, sometime in 1961, Opposer adopted the 21920 has been cancelled for failure of either Lolita rendered a decision declaring private respondent's opposition
trademark BARBIZON and a Representation of a Woman Escobar or herein respondent-applicant, to seasonably file barred by res judicata and giving due course to petitioner's
and thereafter used the said trademark on various kinds of the statutory affidavit of use. By applying for a re- application for registration, to wit:
wearing apparel. Opposer obtained from the United States registration of the mark BARBIZON subject of this
Patent Office registration of the said mark on April 5, 1983 opposition, respondent-applicant seeks to perpetuate the WHEREFORE, the present Opposition in Inter Partes Case
under Certificate of Registration No. 1,233,666 for the fraud and criminal act committed by Lolita Escobar. No. 2049 is hereby DECLARED BARRED by res judicata and
following goods: wearing apparel: robes, pajamas, is hereby DISMISSED. Accordingly, Application Serial No.
nightgowns and lingerie. A copy of the said certificate of (h) Opposer's BARBIZON as well as its BARBIZON and Bee 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri
registration is herewith enclosed as Annex "C." Design and BARBIZON and Representation of a Woman is GIVEN DUE COURSE.
trademarks qualify as well-known trademarks entitled to SO ORDERED. 7
(d) All the above registrations are subsisting and in force protection under Article 6bis of the Convention of Paris for
and Opposer has not abandoned the use of the said the Protection of Industrial Property and further amplified Private respondent questioned this decision before the Court of
trademarks. In fact, Opposer, through a wholly-owned by the Memorandum of the Minister of Trade to the Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of
Philippine subsidiary, the Philippine Lingerie Corporation, Honorable Director of Patents dated October 25, 1983 [sic], Appeals reversed the Director of Patents finding that IPC No. 686
has been manufacturing the goods covered by said 4 Executive Order No. 913 dated October 7, 1963 and the was not barred by judgment in IPC No. 2049 and ordered that the
registrations and selling them to various countries, thereby Memorandum of the Minister of Trade and Industry to the case be remanded to the Bureau of Patents for further proceedings,
earning valuable foreign exchange for the country. As a Honorable Director of Patents dated October 25, 1983. viz:
result of respondent-applicant's misappropriation of WHEREFORE, the appealed Decision No. 92-13 dated June
Opposer's BARBIZON trademark, Philippine Lingerie (i) The trademark applied for by respondent applicant is 18, 1992 of the Director of Patents in Inter Partes Case No.
Corporation is prevented from selling its goods in the local identical to Opposer's BARBIZON trademark and 2049 is hereby SET ASIDE; and the case is hereby
market, to the damage and prejudice of Opposer and its constitutes the dominant part of Opposer's two other marks remanded to the Bureau of Patents for further proceedings,
wholly-owned subsidiary. namely, BARBIZON and Bee design and BARBIZON and a in accordance with this pronouncement. No costs. 8
Representation of a Woman. The continued use by
(e) The Opposer's goods bearing the trademark BARBIZON respondent-applicant of Opposer's trademark BARBIZON In a Resolution dated March 16, 1994, the
have been used in many countries, including the on goods belonging to Class 25 constitutes a clear case of Court of Appeals denied reconsideration of its
Philippines, for at least 40 years and has enjoyed commercial and criminal piracy and if allowed registration decision. 9 Hence, this recourse.
international reputation and good will for their quality. To will violate not only the Trademark Law but also Article
protect its registrations in countries where the goods 189 of the Revised Penal Code and the commitment of the Before us, petitioner raises the following issues:
covered by the registrations are being sold, Opposer has Philippines to an international treaty. 5
procured the registration of the trademark BARBIZON in 1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF
the following countries: Australia, Austria, Abu Dhabi, Replying to private respondent's opposition, PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON
Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, petitioner raised the defense of res judicata. JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES
Colombia, Denmark, Ecuador, France, West Germany, JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR
Greece, Guatemala, Hongkong, Honduras, Italy, Japan, On March 2, 1982, Escobar assigned to petitioner the use of the OF PATENTS IS CONCERNED;
Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, business name "Barbizon International." Petitioner registered the
2. WHETHER OR NOT THE DIRECTOR OF PATENTS ownership of the articles to which they are attached; (2) they Today, the trademark is not merely a symbol of origin and goodwill;
CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN guarantee that those articles come up to a certain standard of it is often the most effective agent for the actual creation and
DISMISSING PRIVATE RESPONDENT BARBIZON'S quality; and (3) they advertise the articles they symbolize. 14 protection of goodwill. It imprints upon the public mind an
OPPOSITION TO PETITIONER'S APPLICATION FOR anonymous and impersonal guaranty of satisfaction, creating a
REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH Symbols have been used to identify the ownership or origin of desire for further satisfaction. In other words, the mark actually
HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION articles for several centuries. 15 As early as 5,000 B.C., markings on sells the goods. 28 The mark has become the "silent salesman," the
NO. 53920 ON NOVEMBER 16, 1992; pottery have been found by archaeologists. Cave drawings in conduit through which direct contact between the trademark owner
southwestern Europe show bison with symbols on their flanks. 16 and the consumer is assured. It has invaded popular culture in ways
3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT Archaeological discoveries of ancient Greek and Roman inscriptions never anticipated that it has become a more convincing selling point
ON THE MERITS" REQUIRED A "HEARING WHERE BOTH on sculptural works, paintings, vases, precious stones, glassworks, than even the quality of the article to which it refers. 29 In the last
PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE" AND bricks, etc. reveal some features which are thought to be marks or half century, the unparalleled growth of industry and the rapid
WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A symbols. These marks were affixed by the creator or maker of the development of communications technology have enabled
CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS article, or by public authorities as indicators for the payment of tax, trademarks, tradenames and other distinctive signs of a product to
WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY for disclosing state monopoly, or devices for the settlement of penetrate regions where the owner does not actually manufacture
EVIDENCE FALLS WITHIN THE MEANING OF "JUDGMENT accounts between an entrepreneur and his workmen. 17 or sell the product itself. Goodwill is no longer confined to the
ON THE MERITS" AS ONE OF THE REQUISITES TO territory of actual market penetration; it extends to zones where the
CONSTITUTE RES JUDICATA; In the Middle Ages, the use of many kinds of marks on a variety of marked article has been fixed in the public mind through
goods was commonplace. Fifteenth century England saw the advertising. 30 Whether in the print, broadcast or electronic
4. WHETHER A DECISION OF THE DEPARTMENT OF compulsory use of identifying marks in certain trades. There were communications medium, particularly on the Internet, 31 advertising
TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM the baker's mark on bread, bottlemaker's marks, smith's marks, has paved the way for growth and expansion of the product by
NAME "BARBIZON INTERNATIONAL" AND WHICH tanner's marks, watermarks on paper, etc. 18 Every guild had its own creating and earning a reputation that crosses over borders,
DECISION IS STILL PENDING RECONSIDERATION NEVER mark and every master belonging to it had a special mark of his virtually turning the whole world into one vast marketplace.
OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF own. The marks were not trademarks but police marks
PATENTS IN INTER PARTES CASE NO. 2049 HAS THE compulsorily imposed by the sovereign to let the public know that This is the mise-en-scene of the present controversy. Petitioner
RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE the goods were not "foreign" goods smuggled into an area where brings this action claiming that "Barbizon" products have been sold
BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED the guild had a monopoly, as well as to aid in tracing defective work in the Philippines since 1970. Petitioner developed this market by
BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE or poor craftsmanship to the artisan. 19 For a similar reason, working long hours and spending considerable sums of money on
BASIS OF THE PARIS CONVENTION AND THE TRADEMARK merchants also used merchants' marks. Merchants dealt in goods advertisements and promotion of the trademark and its products.
LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND acquired from many sources and the marks enabled them to Now, almost thirty years later, private respondent, a foreign
EXCLUSIVE JURISDICTION OF THE DIRECTOR OF identify and reclaim their goods upon recovery after shipwreck or corporation, "swaggers into the country like a conquering hero,"
PATENTS. 10 piracy. 20 usurps the trademark and invades petitioner's market. 32 Justice and
fairness dictate that private respondent be prevented from
Before ruling on the issues of the case, there is need for a brief With constant use, the mark acquired popularity and became appropriating what is not its own. Legally, at the same time, private
background on the function and historical development of voluntarily adopted. It was not intended to create or continue respondent is barred from questioning petitioner's ownership of
trademarks and trademark law. monopoly but to give the customer an index or guarantee of quality. the trademark because of res judicata. 33
21 It was in the late 18th century when the industrial revolution

A "trademark" is defined under R.A. 166, the Trademark Law, as gave rise to mass production and distribution of consumer goods Literally, res judicata means a matter adjudged, a thing judicially
including "any word, name, symbol, emblem, sign or device or any that the mark became an important instrumentality of trade and acted upon or decided; a thing or matter settled by judgment. 34 In
combination thereof adopted and used by a manufacturer or commerce. 22 By this time, trademarks did not merely identify the res judicata, the judgment in the first action is considered conclusive
merchant to identify his goods and distinguish them from those goods; they also indicated the goods to be of satisfactory quality, as to every matter offered and received therein, as to any other
manufactured, sold or dealt in by others. 11 This definition has been and thereby stimulated further purchases by the consuming public. admissible matter which might have been offered for that purpose,
simplified in R.A. No. 8293, the Intellectual Property Code of the 23 Eventually, they came to symbolize the goodwill and business and all other matters that could have been adjudged therein. 35 Res
Philippines, which defines a "trademark" as "any visible sign reputation of the owner of the product and became a property right judicata is an absolute bar to a subsequent action for the same
capable of distinguishing goods." 12 In Philippine jurisprudence, the protected by law. 24 The common law developed the doctrine of cause; and its requisites are: (a) the former judgment or order must
function of a trademark is to point out distinctly the origin or trademarks and tradenames "to prevent a person from palming off be final; (b) the judgment or order must be one on the merits; (c) it
ownership of the goods to which it is affixed; to secure to him, who his goods as another's, from getting another's business or injuring must have been rendered by a court having jurisdiction over the
has been instrumental in bringing into the market a superior article his reputation by unfair means, and, from defrauding the public." 25 subject matter and parties; (d) there must be between the first and
of merchandise, the fruit of his industry and skill; to assure the Subsequently, England and the United States enacted national second actions, identity of parties, of subject matter and of causes of
public that they are procuring the genuine article; to prevent fraud legislation on trademarks as part of the law regulating unfair trade. action. 36
and imposition; and to protect the manufacturer against 26 It became the right of the trademark owner to exclude others

substitution and sale of an inferior and different article as his from the use of his mark, or of a confusingly similar mark where The Solicitor General, on behalf of respondent Director of Patents,
product. 13 confusion resulted in diversion of trade or financial injury. At the has joined cause with petitioner. Both claim that all the four
same time, the trademark served as a warning against the imitation elements of res judicata have been complied with: that the judgment
Modern authorities on trademark law view trademarks as or faking of products to prevent the imposition of fraud upon the in IPC No. 686 was final and was rendered by the Director of Patents
performing three distinct functions: (1) they indicate origin or public. 27 who had jurisdiction over the subject matter and parties; that the
judgment in IPC No. 686 was on the merits; and that the lack of a as the date of first use (Rule 173, Rules of Practice in and Industry to the Director of Patents, as well as Executive Order
hearing was immaterial because substantial issues were raised by Trademark Cases). (E.O.) No. 913.
the parties and passed upon by the Director of Patents. 37
The decision in IPC No. 686 reads as follows: From the foregoing, I conclude that the opposer has not The Convention of Paris for the Protection of Industrial Property,
made out a case of probable damage by the registration of otherwise known as the Paris Convention, is a multilateral treaty
xxx xxx xxx. the respondent-applicant's mark BARBIZON. that seeks to protect industrial property consisting of patents, utility
Neither party took testimony nor adduced documentary models, industrial designs, trademarks, service marks, trade names
evidence. They submitted the case for decision based on the WHEREFORE, the opposition should be, as it is hereby, and indications of source or appellations of origin, and at the same
pleadings which, together with the pertinent records, have DISMISSED. Accordingly, Application Serial No. 19010, for time aims to repress unfair competition. 41 The Convention is
all been carefully considered. the registration of the trademark BARBIZON of respondent essentially a compact among various countries which, as members
Lolita R. Escobar, is given due course.38 of the Union, have pledged to accord to citizens of the other member
Accordingly, the only issue for my disposition is whether or countries trademark and other rights comparable to those accorded
not the herein opposer would probably be damaged by the The decision in IPC No. 686 was a judgment on the merits and it was their own citizens by their domestic laws for an effective protection
registration of the trademark BARBIZON sought by the error for the Court of Appeals to rule that it was not. A judgment is against unfair competition. 42 In short, foreign nationals are to be
respondent-applicant on the ground that it so resembles on the merits when it determines the rights and liabilities of the given the same treatment in each of the member countries as that
the trademark BARBIZON allegedly used and owned by the parties based on the disclosed facts, irrespective of formal, technical country makes available to its own citizens. 43 Nationals of the
former to be "likely to cause confusion, mistake or to or dilatory objections. 39 It is not necessary that a trial should have various member nations are thus assured of a certain minimum of
deceive purchasers." been conducted. If the court's judgment is general, and not based on international protection of their industrial property. 44
any technical defect or objection, and the parties had a full legal
On record, there can be no doubt that respondent- opportunity to be heard on their respective claims and contentions, The Convention was first signed by eleven countries in Paris on
applicant's sought-to-be-registered trademark BARBIZON it is on the merits although there was no actual hearing or March 20, 1883. 45 It underwent several revisions — at Brussels in
is similar, in fact obviously identical, to opposer's alleged arguments on the facts of the case. 40 In the case at bar, the Director 1900, at Washington in 1911, at The Hague in 1925, at London in
trademark BARBIZON, in spelling and pronunciation. The of Patents did not dismiss private respondent's opposition on a 1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the
only appreciable but very negligible difference lies in their sheer technicality. Although no hearing was conducted, both parties Philippines and the United States of America, herein private
respective appearances or manner of presentation. filed their respective pleadings and were given opportunity to respondent's country, are signatories to the Convention. The United
Respondent-applicant's trademark is in bold letters (set present evidence. They, however, waived their right to do so and States acceded on May 30, 1887 while the Philippines, through its
against a black background), while that of the opposer is submitted the case for decision based on their pleadings. The lack of Senate, concurred on May 10, 1965. 47 The Philippines' adhesion
offered in stylish script letters. evidence did not deter the Director of Patents from ruling on the became effective on September 27, 1965, 48 and from this date, the
case, particularly on the issue of prior use, which goes into the very country obligated itself to honor and enforce the provisions of the
It is opposer's assertion that its trademark BARBIZON has substance of the relief sought by the parties. Since private Convention. 49
been used in trade or commerce in the Philippines prior to respondent failed to prove prior use of its trademark, Escobar's
the date of application for the registration of the identical claim of first use was upheld. In the case at bar, private respondent anchors its cause of action on
mark BARBIZON by the respondent-applicant. However, the the first paragraph of Article 6bis of the Paris Convention which
allegation of facts in opposer's verified notice of opposition The judgment in IPC No. 686 being on the merits, petitioner and the reads as follows:
is devoid of such material information. In fact, a reading of Solicitor General allege that IPC No. 686 and IPC No. 2049 also
the text of said verified opposition reveals an apparent, if comply with the fourth requisite of res judicata, i.e., they involve the Article 6bis
not deliberate, omission of the date (or year) when same parties and the same subject matter, and have identical causes
opposer's alleged trademark BARBIZON was first used in of action. (1) The countries of the Union undertake, either
trade in the Philippines (see par. No. 1, p. 2, Verified Notice administratively if their legislation so permits, or at the request
of Opposition, Rec.). Thus, it cannot here and now be Undisputedly, IPC No. 686 and IPC No. 2049 involve the same of an interested party, to refuse or to cancel the registration and
ascertained whether opposer's alleged use of the trademark parties and the same subject matter. Petitioner herein is the to prohibit the use, of a trademark which constitutes a
BARBIZON could be prior to the use of the identical mark assignee of Escobar while private respondent is the same American reproduction, an imitation, or a translation, liable to create
by the herein respondent-applicant, since the opposer corporation in the first case. The subject matter of both cases is the confusion, of a mark considered by the competent authority of
attempted neither to substantiate its claim of use in local trademark "Barbizon." Private respondent counter-argues, the country of registration or use to be well-known in that
commerce with any proof or evidence. Instead, the opposer however, that the two cases do not have identical causes of action. country as being already the mark of a person entitled to the
submitted the case for decision based merely on the New causes of action were allegedly introduced in IPC No. 2049, benefits of this Convention and used for identical or similar
pleadings. such as the prior use and registration of the trademark in the United goods. These provisions shall also apply when the essential part
States and other countries worldwide, prior use in the Philippines, of the mark constitutes a reproduction of any such well-known
On the other hand, respondent-applicant asserted in her and the fraudulent registration of the mark in violation of Article mark or an imitation liable to create confusion therewith.
amended application for registration that she first used the 189 of the Revised Penal Code. Private respondent also cited
trademark BARBIZON for brassiere (or "brasseire") and protection of the trademark under the Convention of Paris for the (2) A period of at least five years from the date of registration
ladies underwear garments and panties as early as March 3, Protection of Industrial Property, specifically Article 6bis thereof, shall be allowed for seeking the cancellation of such a mark. The
1970. Be that as it may, there being no testimony taken as and the implementation of Article 6bis by two Memoranda dated countries of the Union may provide for a period within which
to said date of first use, respondent-applicant will be November 20, 1980 and October 25, 1983 of the Minister of Trade the prohibition of use must be sought.
limited to the filing date, June 15, 1970, of her application
(3) No time limit shall be fixed for seeking the cancellation (e) that the trademark actually belongs to a party claiming
or the prohibition of the use of marks registered or used in For immediate compliance. 55 ownership and has the right to registration under the
bad faith. 50 provisions of the aforestated PARIS CONVENTION.
Three years later, on October 25, 1983, then Minister Roberto
This Article governs protection of well-known trademarks. Ongpin issued another Memorandum to the Director of Patents, viz: 2. The word trademark, as used in this MEMORANDUM,
Under the first paragraph, each country of the Union bound shall include tradenames, service marks, logos, signs,
itself to undertake to refuse or cancel the registration, and Pursuant to Executive Order No. 913 dated 7 October 1983 emblems, insignia or other similar devices used for
prohibit the use of a trademark which is a reproduction, which strengthens the rule-making and adjudicatory powers of identification and recognition by consumers.
imitation or translation, or any essential part of which the Minister of Trade and Industry and provides inter alia, that
trademark constitutes a reproduction, liable to create "such rule-making and adjudicatory powers should be 3. The Philippine Patent Office shall refuse all applications
confusion, of a mark considered by the competent authority of revitalized in order that the Minister of Trade and Industry can . for, or cancel the registration of, trademarks which
the country where protection is sought, to be well-known in the . . apply more swift and effective solutions and remedies to old constitute a reproduction, translation or imitation of a
country as being already the mark of a person entitled to the and new problems . . . such as infringement of internationally- trademark owned by a person, natural or corporate, who is
benefits of the Convention, and used for identical or similar known tradenames and trademarks . . ." and in view of the a citizen of a country signatory to the PARIS CONVENTION
goods. decision of the Intermediate Appellate Court in the case of LA FOR THE PROTECTION OF INDUSTRIAL PROPERTY.
CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP
Art. 6bis was first introduced at The Hague in 1925 and amended in NO. 13359 (17) June 1983] 56 which affirms the validity of the 4. The Philippine Patent Office shall give due course to the
Lisbon in 1952. 51 It is a self-executing provision and does not MEMORANDUM of then Minister Luis R. Villafuerte dated 20 Opposition in cases already or hereafter filed against the
require legislative enactment to give it effect in the member November 1980 confirming our obligations under the PARIS registration of trademarks entitled to protection of Section
country. 52 It may be applied directly by the tribunals and officials of CONVENTION FOR THE PROTECTION OF INDUSTRIAL 6bis of said PARIS CONVENTION as outlined above, by
each member country by the mere publication or proclamation of PROPERTY to which the Republic of the Philippines is a remanding applications filed by one not entitled to such
the Convention, after its ratification according to the public law of signatory, you are hereby directed to implement measures protection for final disallowance by the Examination
each state and the order for its execution. 53 necessary to effect compliance with our obligations under said Division.
Convention in general, and, more specifically, to honor our
The essential requirement under Article 6bis is that the trademark commitment under Section 6bis 57 thereof, as follows: 5. All pending applications for Philippine registration of
to be protected must be "well-known" in the country where signature and other world-famous trademarks filed by
protection is sought. The power to determine whether a trademark 1. Whether the trademark under consideration is well- applicants other than their original owners or users shall be
is well-known lies in the "competent authority of the country of known in the Philippines or is a mark already belonging to a rejected forthwith. Where such applicants have already
registration or use." This competent authority would be either the person entitled to the benefits of the CONVENTION, this obtained registration contrary to the abovementioned
registering authority if it has the power to decide this, or the courts should be established, pursuant to Philippine Patent Office PARIS CONVENTION and/or Philippine Law, they shall be
of the country in question if the issue comes before a court. 54 procedures in inter partes and ex parte cases, according to directed to surrender their Certificates of Registration to
any of the following criteria or any combination thereof: the Philippine Patent Office for immediate cancellation
Pursuant to Article 6bis, on November 20, 1980, then Minister Luis proceedings.
Villafuerte of the Ministry of Trade issued a Memorandum to the (a) a declaration by the Minister of Trade and Industry that
Director of Patents. The Minister ordered the Director that: the trademark being considered is already well-known in xxx xxx xxx. 58
the Philippines such that permission for its use by other In the Villafuerte Memorandum, the Minister of Trade instructed the
Pursuant to the Paris Convention for the Protection of than its original owner will constitute a reproduction, Director of Patents to reject all pending applications for Philippine
Industrial Property to which the Philippines is a signatory, imitation, translation or other infringement; registration of signature and other world-famous trademarks by
you are hereby directed to reject all pending applications applicants other than their original owners or users. The Minister
for Philippine registration of signature and other world- (b) that the trademark is used in commerce internationally, enumerated several internationally-known trademarks and ordered
famous trademarks by applicants other than its original supported by proof that goods bearing the trademark are the Director of Patents to require Philippine registrants of such
owners or users. sold on an international scale, advertisements, the marks to surrender their certificates of registration.
establishment of factories, sales offices, distributorships,
The conflicting claims over internationally known and the like, in different countries, including volume or In the Ongpin Memorandum, the Minister of Trade and Industry did
trademarks involve such name brands as Lacoste, Jordache, other measure of international trade and commerce; not enumerate well-known trademarks but laid down guidelines for
Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, the Director of Patents to observe in determining whether a
Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, (c) that the trademark is duly registered in the industrial trademark is entitled to protection as a well-known mark in the
Geoffrey Beene, Lanvin and Ted Lapidus. property office(s) of another country or countries, taking Philippines under Article 6bis of the Paris Convention. This was to
It is further directed that, in cases where warranted, into consideration the date of such registration; be established through Philippine Patent Office procedures in inter
Philippine registrants of such trademarks should be asked partes and ex parte cases pursuant to the criteria enumerated
to surrender their certificates of registration, if any, to (d) that the trademark has long been established and therein. The Philippine Patent Office was ordered to refuse
avoid suits for damages and other legal action by the obtained goodwill and international consumer recognition applications for, or cancel the registration of, trademarks which
trademarks' foreign or local owners or original users. as belonging to one owner or source; constitute a reproduction, translation or imitation of a trademark
You are also required to submit to the undersigned a owned by a person who is a citizen of a member of the Union. All
progress report on the matter. pending applications for registration of world-famous trademarks
by persons other than their original owners were to be rejected Philippines of world-famous trademarks." 64 This conclusion was (f) Escobar's trademark is identical to private respondent's
forthwith. The Ongpin Memorandum was issued pursuant to based on the finding that Wolverine's two previous petitions and and its use on the same class of goods as the latter's
Executive Order No. 913 dated October 7, 1983 of then President subsequent petition dealt with the same issue of ownership of the amounts to a violation of the Trademark Law and Article
Marcos which strengthened the rule-making and adjudicatory trademark. 65 In other words, since the first and second cases 189 of the Revised Penal Code.
powers of the Minister of Trade and Industry for the effective involved the same issue of ownership, then the first case was a bar
protection of consumers and the application of swift solutions to to the second case. IPC No. 2049 raised the issue of ownership of the trademark,
problems in trade and industry. 59 the first registration and use of the trademark in the United
In the instant case, the issue of ownership of the trademark States and other countries, and the international recognition
Both the Villafuerte and Ongpin Memoranda were sustained by the "Barbizon" was not raised in IPC No. 686. Private respondent's and reputation of the trademark established by extensive use
Supreme Court in the 1984 landmark case of La Chemise Lacoste, opposition therein was merely anchored on: and advertisement of private respondent's products for over
S.A. v. Fernandez. 60 This court ruled therein that under the forty years here and abroad. These are different from the issues
provisions of Article 6bis of the Paris Convention, the Minister of (a) "confusing similarity" of its trademark with that of of confusing similarity and damage in IPC No. 686. The issue of
Trade and Industry was the "competent authority" to determine Escobar's; prior use may have been raised in IPC No. 686 but this claim
whether a trademark is well-known in this country. 61 was limited to prior use in the Philippines only. Prior use in IPC
(b) that the registration of Escobar's similar trademark will No. 2049 stems from private respondent's claim as originator of
The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) cause damage to private respondent's business reputation and the word and symbol "Barbizon," 66 as the first and registered
years after the adoption of the Paris Convention in 1965. In the case goodwill; and user of the mark attached to its products which have been sold
at bar, the first inter partes case, IPC No. 686, was filed in 1970, and advertised worldwide for a considerable number of years
before the Villafuerte Memorandum but five (5) years after the (c) that Escobar's use of the trademark amounts to an unlawful prior to petitioner's first application for registration of her
effectivity of the Paris Convention. Article 6bis was already in effect appropriation of a mark previously used in the Philippines trademark in the Philippines. Indeed, these are substantial
five years before the first case was instituted. Private respondent, which act is penalized under Section 4 allegations that raised new issues and necessarily gave private
however, did not cite the protection of Article 6bis, neither did it respondent a new cause of action. Res judicata does not apply to
mention the Paris Convention at all. It was only in 1981 when IPC (d) of the Trademark Law. rights, claims or demands, although growing out of the same
No. 2049 was instituted that the Paris Convention and the In IPC No. 2049, private respondent's opposition set forth subject matter, which constitute separate or distinct causes of
Villafuerte Memorandum, and, during the pendency of the case, the several issues summarized as follows: action and were not put in issue in the former action. 67
1983 Ongpin Memorandum were invoked by private respondent.
(a) as early as 1933, it adopted the word "BARBIZON" as Respondent corporation also introduced in the second case a fact
The Solicitor General argues that the issue of whether the trademark on its products such as robes, pajamas, lingerie, that did not exist at the time the first case was filed and terminated.
protection of Article 6bis of the Convention and the two Memoranda nightgowns and slips; The cancellation of petitioner's certificate of registration for failure
is barred by res judicata has already been answered in Wolverine to file the affidavit of use arose only after IPC No. 686. It did not and
Worldwide, Inc. v. Court of Appeals. 62 In this case, petitioner (b) that the trademark "BARBIZON" was registered with the could not have occurred in the first case, and this gave respondent
Wolverine, a foreign corporation, filed with the Philippine Patent United States Patent Office in 1934 and 1949; and that another cause to oppose the second application. Res judicata
Office a petition for cancellation of the registration certificate of variations of the same trademark, i.e., "BARBIZON" with Bee extends only to facts and conditions as they existed at the time
private respondent, a Filipino citizen, for the trademark "Hush design and "BARBIZON" with the representation of a woman judgment was rendered and to the legal rights and relations of the
Puppies" and "Dog Device." Petitioner alleged that it was the were also registered with the U.S. Patent Office in 1961 and parties fixed by the facts so determined. 68 When new facts or
registrant of the internationally-known trademark in the United 1976; conditions intervene before the second suit, furnishing a new basis
States and other countries, and cited protection under the Paris for the claims and defenses of the parties, the issues are no longer
Convention and the Ongpin Memorandum. The petition was (c) that these marks have been in use in the Philippines and the same, and the former judgment cannot be pleaded as a bar to
dismissed by the Patent Office on the ground of res judicata. It was in many countries all over the world for over forty years. the subsequent action. 69
found that in 1973 petitioner's predecessor-in-interest filed two "Barbizon" products have been advertised in international
petitions for cancellation of the same trademark against publications and the marks registered in 36 countries It is also noted that the oppositions in the first and second cases are
respondent's predecessor-in-interest. The Patent Office dismissed worldwide; based on different laws. The opposition in IPC No. 686 was based on
the petitions, ordered the cancellation of registration of petitioner's specific provisions of the Trademark Law, i.e., Section 4 (d) 70 on
trademark, and gave due course to respondent's application for (d) Escobar's registration of the similar trademark confusing similarity of trademarks and Section 8 71 on the requisite
registration. This decision was sustained by the Court of Appeals, "BARBIZON" in 1974 was based on fraud; and this damage to file an opposition to a petition for registration. The
which decision was not elevated to us and became final and fraudulent registration was cancelled in 1979, stripping opposition in IPC No. 2049 invoked the Paris Convention,
executory. 63 Escobar of whatsoever right she had to the said mark; particularly Article 6bis thereof, E.O. No. 913 and the two
Memoranda of the Minister of Trade and Industry. This opposition
Wolverine claimed that while its previous petitions were filed under (e) Private respondent's trademark is entitled to protection also invoked Article 189 of the Revised Penal Code which is a
R.A. No. 166, the Trademark Law, its subsequent petition was based as a well-known mark under Article 6bis of the Paris statute totally different from the Trademark Law. 72 Causes of action
on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. Convention, Executive Order No. 913, and the two which are distinct and independent from each other, although
913 issued in 1983, after finality of the previous decision. We held Memoranda dated November 20, 1980 and October 25, arising out of the same contract, transaction, or state of facts, may
that the said Memorandum and E.O. did not grant a new cause of 1983 of the Minister of Trade and Industry to the Director be sued on separately, recovery on one being no bar to subsequent
action because it did "not amend the Trademark Law," . . . "nor did it of Patents; actions on others. 73 The mere fact that the same relief is sought in
indicate a new policy with respect to the registration in the the subsequent action will not render the judgment in the prior
action operative as res judicata, such as where the two actions are A major proportion of international trade depends on the protection laws of the State of California, United States of America (U.S.), where
based on different statutes. 74 Res judicata therefore does not apply of intellectual property rights. 89 Since the late 1970's, the all its wineries are located. Gallo Winery produces different kinds of
to the instant case and respondent Court of Appeals did not err in so unauthorized counterfeiting of industrial property and trademarked wines and brandy products and sells them in many countries under
ruling. products has had a considerable adverse impact on domestic and different registered trademarks, including the GALLO and ERNEST
international trade revenues. 90 The TRIPs Agreement seeks to grant & JULIO GALLO wine trademarks.
Intellectual and industrial property rights cases are not simple adequate protection of intellectual property rights by creating a
property cases. Trademarks deal with the psychological function of favorable economic environment to encourage the inflow of foreign Respondent domestic corporation, Andresons, has been Gallo
symbols and the effect of these symbols on the public at large. 75 investments, and strengthening the multi-lateral trading system to Winery’s exclusive wine importer and distributor in the Philippines
Trademarks play a significant role in communication, commerce bring about economic, cultural and technological independence. 91 since 1991, selling these products in its own name and for its own
and trade, and serve valuable and interrelated business functions, account.5
both nationally and internationally. For this reason, all agreements The Philippines and the United States of America have acceded to
concerning industrial property, like those on trademarks and the WTO Agreement. This Agreement has revolutionized Gallo Winery’s GALLO wine trademark was registered in the
tradenames, are intimately connected with economic development. international business and economic relations among states, and principal register of the Philippine Patent Office (now Intellectual
76 Industrial property encourages investments in new ideas and has propelled the world towards trade liberalization and economic Property Office) on November 16, 1971 under Certificate of
inventions and stimulates creative efforts for the satisfaction of globalization. 92 Protectionism and isolationism belong to the past. Registration No. 17021 which was renewed on November 16, 1991
human needs. They speed up transfer of technology and Trade is no longer confined to a bilateral system. There is now "a for another 20 years.6 Gallo Winery also applied for registration of
industrialization, and thereby bring about social and economic new era of global economic cooperation, reflecting the widespread its ERNEST & JULIO GALLO wine trademark on October 11, 1990
progress. 77 These advantages have been acknowledged by the desire to operate in a fairer and more open multilateral trading under Application Serial No. 901011-00073599-PN but the records
Philippine government itself. The Intellectual Property Code of the system." 93 Conformably, the State must reaffirm its commitment to do not disclose if it was ever approved by the Director of Patents. 7
Philippines declares that "an effective intellectual and industrial the global community and take part in evolving a new international
property system is vital to the development of domestic and economic order at the dawn of the new millenium. On the other hand, petitioners Mighty Corporation and La Campana
creative activity, facilitates transfer of technology, it attracts foreign and their sister company, Tobacco Industries of the Philippines
investments, and ensures market access for our products." 78 The IN VIEW WHEREOF, the petition is denied and the Decision and (Tobacco Industries), are engaged in the cultivation, manufacture,
Intellectual Property Code took effect on January 1, 1998 and by its Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are distribution and sale of tobacco products for which they have been
express provision, 79 repealed the Trademark Law, 80 the Patent affirmed. using the GALLO cigarette trademark since 1973. 8
Law, 81 Articles 188 and 189 of the Revised Penal Code, the Decree
on Intellectual Property, 82 and the Decree on Compulsory SO ORDERED. The Bureau of Internal Revenue (BIR) approved Tobacco Industries’
Reprinting of Foreign Textbooks. 83 The Code was enacted to Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur. use of GALLO 100’s cigarette mark on September 14, 1973 and
strengthen the intellectual and industrial property system in the GALLO filter cigarette mark on March 26, 1976, both for the
Philippines as mandated by the country's accession to the G.R. No. 154342 July 14, 2004 manufacture and sale of its cigarette products. In 1976, Tobacco
Agreement Establishing the World Trade Organization (WTO). 84 Industries filed its manufacturer’s sworn statement as basis for
The WTO is a common institutional framework for the conduct of MIGHTY CORPORATION and LA CAMPANA FABRICA DE BIR’s collection of specific tax on GALLO cigarettes. 9
trade relations among its members in matters related to the TABACO, INC., petitioner, vs. E. & J. GALLO WINERY and THE
multilateral and plurilateral trade agreements annexed to the WTO ANDRESONS GROUP, INC., respondents. On February 5, 1974, Tobacco Industries applied for, but eventually
Agreement. 85 The WTO framework ensures a "single undertaking did not pursue, the registration of the GALLO cigarette trademark in
approach" to the administration and operation of all agreements DECISION the principal register of the then Philippine Patent Office.10
and arrangements attached to the WTO Agreement. Among those CORONA, J.:
annexed is the Agreement on Trade-Related Aspects of Intellectual In this petition for review on certiorari under Rule 45, petitioners In May 1984, Tobacco Industries assigned the GALLO cigarette
Property Rights or TRIPs. 86 Members to this Agreement "desire to Mighty Corporation and La Campana Fabrica de Tabaco, Inc. (La trademark to La Campana which, on July 16, 1985, applied for
reduce distortions and impediments to international trade, taking Campana) seek to annul, reverse and set aside: (a) the November trademark registration in the Philippine Patent Office.11 On July 17,
into account the need to promote effective and adequate protection 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 1985, the National Library issued Certificate of Copyright
of intellectual property rights, and to ensure that measures and 65175 affirming the November 26, 1998 decision,2 as modified by Registration No. 5834 for La Campana’s lifetime copyright claim
procedures to enforce intellectual property rights do not the June 24, 1999 order,3 of the Regional Trial Court of Makati City, over GALLO cigarette labels.12
themselves become barriers to legitimate trade." To fulfill these Branch 57 (Makati RTC) in Civil Case No. 93-850, which held
objectives, the members have agreed to adhere to minimum petitioners liable for, and permanently enjoined them from, Subsequently, La Campana authorized Mighty Corporation to
standards of protection set by several Conventions. 87 These committing trademark infringement and unfair competition, and manufacture and sell cigarettes bearing the GALLO trademark. 13 BIR
Conventions are: the Berne Convention for the Protection of which ordered them to pay damages to respondents E. & J. Gallo approved Mighty Corporation’s use of GALLO 100’s cigarette brand,
Literary and Artistic Works (1971), the Rome Convention or the Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); under licensing agreement with Tobacco Industries, on May 18,
International Convention for the Protection of Performers, (b) the July 11, 2002 CA resolution denying their motion for 1988, and GALLO SPECIAL MENTHOL 100’s cigarette brand on April
Producers of Phonograms and Broadcasting Organisations, the reconsideration4 and (c) the aforesaid Makati RTC decision itself. 3, 1989.14
Treaty on Intellectual Property in Respect of Integrated Circuits,
and the Paris Convention (1967), as revised in Stockholm on July 14, I. The Factual Background Petitioners claim that GALLO cigarettes have been sold in the
1967. 88 Philippines since 1973, initially by Tobacco Industries, then by La
Respondent Gallo Winery is a foreign corporation not doing Campana and finally by Mighty Corporation.15
business in the Philippines but organized and existing under the
On the other hand, although the GALLO wine trademark was good faith in the exercise of their right to manufacture and sell
registered in the Philippines in 1971, respondents claim that they GALLO cigarettes. (ii) exemplary damages in the amount of
first introduced and sold the GALLO and ERNEST & JULIO GALLO PHP100,000.00;
wines in the Philippines circa 1974 within the then U.S. military In an order dated April 21, 1993,24 the Makati RTC denied, for lack of
facilities only. By 1979, they had expanded their Philippine market merit, respondent’s prayer for the issuance of a writ of preliminary (iii) attorney’s fees and expenses of litigation in the
through authorized distributors and independent outlets.16 injunction,25 holding that respondent’s GALLO trademark amount of PHP1,130,068.91;
registration certificate covered wines only, that respondents’ wines
Respondents claim that they first learned about the existence of and petitioners’ cigarettes were not related goods and respondents (iv) the cost of suit.
GALLO cigarettes in the latter part of 1992 when an Andresons failed to prove material damage or great irreparable injury as
employee saw such cigarettes on display with GALLO wines in a required by Section 5, Rule 58 of the Rules of Court.26 SO ORDERED."29
Davao supermarket wine cellar section.17 Forthwith, respondents
sent a demand letter to petitioners asking them to stop using the On August 19, 1993, the Makati RTC denied, for lack of merit, On June 24, 1999, the Makati RTC granted respondent’s motion for
GALLO trademark, to no avail. respondents’ motion for reconsideration. The court reiterated that partial reconsideration and increased the award of actual and
respondents’ wines and petitioners’ cigarettes were not related compensatory damages to 10% of P199,290,000 or P19,929,000.30
II. The Legal Dispute goods since the likelihood of deception and confusion on the part of
the consuming public was very remote. The trial court emphasized On appeal, the CA affirmed the Makati RTC decision and
On March 12, 1993, respondents sued petitioners in the Makati RTC that it could not rely on foreign rulings cited by respondents subsequently denied petitioner’s motion for reconsideration.
for trademark and tradename infringement and unfair competition, "because the[se] cases were decided by foreign courts on the basis
with a prayer for damages and preliminary injunction. of unknown facts peculiar to each case or upon factual surroundings III. The Issues
which may exist only within their jurisdiction. Moreover, there
Respondents charged petitioners with violating Article 6bis of the [was] no showing that [these cases had] been tested or found Petitioners now seek relief from this Court contending that the CA
Paris Convention for the Protection of Industrial Property (Paris applicable in our jurisdiction."27 did not follow prevailing laws and jurisprudence when it held that:
Convention)18 and RA 166 (Trademark Law),19 specifically, Sections [a] RA 8293 (Intellectual Property Code of the Philippines [IP
22 and 23 (for trademark infringement),20 29 and 3021 (for unfair On February 20, 1995, the CA likewise dismissed respondents’ Code]) was applicable in this case; [b] GALLO cigarettes and GALLO
competition and false designation of origin) and 37 (for tradename petition for review on certiorari, docketed as CA-G.R. No. 32626, wines were identical, similar or related goods for the reason alone
infringement).22 They claimed that petitioners adopted the GALLO thereby affirming the Makati RTC’s denial of the application for that they were purportedly forms of vice; [c] both goods passed
trademark to ride on Gallo Winery’s GALLO and ERNEST & JULIO issuance of a writ of preliminary injunction against petitioners. 28 through the same channels of trade and [d] petitioners were liable
GALLO trademarks’ established reputation and popularity, thus for trademark infringement, unfair competition and damages. 31
causing confusion, deception and mistake on the part of the After trial on the merits, however, the Makati RTC, on November 26,
purchasing public who had always associated GALLO and ERNEST & 1998, held petitioners liable for, and permanently enjoined them Respondents, on the other hand, assert that this petition which
JULIO GALLO trademarks with Gallo Winery’s wines. Respondents from, committing trademark infringement and unfair competition invokes Rule 45 does not involve pure questions of law, and hence,
prayed for the issuance of a writ of preliminary injunction and ex with respect to the GALLO trademark: must be dismissed outright.
parte restraining order, plus P2 million as actual and compensatory
damages, at least P500,000 as exemplary and moral damages, and at WHEREFORE, judgment is rendered in favor of the plaintiff (sic)
least P500,000 as attorney’s fees and litigation expenses.23 and against the defendant (sic), to wit: IV. Discussion

In their answer, petitioners alleged, among other affirmative a. permanently restraining and enjoining defendants, their THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE
defenses, that: petitioner’s GALLO cigarettes and Gallo Winery’s distributors, trade outlets, and all persons acting for them COURT TO REVIEW THE CA’S FACTUAL FINDINGS
wines were totally unrelated products; Gallo Winery’s GALLO or under their instructions, from (i) using E & J’s registered
trademark registration certificate covered wines only, not trademark GALLO or any other reproduction, counterfeit, As a general rule, a petition for review on certiorari under Rule 45
cigarettes; GALLO cigarettes and GALLO wines were sold through copy or colorable imitation of said trademark, either singly must raise only "questions of law"32 (that is, the doubt pertains to
different channels of trade; GALLO cigarettes, sold at P4.60 for or in conjunction with other words, designs or emblems the application and interpretation of law to a certain set of facts)
GALLO filters and P3 for GALLO menthols, were low-cost items and other acts of similar nature, and (ii) committing other and not "questions of fact" (where the doubt concerns the truth or
compared to Gallo Winery’s high-priced luxury wines which cost acts of unfair competition against plaintiffs by falsehood of alleged facts),33 otherwise, the petition will be denied.
between P98 to P242.50; the target market of Gallo Winery’s wines manufacturing and selling their cigarettes in the domestic We are not a trier of facts and the Court of Appeals’ factual findings
was the middle or high-income bracket with at least P10,000 or export markets under the GALLO trademark. are generally conclusive upon us.34
monthly income while GALLO cigarette buyers were farmers, b. ordering defendants to pay plaintiffs –
fishermen, laborers and other low-income workers; the dominant This case involves questions of fact which are directly related and
feature of the GALLO cigarette mark was the rooster device with the (i) actual and compensatory damages for the injury and intertwined with questions of law. The resolution of the factual
manufacturer’s name clearly indicated as MIGHTY CORPORATION prejudice and impairment of plaintiffs’ business and issues concerning the goods’ similarity, identity, relation, channels
while, in the case of Gallo Winery’s wines, it was the full names of goodwill as a result of the acts and conduct pleaded as of trade, and acts of trademark infringement and unfair competition
the founders-owners ERNEST & JULIO GALLO or just their surname basis for this suit, in an amount equal to 10% of is greatly dependent on the interpretation of applicable laws. The
GALLO; by their inaction and conduct, respondents were guilty of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE controversy here is not simply the identity or similarity of both
laches and estoppel; and petitioners acted with honesty, justice and THOUSAND PESOS (PHP14,235,000.00) from the filing parties’ trademarks but whether or not infringement or unfair
of the complaint until fully paid; competition was committed, a conclusion based on statutory
interpretation. Furthermore, one or more of the following thus did not err in holding that appellants’ acts not only
exceptional circumstances oblige us to review the evidence on violated the provisions of the our trademark laws (R.A. No. 166 (2) In infringement of trademark fraudulent intent is
record:35 and R.A. Nos. (sic) 8293) but also Article 6bis of the Paris unnecessary, whereas in unfair competition fraudulent
Convention.39 (Emphasis and underscoring supplied) intent is essential.
(1) the conclusion is grounded entirely on speculation,
surmises, and conjectures; We therefore hold that the courts a quo erred in retroactively (3) In infringement of trademark the prior registration of
(2) the inference of the Court of Appeals from its findings of fact applying the IP Code in this case. the trademark is a prerequisite to the action, whereas in
is manifestly mistaken, absurd and impossible; unfair competition registration is not necessary.
(3) there is grave abuse of discretion; It is a fundamental principle that the validity and obligatory force of
(4) the judgment is based on a misapprehension of facts; a law proceed from the fact that it has first been promulgated. A law Pertinent Provisions on Trademark Infringement under the
(5) the appellate court, in making its findings, went beyond the that is not yet effective cannot be considered as conclusively known Paris Convention and the Trademark Law
issues of the case, and the same are contrary to the admissions by the populace. To make a law binding even before it takes effect
of both the appellant and the appellee; may lead to the arbitrary exercise of the legislative power. 40 Nova Article 6bis of the Paris Convention,46 an international agreement
(6) the findings are without citation of specific evidence on constitutio futuris formam imponere debet non praeteritis. A new binding on the Philippines and the United States (Gallo Winery’s
which they are based; state of the law ought to affect the future, not the past. Any doubt country of domicile and origin) prohibits "the [registration] or use
(7) the facts set forth in the petition as well as in the petitioner's must generally be resolved against the retroactive operation of of a trademark which constitutes a reproduction, imitation or
main and reply briefs are not disputed by the respondents; and laws, whether these are original enactments, amendments or translation, liable to create confusion, of a mark considered by the
(8) the findings of fact of the Court of Appeals are premised on repeals.41 There are only a few instances when laws may be given competent authority of the country of registration or use to be well-
the absence of evidence and are contradicted [by the evidence] retroactive effect,42 none of which is present in this case. known in that country as being already the mark of a person entitled
on record.36 The IP Code, repealing the Trademark Law, 43 was approved on June to the benefits of the [Paris] Convention and used for identical or
6, 1997. Section 241 thereof expressly decreed that it was to take similar goods. [This rule also applies] when the essential part of the
In this light, after thoroughly examining the evidence on record, effect only on January 1, 1998, without any provision for retroactive mark constitutes a reproduction of any such well-known mark or an
weighing, analyzing and balancing all factors to determine whether application. Thus, the Makati RTC and the CA should have limited imitation liable to create confusion therewith." There is no time limit
trademark infringement and/or unfair competition has been the consideration of the present case within the parameters of the for seeking the prohibition of the use of marks used in bad faith.47
committed, we conclude that both the Court of Appeals and the trial Trademark Law and the Paris Convention, the laws in force at the
court veered away from the law and well-settled jurisprudence. time of the filing of the complaint. Thus, under Article 6bis of the Paris Convention, the following are
the elements of trademark infringement:
Thus, we give due course to the petition. DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION (a) registration or use by another person of a trademark which
THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE is a reproduction, imitation or translation liable to create
APPLICABLE LAWS, NOT THE INTELLECTUAL PROPERTY CODE Although the laws on trademark infringement and unfair confusion,
competition have a common conception at their root, that is, a
We note that respondents sued petitioners on March 12, 1993 for person shall not be permitted to misrepresent his goods or his (b) of a mark considered by the competent authority of the
trademark infringement and unfair competition committed during business as the goods or business of another, the law on unfair country of registration or use48 to be well-known in that country
the effectivity of the Paris Convention and the Trademark Law. competition is broader and more inclusive than the law on and is already the mark of a person entitled to the benefits of
trademark infringement. The latter is more limited but it recognizes the Paris Convention, and
Yet, in the Makati RTC decision of November 26, 1998, petitioners a more exclusive right derived from the trademark adoption and
were held liable not only under the aforesaid governing laws but registration by the person whose goods or business is first (c) such trademark is used for identical or similar goods.
also under the IP Code which took effect only on January 1, 1998, 37 associated with it. The law on trademarks is thus a specialized
or about five years after the filing of the complaint: subject distinct from the law on unfair competition, although the On the other hand, Section 22 of the Trademark Law holds a person
two subjects are entwined with each other and are dealt with liable for infringement when, among others, he "uses without the
Defendants’ unauthorized use of the GALLO trademark together in the Trademark Law (now, both are covered by the IP consent of the registrant, any reproduction, counterfeit, copy or
constitutes trademark infringement pursuant to Section 22 of Code). Hence, even if one fails to establish his exclusive property colorable imitation of any registered mark or tradename in
Republic Act No. 166, Section 155 of the IP Code, Article 6bis of right to a trademark, he may still obtain relief on the ground of his connection with the sale, offering for sale, or advertising of any
the Paris Convention, and Article 16 (1) of the TRIPS Agreement competitor’s unfairness or fraud. Conduct constitutes unfair goods, business or services or in connection with which such use is
as it causes confusion, deception and mistake on the part of the competition if the effect is to pass off on the public the goods of one likely to cause confusion or mistake or to deceive purchasers or
purchasing public.38 (Emphasis and underscoring supplied) man as the goods of another. It is not necessary that any particular others as to the source or origin of such goods or services, or
means should be used to this end.44 identity of such business; or reproduce, counterfeit, copy or
The CA apparently did not notice the error and affirmed the Makati colorably imitate any such mark or tradename and apply such
RTC decision: In Del Monte Corporation vs. Court of Appeals,45 we distinguished reproduction, counterfeit, copy or colorable imitation to labels,
trademark infringement from unfair competition: signs, prints, packages, wrappers, receptacles or advertisements
In the light of its finding that appellants’ use of the GALLO intended to be used upon or in connection with such goods,
trademark on its cigarettes is likely to create confusion with the (1) Infringement of trademark is the unauthorized use of a business or services."49 Trademark registration and actual use are
GALLO trademark on wines previously registered and used in trademark, whereas unfair competition is the passing off of material to the complaining party’s cause of action.
the Philippines by appellee E & J Gallo Winery, the trial court one's goods as those of another.
Corollary to this, Section 20 of the Trademark Law 50 considers the to another’s use of its trademark or a colorable imitation thereof. the recent case of Philip Morris, Inc. v. Court of Appeals
trademark registration certificate as prima facie evidence of the This is why acquiescence, estoppel or laches may defeat the (224 SCRA 576 [1993]):
validity of the registration, the registrant’s ownership and exclusive registrant’s otherwise valid cause of action.
right to use the trademark in connection with the goods, business or Hence, proof of all the elements of trademark infringement is a xxx xxx xxx
services as classified by the Director of Patents51 and as specified in condition precedent to any finding of liability. Following universal acquiescence and comity, our
the certificate, subject to the conditions and limitations stated municipal law on trademarks regarding the
therein. Sections 2 and 2-A52 of the Trademark Law emphasize the THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO requirement of actual use in the Philippines must
importance of the trademark’s actual use in commerce in the CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE subordinate an international agreement inasmuch
Philippines prior to its registration. In the adjudication of trademark TRADEMARK. as the apparent clash is being decided by a
rights between contending parties, equitable principles of laches, municipal tribunal (Mortisen vs. Peters, Great Britain,
estoppel, and acquiescence may be considered and applied.53 By respondents’ own judicial admission, the GALLO wine trademark High Court of Judiciary of Scotland, 1906, 8 Sessions,
was registered in the Philippines in November 1971 but the wine 93; Paras, International Law and World Organization,
Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law itself was first marketed and sold in the country only in 1974 and 1971 Ed., p. 20). Withal, the fact that international law
therefore, the following constitute the elements of trademark only within the former U.S. military facilities, and outside thereof, has been made part of the law of the land does not by
infringement: only in 1979. To prove commercial use of the GALLO wine any means imply the primacy of international law over
trademark in the Philippines, respondents presented sales invoice national law in the municipal sphere. Under the
(a) a trademark actually used in commerce in the no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., doctrine of incorporation as applied in most countries,
Philippines and registered in the principal register of the Makati, Philippines and sales invoice no. 85926 dated March 22, rules of international law are given a standing equal,
Philippine Patent Office 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. not superior, to national legislative enactments.
Both invoices were for the sale and shipment of GALLO wines to the xxx xxx xxx
(b) is used by another person in connection with the sale, Philippines during that period.55 Nothing at all, however, was
offering for sale, or advertising of any goods, business or presented to evidence the alleged sales of GALLO wines in the In other words, (a foreign corporation) may have the
services or in connection with which such use is likely to Philippines in 1974 or, for that matter, prior to July 9, 1981. capacity to sue for infringement irrespective of lack
cause confusion or mistake or to deceive purchasers or On the other hand, by testimonial evidence supported by the BIR of business activity in the Philippines on account of
others as to the source or origin of such goods or services, authorization letters, forms and manufacturer’s sworn statement, it Section 21-A of the Trademark Law but the
or identity of such business; or such trademark is appears that petitioners and its predecessor-in-interest, Tobacco question of whether they have an exclusive right
reproduced, counterfeited, copied or colorably imitated by Industries, have indeed been using and selling GALLO cigarettes in over their symbol as to justify issuance of the
another person and such reproduction, counterfeit, copy or the Philippines since 1973 or before July 9, 1981.56 controversial writ will depend on actual use of their
colorable imitation is applied to labels, signs, prints, In Emerald Garment Manufacturing Corporation vs. Court of trademarks in the Philippines in line with Sections
packages, wrappers, receptacles or advertisements Appeals,57 we reiterated our rulings in Pagasa Industrial Corporation 2 and 2-A of the same law. It is thus incongruous for
intended to be used upon or in connection with such goods, vs. Court of Appeals,58 Converse Rubber Corporation vs. Universal petitioners to claim that when a foreign corporation not
business or services as to likely cause confusion or mistake Rubber Products, Inc.,59 Sterling Products International, Inc. vs. licensed to do business in the Philippines files a
or to deceive purchasers, Farbenfabriken Bayer Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. complaint for infringement, the entity need not be
Intermediate Appellate Court,61 and Philip Morris vs. Court of actually using the trademark in commerce in the
(c) the trademark is used for identical or similar goods, and Appeals,62 giving utmost importance to the actual commercial use Philippines. Such a foreign corporation may have the
of a trademark in the Philippines prior to its registration, personality to file a suit for infringement but it may not
(d) such act is done without the consent of the trademark notwithstanding the provisions of the Paris Convention: necessarily be entitled to protection due to absence of
registrant or assignee. actual use of the emblem in the local market.
xxx xxx xxx xxx xxx xxx
In summary, the Paris Convention protects well-known trademarks In addition to the foregoing, we are constrained to agree
only (to be determined by domestic authorities), while the with petitioner's contention that private respondent Undisputably, private respondent is the senior
Trademark Law protects all trademarks, whether well-known or failed to prove prior actual commercial use of its "LEE" registrant, having obtained several registration
not, provided that they have been registered and are in actual trademark in the Philippines before filing its certificates for its various trademarks "LEE," "LEE
commercial use in the Philippines. Following universal acquiescence application for registration with the BPTTT and hence, RIDERS," and "LEESURES" in both the supplemental
and comity, in case of domestic legal disputes on any conflicting has not acquired ownership over said mark. and principal registers, as early as 1969 to 1973.
provisions between the Paris Convention (which is an international Actual use in commerce in the Philippines is an However, registration alone will not suffice. In
agreement) and the Trademark law (which is a municipal law) the essential prerequisite for the acquisition of ownership Sterling Products International, Inc. v.
latter will prevail.54 over a trademark pursuant to Sec. 2 and 2-A of the Farbenfabriken Bayer Aktiengesellschaft (27 SCRA
Philippine Trademark Law (R.A. No. 166) x x x 1214 [1969]; Reiterated in Kabushi Isetan vs.
Under both the Paris Convention and the Trademark Law, the Intermediate Appellate Court (203 SCRA 583 [1991])
protection of a registered trademark is limited only to goods xxx xxx xxx we declared:
identical or similar to those in respect of which such trademark is The provisions of the 1965 Paris Convention for the
registered and only when there is likelihood of confusion. Under Protection of Industrial Property relied upon by private xxx xxx xxx
both laws, the time element in commencing infringement cases is respondent and Sec. 21-A of the Trademark Law (R.A. No. A rule widely accepted and firmly entrenched because
material in ascertaining the registrant’s express or implied consent 166) were sufficiently expounded upon and qualified in it has come down through the years is that actual use
in commerce or business is a prerequisite in the should consist among others, of considerable sales limited to: after-shave lotion, shaving cream, deodorant,
acquisition of the right of ownership over a since its first use. The invoices submitted by talcum powder and toilet soap. Inasmuch as petitioner
trademark. respondent which were dated way back in 1957 has not ventured in the production of briefs, an item
xxx xxx xxx show that the zippers sent to the Philippines were which is not listed in its certificate of registration,
to be used as "samples" and "of no commercial petitioner cannot and should not be allowed to feign
The credibility placed on a certificate of registration of value." The evidence for respondent must be clear, that private respondent had invaded petitioner's
one's trademark, or its weight as evidence of validity, definite and free from inconsistencies. "Samples" are exclusive domain. To be sure, it is significant that
ownership and exclusive use, is qualified. A registration not for sale and therefore, the fact of exporting them to petitioner failed to annex in its Brief the so-called "eloquent
certificate serves merely as prima facie evidence. It is the Philippines cannot be considered to be equivalent proof that petitioner indeed intended to expand its mark
not conclusive but can and may be rebutted by to the "use" contemplated by law. Respondent did not ‘BRUT’ to other goods" (Page 27, Brief for the Petitioner;
controverting evidence. expect income from such "samples." There were no page 202, Rollo). Even then, a mere application by
xxx xxx xxx receipts to establish sale, and no proof were presented petitioner in this aspect does not suffice and may not vest
to show that they were subsequently sold in the an exclusive right in its favor that can ordinarily be
In the case at bench, however, we reverse the findings of Philippines. protected by the Trademark Law. In short, paraphrasing
the Director of Patents and the Court of Appeals. After a xxx xxx xxx Section 20 of the Trademark Law as applied to the
meticulous study of the records, we observe that the documentary evidence adduced by petitioner, the
Director of Patents and the Court of Appeals relied For lack of adequate proof of actual use of its certificate of registration issued by the Director of
mainly on the registration certificates as proof of use trademark in the Philippines prior to petitioner's use of Patents can confer upon petitioner the exclusive right
by private respondent of the trademark "LEE" which, as its own mark and for failure to establish confusing to use its own symbol only to those goods specified in
we have previously discussed are not sufficient. We similarity between said trademarks, private the certificate, subject to any conditions and limitations
cannot give credence to private respondent's claim that respondent's action for infringement must necessarily stated therein. This basic point is perhaps the unwritten
its "LEE" mark first reached the Philippines in the fail. (Emphasis supplied.) rationale of Justice Escolin in Philippine Refining Co.,
1960's through local sales by the Post Exchanges of the Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed
U.S. Military Bases in the Philippines (Rollo, p. 177) In view of the foregoing jurisprudence and respondents’ judicial the principle enunciated by the United States Supreme
based as it was solely on the self-serving statements of admission that the actual commercial use of the GALLO wine Court in American Foundries vs. Robertson (269 U.S. 372,
Mr. Edward Poste, General Manager of Lee (Phils.), Inc., trademark was subsequent to its registration in 1971 and to 381, 70 L ed 317, 46 Sct. 160) that one who has adopted
a wholly owned subsidiary of the H.D. Lee, Co., Inc., Tobacco Industries’ commercial use of the GALLO cigarette and used a trademark on his goods does not prevent
U.S.A., herein private respondent. (Original Records, p. trademark in 1973, we rule that, on this account, respondents never the adoption and use of the same trademark by others
52) Similarly, we give little weight to the numerous enjoyed the exclusive right to use the GALLO wine trademark to the for products which are of a different description. Verily,
vouchers representing various advertising expenses in prejudice of Tobacco Industries and its successors-in-interest, this Court had the occasion to observe in the 1966 case of
the Philippines for "LEE" products. It is well to note that herein petitioners, either under the Trademark Law or the Paris George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966])
these expenses were incurred only in 1981 and 1982 by Convention. that no serious objection was posed by the petitioner
LEE (Phils.), Inc. after it entered into a licensing therein since the applicant utilized the emblem "Tango" for
agreement with private respondent on 11 May 1981. Respondents’ GALLO trademark registration is limited to wines no other product than hair pomade in which petitioner
(Exhibit E) only does not deal.

On the other hand, petitioner has sufficiently shown that We also note that the GALLO trademark registration certificates in This brings Us back to the incidental issue raised by
it has been in the business of selling jeans and other the Philippines and in other countries expressly state that they petitioner which private respondent sought to belie as
garments adopting its "STYLISTIC MR. LEE" trademark cover wines only, without any evidence or indication that registrant regards petitioner's alleged expansion of its business. It
since 1975 as evidenced by appropriate sales invoices to Gallo Winery expanded or intended to expand its business to may be recalled that petitioner claimed that it has a
various stores and retailers. (Exhibit 1-e to 1-o) cigarettes.63 pending application for registration of the emblem "BRUT
33" for briefs (page 25, Brief for the Petitioner; page 202,
Our rulings in Pagasa Industrial Corp. v. Court of Appeals Thus, by strict application of Section 20 of the Trademark Law, Gallo Rollo) to impress upon Us the Solomonic wisdom imparted
(118 SCRA 526 [1982]) and Converse Rubber Corp. v. Winery’s exclusive right to use the GALLO trademark should be by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018
Universal Rubber Products, Inc., (147 SCRA 154 [1987]), limited to wines, the only product indicated in its registration [1968]), to the effect that dissimilarity of goods will not
respectively, are instructive: certificates. This strict statutory limitation on the exclusive right to preclude relief if the junior user's goods are not remote
use trademarks was amply clarified in our ruling in Faberge, Inc. vs. from any other product which the first user would be
The Trademark Law is very clear. It requires actual Intermediate Appellate Court:64 likely to make or sell (vide, at page 1025). Commenting on
commercial use of the mark prior to its registration. the former provision of the Trademark Law now embodied
There is no dispute that respondent corporation Having thus reviewed the laws applicable to the case before substantially under Section 4(d) of Republic Act No. 166, as
was the first registrant, yet it failed to fully Us, it is not difficult to discern from the foregoing statutory amended, the erudite jurist opined that the law in point
substantiate its claim that it used in trade or enactments that private respondent may be permitted to "does not require that the articles of manufacture of the
business in the Philippines the subject mark; it did register the trademark "BRUTE" for briefs produced by it previous user and late user of the mark should possess the
not present proof to invest it with exclusive, notwithstanding petitioner's vehement protestations of same descriptive properties or should fall into the same
continuous adoption of the trademark which unfair dealings in marketing its own set of items which are
categories as to bar the latter from registering his mark in There are two types of confusion in trademark infringement. The trademark ESSO for its cigarettes, the same trademark used by
the principal register." (supra at page 1026). first is "confusion of goods" when an otherwise prudent purchaser ESSO for its petroleum products, and
is induced to purchase one product in the belief that he is
Yet, it is equally true that as aforesaid, the protective purchasing another, in which case defendant’s goods are then (f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR
mantle of the Trademark Law extends only to the goods bought as the plaintiff’s and its poor quality reflects badly on the Rubber Corporation,72 we affirmed the rulings of the Patent
used by the first user as specified in the certificate of plaintiff’s reputation. The other is "confusion of business" wherein Office and the CA that NSR Rubber Corporation could use the
registration following the clear message conveyed by the goods of the parties are different but the defendant’s product trademark CANON for its sandals (Class 25) despite Canon
Section 20. can reasonably (though mistakenly) be assumed to originate from Kabushiki Kaisha’s prior registration and use of the same
the plaintiff, thus deceiving the public into believing that there is trademark for its paints, chemical products, toner and dyestuff
How do We now reconcile the apparent conflict some connection between the plaintiff and defendant which, in fact, (Class 2).
between Section 4(d) which was relied upon by Justice does not exist.66
JBL Reyes in the Sta. Ana case and Section 20? It would Whether a trademark causes confusion and is likely to deceive the
seem that Section 4(d) does not require that the goods In determining the likelihood of confusion, the Court must consider: public hinges on "colorable imitation"73 which has been defined as
manufactured by the second user be related to the [a] the resemblance between the trademarks; [b] the similarity of "such similarity in form, content, words, sound, meaning, special
goods produced by the senior user while Section 20 the goods to which the trademarks are attached; [c] the likely effect arrangement or general appearance of the trademark or tradename
limits the exclusive right of the senior user only to on the purchaser and [d] the registrant’s express or implied consent in their overall presentation or in their essential and substantive
those goods specified in the certificate of registration. and other fair and equitable considerations. and distinctive parts as would likely mislead or confuse persons in
But the rule has been laid down that the clause which the ordinary course of purchasing the genuine article."74
comes later shall be given paramount significance over an Petitioners and respondents both use "GALLO" in the labels of their Jurisprudence has developed two tests in determining similarity
anterior proviso upon the presumption that it expresses the respective cigarette and wine products. But, as held in the following and likelihood of confusion in trademark resemblance:75
latest and dominant purpose. (Graham Paper Co. vs. cases, the use of an identical mark does not, by itself, lead to a legal
National Newspapers Asso. (Mo. App.) 193 S.W. 1003; conclusion that there is trademark infringement: (a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court
Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. of Appeals76 and other cases,77 and
Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory (a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered
Construction Sixth ed., 1980 Reprinted, p. 144). It the approval of Acoje Mining’s application for registration of the (b) the Holistic or Totality Test used in Del Monte Corporation
ineluctably follows that Section 20 is controlling and, trademark LOTUS for its soy sauce even though Philippine vs. Court of Appeals78 and its preceding cases.79
therefore, private respondent can appropriate its Refining Company had prior registration and use of such
symbol for the briefs it manufactures because as aptly identical mark for its edible oil which, like soy sauce, also The Dominancy Test focuses on the similarity of the prevalent
remarked by Justice Sanchez in Sterling Products belonged to Class 47; features of the competing trademarks which might cause confusion
International Inc. vs. Farbenfabriken Bayer (27 SCRA or deception, and thus infringement. If the competing trademark
1214 [1969]): (b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of contains the main, essential or dominant features of another, and
Patents,68 we upheld the Patent Director’s registration of the confusion or deception is likely to result, infringement takes place.
"Really, if the certificate of registration were to be same trademark CAMIA for Ng Sam’s ham under Class 47, Duplication or imitation is not necessary; nor is it necessary that the
deemed as including goods not specified therein, despite Philippine Refining Company’s prior trademark infringing label should suggest an effort to imitate. The question is
then a situation may arise whereby an applicant registration and actual use of such mark on its lard, butter, whether the use of the marks involved is likely to cause confusion or
may be tempted to register a trademark on any and cooking oil (all of which belonged to Class 47), abrasive mistake in the mind of the public or deceive purchasers. 80
all goods which his mind may conceive even if he detergents, polishing materials and soaps;
had never intended to use the trademark for the On the other hand, the Holistic Test requires that the entirety of the
said goods. We believe that such omnibus registration (c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and marks in question be considered in resolving confusing similarity.
is not contemplated by our Trademark Law." (1226). Santos Lim Bun Liong,69 we dismissed Hickok’s petition to cancel Comparison of words is not the only determining factor. The
private respondent’s HICKOK trademark registration for its trademarks in their entirety as they appear in their respective labels
NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO Marikina shoes as against petitioner’s earlier registration of the or hang tags must also be considered in relation to the goods to
THE IDENTITY OR SOURCE OF PETITIONERS’ AND same trademark for handkerchiefs, briefs, belts and wallets; which they are attached. The discerning eye of the observer must
RESPONDENTS’ GOODS OR BUSINESS focus not only on the predominant words but also on the other
(d) in Shell Company of the Philippines vs. Court of Appeals,70 in a features appearing in both labels in order that he may draw his
A crucial issue in any trademark infringement case is the likelihood minute resolution, we dismissed the petition for review for lack conclusion whether one is confusingly similar to the other. 81
of confusion, mistake or deceit as to the identity, source or origin of of merit and affirmed the Patent Office’s registration of the
the goods or identity of the business as a consequence of using a trademark SHELL used in the cigarettes manufactured by In comparing the resemblance or colorable imitation of marks,
certain mark. Likelihood of confusion is admittedly a relative term, respondent Fortune Tobacco Corporation, notwithstanding various factors have been considered, such as the dominant color,
to be determined rigidly according to the particular (and sometimes Shell Company’s opposition as the prior registrant of the same style, size, form, meaning of letters, words, designs and emblems
peculiar) circumstances of each case. Thus, in trademark cases, trademark for its gasoline and other petroleum products; used, the likelihood of deception of the mark or name's tendency to
more than in other kinds of litigation, precedents must be studied in confuse82 and the commercial impression likely to be conveyed by
the light of each particular case. 65 (e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we the trademarks if used in conjunction with the respective goods of
dismissed ESSO’s complaint for trademark infringement against the parties.83
United Cigarette Corporation and allowed the latter to use the
Applying the Dominancy and Holistic Tests, we find that the "related goods."91 Simply stated, when goods are so related that the buy, and therefore to some extent familiar with, the goods in
dominant feature of the GALLO cigarette trademark is the device of public may be, or is actually, deceived and misled that they come question. The test of fraudulent simulation is to be found in the
a large rooster facing left, outlined in black against a gold from the same maker or manufacturer, trademark infringement likelihood of the deception of some persons in some measure
background. The rooster’s color is either green or red – green for occurs.92 acquainted with an established design and desirous of purchasing
GALLO menthols and red for GALLO filters. Directly below the large Non-competin the commodity with which that design has been associated. The test
rooster device is the word GALLO. The rooster device is given g goods may be those which, though they are not in actual is not found in the deception, or the possibility of deception, of the
prominence in the GALLO cigarette packs in terms of size and competition, are so related to each other that it can reasonably be person who knows nothing about the design which has been
location on the labels.84 assumed that they originate from one manufacturer, in which case, counterfeited, and who must be indifferent between that and the
confusion of business can arise out of the use of similar marks. 93 other. The simulation, in order to be objectionable, must be such as
The GALLO mark appears to be a fanciful and arbitrary mark for the They may also be those which, being entirely unrelated, cannot be appears likely to mislead the ordinary intelligent buyer who has a
cigarettes as it has no relation at all to the product but was chosen assumed to have a common source; hence, there is no confusion of need to supply and is familiar with the article that he seeks to
merely as a trademark due to the fondness for fighting cocks of the business, even though similar marks are used.94 Thus, there is no purchase."110
son of petitioners’ president. Furthermore, petitioners adopted trademark infringement if the public does not expect the plaintiff to
GALLO, the Spanish word for rooster, as a cigarette trademark to make or sell the same class of goods as those made or sold by the Hence, in the adjudication of trademark infringement, we give due
appeal to one of their target markets, the sabungeros (cockfight defendant.95 regard to the goods’ usual purchaser’s character, attitude, habits,
aficionados).85 age, training and education. 111
In resolving whether goods are related,96 several factors come into
Also, as admitted by respondents themselves,86 on the side of the play: Applying these legal precepts to the present case, petitioner’s use of
GALLO cigarette packs are the words "MADE BY MIGHTY the GALLO cigarette trademark is not likely to cause confusion or
CORPORATION," thus clearly informing the public as to the identity (a) the business (and its location) to which the goods belong mistake, or to deceive the "ordinarily intelligent buyer" of either
of the manufacturer of the cigarettes. (b) the class of product to which the goods belong wines or cigarettes or both as to the identity of the goods, their
(c) the product's quality, quantity, or size, including the nature of source and origin, or identity of the business of petitioners and
On the other hand, GALLO Winery’s wine and brandy labels are the package, wrapper or container 97 respondents.
diverse. In many of them, the labels are embellished with sketches (d) the nature and cost of the articles98
of buildings and trees, vineyards or a bunch of grapes while in a few, (e) the descriptive properties, physical attributes or essential Obviously, wines and cigarettes are not identical or competing
one or two small roosters facing right or facing each other (atop the characteristics with reference to their form, composition, texture or products. Neither do they belong to the same class of goods.
EJG crest, surrounded by leaves or ribbons), with additional designs quality Respondents’ GALLO wines belong to Class 33 under Rule 84[a]
in green, red and yellow colors, appear as minor features thereof. 87 (f) the purpose of the goods99 Chapter III, Part II of the Rules of Practice in Trademark Cases while
Directly below or above these sketches is the entire printed name of (g) whether the article is bought for immediate consumption,100 that petitioners’ GALLO cigarettes fall under Class 34.
the founder-owners, "ERNEST & JULIO GALLO" or just their is, day-to-day household items101
surname "GALLO,"88 which appears in different fonts, sizes, styles (h) the fields of manufacture102 We are mindful that product classification alone cannot serve as the
and labels, unlike petitioners’ uniform casque-font bold-lettered (i) the conditions under which the article is usually purchased103 decisive factor in the resolution of whether or not wines and
GALLO mark. and cigarettes are related goods. Emphasis should be on the similarity of
(j) the channels of trade through which the goods flow, 104 how they the products involved and not on the arbitrary classification or
Moreover, on the labels of Gallo Winery’s wines are printed the are distributed, marketed, displayed and sold.105 general description of their properties or characteristics. But the
words "VINTED AND BOTTLED BY ERNEST & JULIO GALLO, mere fact that one person has adopted and used a particular
MODESTO, CALIFORNIA."89 The wisdom of this approach is its recognition that each trademark trademark for his goods does not prevent the adoption and use of
infringement case presents its own unique set of facts. No single the same trademark by others on articles of a different description.
The many different features like color schemes, art works and other factor is preeminent, nor can the presence or absence of one 112

markings of both products drown out the similarity between them – determine, without analysis of the others, the outcome of an
the use of the word “GALLO” ― a family surname for the Gallo infringement suit. Rather, the court is required to sift the evidence Both the Makati RTC and the CA held that wines and cigarettes are
Winery’s wines and a Spanish word for rooster for petitioners’ relevant to each of the criteria. This requires that the entire panoply related products because: (1) "they are related forms of vice,
cigarettes. of elements constituting the relevant factual landscape be harmful when taken in excess, and used for pleasure and relaxation"
comprehensively examined.106 It is a weighing and balancing and (2) "they are grouped or classified in the same section of
WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, process. With reference to this ultimate question, and from a supermarkets and groceries."
COMPETING OR RELATED GOODS balancing of the determinations reached on all of the factors, a
conclusion is reached whether the parties have a right to the relief We find these premises patently insufficient and too arbitrary to
Confusion of goods is evident where the litigants are actually in sought.107 support the legal conclusion that wines and cigarettes are related
competition; but confusion of business may arise between non- products within the contemplation of the Trademark Law and the
competing interests as well.90 A very important circumstance though is whether there exists a Paris Convention.
Thus, apart from the strict application of Section 20 of the likelihood that an appreciable number of ordinarily prudent
Trademark Law and Article 6bis of the Paris Convention which purchasers will be misled, or simply confused, as to the source of First, anything –- not only wines and cigarettes ― can be used for
proscribe trademark infringement not only of goods specified in the the goods in question.108 The "purchaser" is not the "completely pleasure and relaxation and can be harmful when taken in excess.
certificate of registration but also of identical or similar goods, we unwary consumer" but is the "ordinarily intelligent buyer" Indeed, it would be a grave abuse of discretion to treat wines and
have also uniformly recognized and applied the modern concept of considering the type of product involved.109 He is "accustomed to cigarettes as similar or related products likely to cause confusion
just because they are pleasure-giving, relaxing or potentially or essential characteristics like form, composition, texture and involving special circumstances. Schenley Distillers, Inc. v.
harmful. Such reasoning makes no sense. quality. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785
(1970). The presence of special circumstances has been
Second, it is common knowledge that supermarkets sell an infinite GALLO cigarettes are inexpensive items while GALLO wines are not. found to exist where there is a finding of unfair competition
variety of wholly unrelated products and the goods here involved, GALLO wines are patronized by middle-to-high-income earners or where a ‘famous’ or ‘well-known mark’ is involved and
wines and cigarettes, have nothing whatsoever in common with while GALLO cigarettes appeal only to simple folks like farmers, there is a demonstrated intent to capitalize on that mark.
respect to their essential characteristics, quality, quantity, size, fishermen, laborers and other low-income workers.116 Indeed, the For example, in John Walker & Sons, the court was persuaded to
including the nature of their packages, wrappers or containers. 113 big price difference of these two products is an important factor in find a relationship between products, and hence a likelihood of
Accordingly, the U.S. patent office and courts have consistently held proving that they are in fact unrelated and that they travel in confusion, because of the plaintiff’s long use and extensive
that the mere fact that goods are sold in one store under the same different channels of trade. There is a distinct price segmentation advertising of its mark and placed great emphasis on the fact
roof does not automatically mean that buyers are likely to be based on vastly different social classes of purchasers.117 that the defendant used the trademark ‘Johnnie Walker with full
confused as to the goods’ respective sources, connections or knowledge of its fame and reputation and with the intention of
sponsorships. The fact that different products are available in the GALLO cigarettes and GALLO wines are not sold through the same taking advantage thereof.’ John Walker & Sons, 124 F. Supp. At
same store is an insufficient standard, in and of itself, to warrant a channels of trade. GALLO cigarettes are Philippine-made and 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL
finding of likelihood of confusion.114 petitioners neither claim nor pass off their goods as imported or 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision in
emanating from Gallo Winery. GALLO cigarettes are distributed, John Walker & Sons was ‘merely the law on the particular case
In this regard, we adopted the Director of Patents’ finding in marketed and sold through ambulant and sidewalk vendors, small based upon its own peculiar facts’); see also Alfred Dunhill, 350
Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents:115 local sari-sari stores and grocery stores in Philippine rural areas, F. Supp. At 1363 (defendant’s adoption of ‘Dunhill’ mark was
mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu. 118 On the not innocent). However, in Schenley, the court noted that the
In his decision, the Director of Patents enumerated the factors other hand, GALLO wines are imported, distributed and sold in the relation between tobacco and whiskey products is significant
that set respondent’s products apart from the goods of Philippines through Gallo Winery’s exclusive contracts with a where a widely known arbitrary mark has long been used for
petitioner. He opined and we quote: domestic entity, which is currently Andresons. By respondents’ own diversified products emanating from a single source and a
testimonial evidence, GALLO wines are sold in hotels, expensive newcomer seeks to use the same mark on unrelated goods.
"I have taken into account such factors as probable bars and restaurants, and high-end grocery stores and Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court
purchaser attitude and habits, marketing activities, retail supermarkets, not through sari-sari stores or ambulant vendors.119 looked at the industry practice and the facts of the case in order
outlets, and commercial impression likely to be conveyed Furthermore, the Makati RTC and the CA erred in relying on Carling to determine the nature and extent of the relationship between
by the trademarks if used in conjunction with the Brewing Company vs. Philip Morris, Inc.120 to support its finding that the mark on the tobacco product and the mark on the alcohol
respective goods of the parties, I believe that ham on one GALLO wines and GALLO cigarettes are related goods. The courts a product.
hand, and lard, butter, oil, and soap on the other are quo should have taken into consideration the subsequent case of
products that would not move in the same manner IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, The record here establishes conclusively that IDV has never
through the same channels of trade. They pertain to Inc.:121 advertised BAILEYS liqueurs in conjunction with tobacco or
unrelated fields of manufacture, might be distributed tobacco accessory products and that IDV has no intent to do so.
and marketed under dissimilar conditions, and are IDV correctly acknowledges, however, that there is no per se And, unlike the defendant in Dunhill, S & M Brands does not
displayed separately even though they frequently may rule that the use of the same mark on alcohol and tobacco market bar accessories, or liqueur related products, with its
be sold through the same retail food establishments. products always will result in a likelihood of confusion. cigarettes. The advertising and promotional materials
Opposer’s products are ordinary day-to-day household Nonetheless, IDV relies heavily on the decision in John Walker & presented a trial in this action demonstrate a complete lack of
items whereas ham is not necessarily so. Thus, the goods of Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. affiliation between the tobacco and liqueur products bearing
the parties are not of a character which purchasers would 1954), aff’d, 222 F. 2d 460 (5th Cir. 1955), wherein the court the marks here at issue.
likely attribute to a common origin. enjoined the use of the mark "JOHNNIE WALKER" on cigars
because the fame of the plaintiff’s mark for scotch whiskey and xxx xxx xxx
The observations and conclusion of the Director of Patents are because the plaintiff advertised its scotch whiskey on, or in Of equal significance, it is undisputed that S & M Brands had no
correct. The particular goods of the parties are so unrelated that connection with tobacco products. The court, in John Walker intent, by adopting the family name ‘Bailey’s’ as the mark for its
consumers, would not, in any probability mistake one as the & Sons, placed great significance on the finding that the cigarettes, to capitalize upon the fame of the ‘BAILEYS’ mark for
source of origin of the product of the other. (Emphasis infringers use was a deliberate attempt to capitalize on the liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be
supplied). senior marks’ fame. Id. At 256. IDV also relies on Carling discussed below, and as found in Mckesson & Robbins, the
Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 survey evidence refutes the contention that cigarettes and
The same is true in the present case. Wines and cigarettes are non- (N.D. Ga. 1968), in which the court enjoined the defendant’s alcoholic beverages are so intimately associated in the
competing and are totally unrelated products not likely to cause use of the mark "BLACK LABEL" for cigarettes because it public mind that they cannot under any circumstances be
confusion vis-à-vis the goods or the business of the petitioners and was likely to cause confusion with the plaintiff’s well- sold under the same mark without causing confusion. See
respondents. known mark "BLACK LABEL" for beer. Mckesson & Robbins, 120 U.S.P.Q. at 308.

Wines are bottled and consumed by drinking while cigarettes are xxx xxx xxx Taken as a whole, the evidence here demonstrates the absence
packed in cartons or packages and smoked. There is a whale of a Those decisions, however, must be considered in of the ‘special circumstances’ in which courts have found a
difference between their descriptive properties, physical attributes perspective of the principle that tobacco products and relationship between tobacco and alcohol products sufficient to
alcohol products should be considered related only in cases tip the similarity of goods analysis in favor of the protected
mark and against the allegedly infringing mark. It is true that "Regarding the applicability of Article 8 of the Paris products) while the Respondent is using the same
BAILEYS liqueur, the world’s best selling liqueur and the Convention, this Office believes that there is no mark for sandals (class 25).
second best selling in the United States, is a well-known automatic protection afforded an entity whose
product. That fact alone, however, is insufficient to invoke tradename is alleged to have been infringed Hence, Petitioner's contention that its mark is well-
the special circumstances connection here where so much through the use of that name as a trademark by a known at the time the Respondent filed its
other evidence and so many other factors disprove a local entity. application for the same mark should fail."
likelihood of confusion. The similarity of products analysis, (Emphasis supplied.)
therefore, augers against finding that there is a likelihood In Kabushiki Kaisha Isetan vs. The Intermediate
of confusion. (Emphasis supplied). Appellate Court, et. al., G.R. No. 75420, 15 November Consent of the Registrant and Other air, Just and Equitable
1991, the Honorable Supreme Court held that: Considerations
In short, tobacco and alcohol products may be considered related
only in cases involving special circumstances which exist only if a ‘The Paris Convention for the Protection of Each trademark infringement case presents a unique problem
famous mark is involved and there is a demonstrated intent to Industrial Property does not automatically which must be answered by weighing the conflicting interests of the
capitalize on it. Both of these are absent in the present case. exclude all countries of the world which have litigants.124
signed it from using a tradename which
THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK happens to be used in one country. To illustrate Respondents claim that GALLO wines and GALLO cigarettes flow
IN THE CONTEXT OF THE PARIS CONVENTION IN THIS CASE — if a taxicab or bus company in a town in the through the same channels of trade, that is, retail trade. If
SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR United Kingdom or India happens to use the respondents’ assertion is true, then both goods co-existed
SIMILAR GOODS tradename ‘Rapid Transportation,’ it does not peacefully for a considerable period of time. It took respondents
necessarily follow that ‘Rapid’ can no longer be almost 20 years to know about the existence of GALLO cigarettes
First, the records bear out that most of the trademark registrations registered in Uganda, Fiji, or the Philippines. and sue petitioners for trademark infringement. Given, on one hand,
took place in the late 1980s and the 1990s, that is, after Tobacco the long period of time that petitioners were engaged in the
Industries’ use of the GALLO cigarette trademark in 1973 and This office is not unmindful that in (sic) the Treaty of manufacture, marketing, distribution and sale of GALLO cigarettes
petitioners’ use of the same mark in 1984. Paris for the Protection of Intellectual Property and, on the other, respondents’ delay in enforcing their rights (not
regarding well-known marks and possible application to mention implied consent, acquiescence or negligence) we hold
GALLO wines and GALLO cigarettes are neither the same, identical, thereof in this case. Petitioner, as this office sees it, is that equity, justice and fairness require us to rule in favor of
similar nor related goods, a requisite element under both the trying to seek refuge under its protective mantle, petitioners. The scales of conscience and reason tip far more readily
Trademark Law and the Paris Convention. claiming that the subject mark is well known in this in favor of petitioners than respondents.
country at the time the then application of NSR Rubber
Second, the GALLO trademark cannot be considered a strong and was filed. Moreover, there exists no evidence that petitioners employed
distinct mark in the Philippines. Respondents do not dispute the malice, bad faith or fraud, or that they intended to capitalize on
documentary evidence that aside from Gallo Winery’s GALLO However, the then Minister of Trade and Industry, the respondents’ goodwill in adopting the GALLO mark for their
trademark registration, the Bureau of Patents, Trademarks and Hon. Roberto V. Ongpin, issued a memorandum dated cigarettes which are totally unrelated to respondents’ GALLO wines.
Technology Transfer also issued on September 4, 1992 Certificate of 25 October 1983 to the Director of Patents, a set of Thus, we rule out trademark infringement on the part of petitioners.
Registration No. 53356 under the Principal Register approving guidelines in the implementation of Article 6bis of
Productos Alimenticios Gallo, S.A’s April 19, 1990 application for the Treaty of Paris. These conditions are: PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR
GALLO trademark registration and use for its "noodles, prepared COMPETITION
food or canned noodles, ready or canned sauces for noodles, a) the mark must be internationally known;
semolina, wheat flour and bread crumbs, pastry, confectionery, ice b) the subject of the right must be a trademark, not Under Section 29 of the Trademark Law, any person who employs
cream, honey, molasses syrup, yeast, baking powder, salt, mustard, a patent or copyright or anything else; deception or any other means contrary to good faith by which he
vinegar, species and ice."122 c) the mark must be for use in the same or similar passes off the goods manufactured by him or in which he deals, or
kinds of goods; and his business, or services for those of the one having established such
Third and most important, pursuant to our ruling in Canon Kabushiki d) the person claiming must be the owner of the goodwill, or who commits any acts calculated to produce said result,
Kaisha vs. Court of Appeals and NSR Rubber Corporation,123 "GALLO" mark (The Parties Convention Commentary on the is guilty of unfair competition. It includes the following acts:
cannot be considered a "well-known" mark within the contemplation Paris Convention. Article by Dr. Bogsch, Director
and protection of the Paris Convention in this case since wines and General of the World Intellectual Property (a) Any person, who in selling his goods shall give them the
cigarettes are not identical or similar goods: Organization, Geneva, Switzerland, 1985)’ general appearance of goods of another manufacturer or
dealer, either as to the goods themselves or in the wrapping
We agree with public respondents that the controlling From the set of facts found in the records, it is ruled of the packages in which they are contained, or the devices
doctrine with respect to the applicability of Article 8 of the that the Petitioner failed to comply with the third or words thereon, or in any other feature of their
Paris Convention is that established in Kabushi Kaisha requirement of the said memorandum that is the appearance, which would be likely to influence purchasers
Isetan vs. Intermediate Appellate Court (203 SCRA 59 mark must be for use in the same or similar kinds to believe that the goods offered are those of a
[1991]). As pointed out by the BPTTT: of goods. The Petitioner is using the mark "CANON" manufacturer or dealer other than the actual manufacturer
for products belonging to class 2 (paints, chemical or dealer, or who otherwise clothes the goods with such
appearance as shall deceive the public and defraud another
of his legitimate trade, or any subsequent vendor of such
goods or any agent of any vendor engaged in selling such
goods with a like purpose;

(b) Any person who by any artifice, or device, or who


employs any other means calculated to induce the false
belief that such person is offering the services of another
who has identified such services in the mind of the public;

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

The universal test question is whether the public is likely to be


deceived. Nothing less than conduct tending to pass off one man’s
goods or business as that of another constitutes unfair competition.
Actual or probable deception and confusion on the part of
customers by reason of defendant’s practices must always
appear.125 On this score, we find that petitioners never attempted to
pass off their cigarettes as those of respondents. There is no
evidence of bad faith or fraud imputable to petitioners in using their
GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws
as well as those recognized by jurisprudence, we conclude that
petitioners are not liable for trademark infringement, unfair
competition or damages.

WHEREFORE, finding the petition for review meritorious, the same


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

Costs against respondents.


SO ORDERED.

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