Intellectual Propery Law By Salao

Republic Act No. 8293 AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND ESTABLISHING THE INTELLECTUAL PROPERTY OFFICE, PROVIDING FOR ITS POWERS AND FUNCTIONS, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:: PART I THE INTELLECTUAL PROPERTY OFFICE Section 1. Title. - This Act shall be known as the "Intellectual Property Code of the Philippines." Section 2. Declaration of State Policy. - The State recognizes that an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, attracts foreign investments, and ensures market access for our products. It shall protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such periods as provided in this Act. The use of intellectual property bears a social function. To this end, the State shall promote the diffusion of knowledge and information for the promotion of national development and progress and the common good. It is also the policy of the State to streamline administrative procedures of registering patents, trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the enforcement of intellectual property rights in the Philippines. (n) Section 3. International Conventions and Reciprocity. - Any person who is a national or who is domiciled or has a real and effective industrial establishment in a country which is a 1|Page

party to any convention, treaty or agreement relating to intellectual property rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the extent necessary to give effect to any provision of such convention, treaty or reciprocal law, in addition to the rights to which any owner of an intellectual property right is otherwise entitled by this Act. (n) A. Intellectual Property Rights Section 4. Definitions. 4.1. The "intellectual property rights" consists of:

term

a) Copyright and Related Rights; b) Trademarks and Service Marks; c) Geographic Indications; d) Industrial Designs; e) Patents; f) Layout-Designs Circuits; and

(Topographies)

g) Protection TRIPS).

Undisclosed

of

of

Integrated

Information

(n,

4.2. The term "technology transfer arrangements" refers to contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market. 4.3. The term "Office" refers Intellectual Property Office created Act. 2|Page

to by

the this

4.4. The term "IPO Gazette" refers to the gazette published by the Office under this Act. (n) MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC. vs. E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC. In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the November 15, 2001 decision1[1] of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998 decision,2[2] as modified by the June 24, 1999 order,3[3] of the Regional Trial Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition, and which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution denying their motion for reconsideration4[4] and (c) the aforesaid Makati RTC decision itself. I. The Factual Background Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of California, United States of America (U.S.), where all its wineries are located.

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Gallo Winery produces different kinds of wines and brandy products and sells them in many countries under different registered trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks. Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive wine importer and distributor in the Philippines since 1991, selling these products in its own name and for its own account.5[5] Gallo Winerys GALLO wine trademark was registered in the principal register of the Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of Registration No. 17021 which was renewed on November 16, 1991 for another 20 years.6[6] Gallo Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application Serial No. 901011-00073599-PN but the records do not disclose if it was ever approved by the Director of Patents.7[7] On the other hand, petitioners Mighty Corporation and La Campana and their sister company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation, manufacture, distribution and sale of tobacco products for which they have been using the GALLO cigarette trademark since 1973. 8[8] The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO 100s cigarette

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mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its manufacturers sworn statement as basis for BIRs collection of specific tax on GALLO cigarettes.9[9] On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the registration of the GALLO cigarette trademark in the principal register of the then Philippine Patent Office.10[10] In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.11[11] On July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La Campanas lifetime copyright claim over GALLO cigarette labels.12[12] Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing the GALLO trademark.13[13] BIR approved Mighty Corporations use of GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3, 1989.14[14]

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Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by Tobacco Industries, then by La Campana and finally by Mighty Corporation.15[15] On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO GALLO wines in the Philippines circa 1974 within the then U.S. military facilities only. By 1979, they had expanded their Philippine market through authorized distributors and independent outlets.16[16] Respondents claim that they first learned about the existence of GALLO cigarettes in the latter part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in a Davao supermarket wine cellar section.17[17] Forthwith, respondents sent a demand letter to petitioners asking them to stop using the GALLO trademark, to no avail. II. The Legal Dispute On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and tradename infringement and unfair competition, with a prayer for damages and preliminary injunction. Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention)18[18] and RA 166 (Trademark

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Law),19[19] specifically, Sections 22 and 23 (for trademark infringement),20[20] 29 and 3021[21] (for unfair competition and false designation of origin) and 37 (for tradename infringement).22[22] They claimed that petitioners adopted the GALLO trademark to ride on Gallo Winerys GALLO and ERNEST & JULIO GALLO trademarks established reputation and popularity, thus causing confusion, deception and mistake on the part of the purchasing public who had always associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winerys wines. Respondents prayed for the issuance of a writ of preliminary injunction and ex parte restraining order, plus P2 million as actual and compensatory damages, at least P500,000 as exemplary and moral damages, and at least P500,000 as attorneys fees and litigation expenses.23[23] In their answer, petitioners alleged, among other affirmative defenses, that: petitioners GALLO cigarettes and Gallo Winerys wines were totally unrelated products; Gallo Winerys GALLO trademark registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines were sold through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items compared to Gallo Winerys high-priced luxury wines which cost between P98 to P242.50;

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the target market of Gallo Winerys wines was the middle or high-income bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the rooster device with the manufacturers name clearly indicated as MIGHTY CORPORATION while, in the case of Gallo Winerys wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and conduct, respondents were guilty of laches and estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO cigarettes. In an order dated April 21, 1993,24[24] the Makati RTC denied, for lack of merit, respondents prayer for the issuance of a writ of preliminary injunction,25[25] holding that respondents GALLO trademark registration certificate covered wines only, that respondents wines and petitioners cigarettes were not related goods and respondents failed to prove material damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court.26[26] On August 19, 1993, the Makati RTC denied, for lack of merit, respondents motion for reconsideration. The court reiterated that respondents wines and petitioners cigarettes were not related goods since the likelihood of deception and confusion on the part of the consuming public was very remote. The trial court emphasized that it could not rely on foreign rulings cited by respondents because

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the[se] cases were decided by foreign courts on the basis of unknown facts peculiar to each case or upon factual surroundings which may exist only within their jurisdiction. Moreover, there [was] no showing that [these cases had] been tested or found applicable in our jurisdiction.27[27] On February 20, 1995, the CA likewise dismissed respondents petition for review on certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTCs denial of the application for issuance of a writ of preliminary injunction against petitioners.28[28] After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition with respect to the GALLO trademark: WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit: a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons acting for them or under their instructions, from (i) using E & Js registered trademark GALLO or any other reproduction, counterfeit, copy or colorable imitation of said trademark, either singly or in conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under the GALLO trademark. b. ordering defendants to pay plaintiffs

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(i) actual and compensatory damages for the injury and prejudice and impairment of plaintiffs business and goodwill as a result of the acts and conduct pleaded as basis for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the complaint until fully paid; (ii) exemplary PHP100,000.00;

damages

in

the

amount

of

(iii) attorneys fees and expenses of litigation in the amount of PHP1,130,068.91; (iv) the cost of suit. SO ORDERED.29[29] On June 24, 1999, the Makati RTC granted respondents motion for partial reconsideration and increased the award of actual and compensatory damages to 10% of P199,290,000 or P19,929,000.30[30] On appeal, the CA affirmed the decision and subsequently denied motion for reconsideration.

Makati RTC petitioners

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

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liable for trademark infringement, competition and damages.31[31]

unfair

Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure questions of law, and hence, must be dismissed outright. IV. Discussion THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE COURT TO REVIEW THE CAS FACTUAL FINDINGS As a general rule, a petition for review on certiorari under Rule 45 must raise only questions of law32[32] (that is, the doubt pertains to the application and interpretation of law to a certain set of facts) and not questions of fact (where the doubt concerns the truth or falsehood of alleged facts),33[33] otherwise, the petition will be denied. We are not a trier of facts and the Court of Appeals factual findings are generally conclusive upon us.34[34] This case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the factual issues concerning the goods similarity, identity, relation, channels of trade, and acts of trademark infringement and unfair competition is greatly dependent on the interpretation of applicable laws. The controversy here is not simply the identity or similarity of both

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parties trademarks but whether or not infringement or unfair competition was committed, a conclusion based on statutory interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to review the evidence on record:35[35] (1) the conclusion is grounded entirely on speculation, surmises, and conjectures; (2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) there is grave abuse of discretion; (4) the judgment is misapprehension of facts;

based

on

a

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

its the the the

(6) the findings are without citation of specific evidence on which they are based; (7) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted [by the evidence] on record.36[36] In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all factors to determine whether trademark infringement and/or unfair competition has been committed, we conclude that both the Court of Appeals and the trial court veered away from the law and well-settled jurisprudence.

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Thus, we give due course to the petition. THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE APPLICABLE LAWS, NOT THE INTELLECTUAL PROPERTY CODE We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair competition committed during the effectivity of the Paris Convention and the Trademark Law. Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the aforesaid governing laws but also under the IP Code which took effect only on January 1, 1998,37[37] or about five years after the filing of the complaint: Defendants unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the IP Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on the part of the purchasing public.38[38] (Emphasis and underscoring supplied) The CA apparently did not notice the error and affirmed the Makati RTC decision: In the light of its finding that appellants use of the GALLO trademark on its cigarettes is likely to create confusion with the GALLO trademark on wines previously registered and used in the Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that appellants acts not only violated the provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also

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Article 6bis of the Paris Convention.39[39] (Emphasis and underscoring supplied) We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case. It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it has first been promulgated. A law that is not yet effective cannot be considered as conclusively known by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of the legislative power.40[40] Nova constitutio futuris formam imponere debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt must generally be resolved against the retroactive operation of laws, whether these are original enactments, amendments or repeals.41[41] There are only a few instances when laws may be given retroactive effect,42[42] none of which is present in this case. The IP Code, repealing the Trademark Law,43[43] was approved on June 6, 1997. Section 241 thereof expressly decreed that it was to take effect only on January 1, 1998, without any provision for retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the present case within the parameters of the Trademark Law and the Paris

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Convention, the laws in force at the time of the filing of the complaint. DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION Although the laws on trademark infringement and unfair competition have a common conception at their root, that is, a person shall not be permitted to misrepresent his goods or his business as the goods or business of another, the law on unfair competition is broader and more inclusive than the law on trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from the trademark adoption and registration by the person whose goods or business is first associated with it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition, although the two subjects are entwined with each other and are dealt with together in the Trademark Law (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitors unfairness or fraud. Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end.44[44] In Del Monte Corporation vs. Appeals,45[45] we distinguished infringement from unfair competition: (1)

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Court of trademark

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

(2)

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

(3)

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

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

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(b) of a mark considered by the competent authority of the country of registration or use48[48] to be well-known in that country and is already the mark of a person entitled to the benefits of the Paris Convention, and (c) such trademark is used for identical or similar goods. On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when, among others, he uses without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services.49[49] Trademark registration and actual use are material to the complaining partys cause of action. Corollary to this, Section 20 of the Trademark Law50[50] considers the trademark registration certificate as prima facie evidence of the validity of the registration, the registrants ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of

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Patents51[51] and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2A52[52] of the Trademark Law emphasize the importance of the trademarks actual use in commerce in the Philippines prior to its registration. In the adjudication of trademark rights between contending parties, equitable principles of laches, estoppel, and acquiescence may be considered and applied.53[53] Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following constitute the elements of trademark infringement: (a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office (b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers,

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(c) the trademark similar goods, and

is

used

for

identical

or

(d) such act is done without the consent of the trademark registrant or assignee. In summary, the Paris Convention protects wellknown trademarks only (to be determined by domestic authorities), while the Trademark Law protects all trademarks, whether well-known or not, provided that they have been registered and are in actual commercial use in the Philippines. Following universal acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the Paris Convention (which is an international agreement) and the Trademark law (which is a municipal law) the latter will prevail.54[54] Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is limited only to goods identical or similar to those in respect of which such trademark is registered and only when there is likelihood of confusion. Under both laws, the time element in commencing infringement cases is material in ascertaining the registrants express or implied consent to anothers use of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may defeat the registrants otherwise valid cause of action. Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of liability. THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE TRADEMARK. By respondents own judicial admission, the GALLO wine trademark was registered in the Philippines in November 1971 but the wine itself was first

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marketed and sold in the country only in 1974 and only within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO wines to the Philippines during that period.55[55] Nothing at all, however, was presented to evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter, prior to July 9, 1981. On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and manufacturers sworn statement, it appears that petitioners and its predecessor-ininterest, Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56[56] In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57[57] we reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,58[58] Converse Rubber Corporation vs. Universal Rubber Products, Inc.,59[59] Sterling Products International, Inc. vs. Farbenfabriken Bayer

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

xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its LEE trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) x x x xxx xxx xxx The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]): xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement

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inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using the trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx xxx xxx Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks LEE, LEE RIDERS, and LEESURES in both the supplemental and principal registers, as early as 1969 to 1973. However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft 22 | P a g e

(27 SCRA 1214 [1969]; Reiterated Isetan vs. Intermediate Appellate SCRA 583 [1991]) we declared:

in Kabushi Court (203

xxx xxx xxx A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. xxx xxx xxx In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark LEE which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its LEE mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for LEE products. It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement 23 | P a g e

with private respondent on 11 May 1981. (Exhibit E) On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its STYLISTIC MR. LEE trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. (Exhibit 1-e to 1o) Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA 154 [1987]), respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as samples and of no commercial value. The evidence for respondent must be clear, definite and free from inconsistencies. Samples are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the use contemplated by law. Respondent did not expect income from such samples. There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx xxx xxx For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for 24 | P a g e

infringement supplied.)

must

necessarily

fail.

(Emphasis

In view of the foregoing jurisprudence and respondents judicial admission that the actual commercial use of the GALLO wine trademark was subsequent to its registration in 1971 and to Tobacco Industries commercial use of the GALLO cigarette trademark in 1973, we rule that, on this account, respondents never enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of Tobacco Industries and its successors-in-interest, herein petitioners, either under the Trademark Law or the Paris Convention. Respondents GALLO trademark registration is limited to wines only We also note that the GALLO trademark registration certificates in the Philippines and in other countries expressly state that they cover wines only, without any evidence or indication that registrant Gallo Winery expanded or intended to expand its business to cigarettes.63[63] Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys exclusive right to use the GALLO trademark should be limited to wines, the only product indicated in its registration certificates. This strict statutory limitation on the exclusive right to use trademarks was amply clarified in our ruling in Faberge, Inc. vs. Intermediate Appellate Court:64[64] Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private respondent may be permitted to register

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

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This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem BRUT 33 for briefs (page 25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law in point does not require that the articles of manufacture of the previous user and late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register. (supra at page 1026). Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration following the clear message conveyed by Section 20. How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.) 193 27 | P a g e

S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken Bayer (27 SCRA 1214 [1969]): Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. (1226). NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCE OF PETITIONERS AND RESPONDENTS GOODS OR BUSINESS A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied in the light of each particular case. 65[65] There are two types of confusion in trademark infringement. The first is confusion of goods when an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing another, in which case defendants

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goods are then bought as the plaintiffs and its poor quality reflects badly on the plaintiffs reputation. The other is confusion of business wherein the goods of the parties are different but the defendants product can reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and defendant which, in fact, does not exist.66[66] In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the purchaser and [d] the registrants express or implied consent and other fair and equitable considerations. Petitioners and respondents both use GALLO in the labels of their respective cigarette and wine products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement: (a) in Acoje Mining Co., Inc. vs. Director of Patent,67[67] we ordered the approval of Acoje Minings application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy sauce, also belonged to Class 47; (b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68[68] we upheld the Patent Directors registration of the same trademark CAMIA for Ng Sams ham under

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Class 47, despite Philippine Refining Companys prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps; (c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69[69] we dismissed Hickoks petition to cancel private respondents HICKOK trademark registration for its Marikina shoes as against petitioners earlier registration of the same trademark for handkerchiefs, briefs, belts and wallets; (d) in Shell Company of the Philippines vs. Court of Appeals,70[70] in a minute resolution, we dismissed the petition for review for lack of merit and affirmed the Patent Offices registration of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell Companys opposition as the prior registrant of the same trademark for its gasoline and other petroleum products; (e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71[71] we dismissed ESSOs complaint for trademark infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and (f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72[72]

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we affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaishas prior registration and use of the same trademark for its paints, chemical products, toner and dyestuff (Class 2). Whether a trademark causes confusion and is likely to deceive the public hinges on colorable imitation73[73] which has been defined as such similarity in form, content, words, sound, meaning, special arrangement or general appearance of the trademark or tradename in their overall presentation or in their essential and substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article.74[74] Jurisprudence has developed two tests determining similarity and likelihood confusion in trademark resemblance:75[75]

in of

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals76[76] and other cases,77[77] and (b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of

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Appeals78[78] cases.79[79]

and

its

preceding

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.80[80] On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other.81[81] In comparing the imitation of marks, considered, such as size, form, meaning

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resemblance or colorable various factors have been the dominant color, style, of letters, words, designs

and the the by the

emblems used, the likelihood of deception of mark or name's tendency to confuse82[82] and commercial impression likely to be conveyed the trademarks if used in conjunction with respective goods of the parties.83[83]

Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette trademark is the device of a large rooster facing left, outlined in black against a gold background. The roosters color is either green or red green for GALLO menthols and red for GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of size and location on the labels.84[84] The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all to the product but was chosen merely as a trademark due to the fondness for fighting cocks of the son of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).85[85] Also, as admitted by respondents themselves,86[86] on the side of the GALLO cigarette packs are the words MADE BY MIGHTY CORPORATION, thus clearly informing the public

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as to the identity of the manufacturer of the cigarettes. On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof.87[87] Directly below or above these sketches is the entire printed name of the founder-owners, ERNEST & JULIO GALLO or just their surname GALLO,88[88] which appears in different fonts, sizes, styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark. Moreover, on the labels of Gallo Winerys wines are printed the words VINTED AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.89[89] The many different features like color schemes, art works and other markings of both products drown out the similarity between them the use of the word GALLO ― a family surname for the Gallo Winerys wines and a Spanish word for rooster for petitioners cigarettes. WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, COMPETING OR RELATED GOODS Confusion of goods is evident where the litigants are actually in competition; but confusion of business may arise between noncompeting interests as well.90[90]

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Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the Paris Convention which proscribe trademark infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern concept of related goods.91[91] Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same maker or manufacturer, trademark infringement occurs.92[92] Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks.93[93] They may also be those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of business, even though similar marks are used.94[94] Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant.95[95]

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In resolving whether goods are several factors come into play:

related,96[96]

(a) the business (and its location) to which the goods belong (b) the class of product to which the goods belong (c) the product's quality, quantity, or size, including the nature of the package, wrapper or container 97[97] (d) the nature and cost of the articles98[98] (e) the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality (f) the purpose of the goods99[99] (g) whether the article is bought for immediate consumption,100[100] that is, day-to-day household items101[101] (h) the fields of manufacture102[102]

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(i) the conditions under which the article is usually purchased103[103] and (j) the channels of trade through which goods flow,104[104] how they distributed, marketed, displayed sold.105[105]

the are and

The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.106[106] It is a weighing and balancing process. With reference to this ultimate question, and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the parties have a right to the relief sought.107[107] A very important circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in question.108[108] The purchaser is

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not the completely unwary consumer but is the ordinarily intelligent buyer considering the type of product involved.109[109] He is accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase.110[110] Hence, in the adjudication of trademark infringement, we give due regard to the goods usual purchasers character, attitude, habits, age, training and education. 111[111] Applying these legal precepts to the present case, petitioners use of the GALLO cigarette trademark is not likely to cause confusion or mistake, or to deceive the ordinarily intelligent buyer of either wines or cigarettes or both as to the identity of the goods, their source and origin, or identity of the business of petitioners and respondents. Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the same class of goods. Respondents GALLO wines belong to Class 33 under Rule 84[a]

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Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners GALLO cigarettes fall under Class 34. We are mindful that product classification alone cannot serve as the decisive factor in the resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. But the mere fact that one person has adopted and used a particular trademark for his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. 112[112] Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) they are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation and (2) they are grouped or classified in the same section of supermarkets and groceries. We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines and cigarettes are related products within the contemplation of the Trademark Law and the Paris Convention. First, anything - not only wines and cigarettes ― can be used for pleasure and relaxation and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no sense. Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products and the goods here involved, wines and cigarettes, have nothing whatsoever in common

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with respect to their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or containers.113[113] Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are sold in one store under the same roof does not automatically mean that buyers are likely to be confused as to the goods respective sources, connections or sponsorships. The fact that different products are available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.114[114] In this regard, we adopted the Director of Patents finding in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents:115[115] In his decision, the Director of Patents enumerated the factors that set respondents products apart from the goods of petitioner. He opined and we quote: I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments. Opposers products are ordinary

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day-to-day household items whereas ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would likely attribute to a common origin. The observations and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers, would not, in any probability mistake one as the source of origin of the product of the other. (Emphasis supplied). The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated products not likely to cause confusion vis--vis the goods or the business of the petitioners and respondents. Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages and smoked. There is a whale of a difference between their descriptive properties, physical attributes or essential characteristics like form, composition, texture and quality. GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by middle-to-high-income earners while GALLO cigarettes appeal only to simple folks like farmers, fishermen, laborers and other lowincome workers.116[116] Indeed, the big price difference of these two products is an important factor in proving that they are in fact unrelated and that they travel in different channels of trade. There is a distinct price segmentation based on vastly different social classes of purchasers.117[117] GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as

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imported or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk vendors, small local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu.118[118] On the other hand, GALLO wines are imported, distributed and sold in the Philippines through Gallo Winerys exclusive contracts with a domestic entity, which is currently Andresons. By respondents own testimonial evidence, GALLO wines are sold in hotels, expensive bars and restaurants, and high-end grocery stores and supermarkets, not through sari-sari stores or ambulant vendors.119[119] Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris, Inc.120[120] to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.:121[121] IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd, 222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark JOHNNIE WALKER on cigars because the fame of the plaintiffs mark for scotch whiskey and because the plaintiff

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advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker & Sons, placed great significance on the finding that the infringers use was a deliberate attempt to capitalize on the senior marks fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the mark BLACK LABEL for cigarettes because it was likely to cause confusion with the plaintiffs well-known mark BLACK LABEL for beer. xxx

xxx

xxx

Those decisions, however, must be considered in perspective of the principle that tobacco products and alcohol products should be considered related only in cases involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances has been found to exist where there is a finding of unfair competition or where a famous or well-known mark is involved and there is a demonstrated intent to capitalize on that mark. For example, in John Walker & Sons, the court was persuaded to find a relationship between products, and hence a likelihood of confusion, because of the plaintiffs long use and extensive advertising of its mark and placed great emphasis on the fact that the defendant used the trademark Johnnie Walker with full knowledge of its fame and reputation and with the intention of taking advantage thereof. John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision in John Walker & Sons was merely the law on the particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F. Supp. At 1363 (defendants adoption of Dunhill mark was not innocent). However, in Schenley, the court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary mark has long been used for diversified products emanating from a single 43 | P a g e

source and a newcomer seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry practice and the facts of the case in order to determine the nature and extent of the relationship between the mark on the tobacco product and the mark on the alcohol product. The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue. xxx

xxx

xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name Baileys as the mark for its cigarettes, to capitalize upon the fame of the BAILEYS mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308. Taken as a whole, the evidence here demonstrates the absence of the special circumstances in which courts have found a relationship between tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that BAILEYS liqueur, the worlds best selling liqueur and the second best selling in the United States, is a well-known product. That fact alone, however, is insufficient to invoke the special circumstances 44 | P a g e

connection here where so much other evidence and so many other factors disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion. (Emphasis supplied). In short, tobacco and alcohol products may be considered related only in cases involving special circumstances which exist only if a famous mark is involved and there is a demonstrated intent to capitalize on it. Both of these are absent in the present case. THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK IN THE CONTEXT OF THE PARIS CONVENTION IN THIS CASE SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR SIMILAR GOODS First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, after Tobacco Industries use of the GALLO cigarette trademark in 1973 and petitioners use of the same mark in 1984. GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite element under both the Trademark Law and the Paris Convention. Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary evidence that aside from Gallo Winerys GALLO trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration and use for its noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey,

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molasses syrup, yeast, baking powder, mustard, vinegar, species and ice.122[122]

salt,

Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,123[123] GALLO cannot be considered a well-known mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes are not identical or similar goods: We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT: Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity. In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename Rapid Transportation, it does not necessarily follow that Rapid can no longer be registered in Uganda, Fiji, or the Philippines.

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This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the bis implementation of Article 6 of the Treaty of Paris. These conditions are: a) the known;

mark

must

be

internationally

b)

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

c)

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

d)

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

From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark CANON for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail. (Emphasis supplied.) 47 | P a g e

Consent of the Registrant and Other air, Just and Equitable Considerations Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.124[124] Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents assertion is true, then both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing, distribution and sale of GALLO cigarettes and, on the other, respondents delay in enforcing their rights (not to mention implied consent, acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than respondents. Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents goodwill in adopting the GALLO mark for their cigarettes which are totally unrelated to respondents GALLO wines. Thus, we rule out trademark infringement on the part of petitioners. PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his business, or services for those of

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the one having established such goodwill, or who commits any acts calculated to produce said result, is guilty of unfair competition. It includes the following acts: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one mans goods or business as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendants practices must always appear.125[125] On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents. There is no

49 | P a g e

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. B. Differences and Patent

between

Copyrights,

Trademarks

1. PEARL & DEAN (PHIL.), INCORPORATED vs. SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED. In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision126[1] of the Court of Appeals reversing the October 31, 1996 decision127[2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition. FACTUAL ANTECEDENTS

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The May 22, Appeals128[3] dispute:

2001 decision contained a

of the summary

Court of of this

Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The advertising light boxes were marketed under the trademark Poster Ads. The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture its advertising displays. Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On September 11, 1985, Pearl and Deans General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMIs Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply.

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Instead, in a letter dated January 14, 1986, SMIs house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao. Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display units, offered to construct light boxes for Shoemarts chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City. Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMIs different branches. Pearl and Dean noted that NEMI is a sister company of SMI. In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMIs establishments. It also demanded the discontinued use of the trademark Poster Ads, and the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00). 52 | P a g e

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements for Poster Ads from the lighted display units in SMIs stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant case for infringement of trademark and copyright, unfair competition and damages. In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to Pearl and Deans copyright. SMI noted that the registration of the mark Poster Ads was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word Poster Ads is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purely intended to malign SMIs good name. On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988. NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising. It repleaded SMIs averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI. The RTC of Makati City decided in favor of P & D:

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Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed: (1) to pay plaintiff the following damages: (a) actual damages P16,600,000.00, representing profits derived by defendants as a result of infringement of plaintiffs copyright from 1991 to 1992 (b) moral damages

- P1,000.000.00

(c) exemplary damages

- P1,000,000.00

(d) attorneys fees plus

- P1,000,000.00

(e) costs of suit; (2)

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

(3)

to deliver, under oath, to the National Library, all filler-posters using the trademark Poster Ads, for destruction; and

(4)

to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark Poster Ads.

Defendants counterclaims are hereby ordered dismissed for lack of merit. SO ORDERED.129[4]

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On appeal, however, the reversed the trial court:

Court

of

Appeals

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable class O work, we have to agree with SMI when it posited that what was copyrighted were the technical drawings only, and not the light boxes themselves, thus: 42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellants will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled Seldens Condensed Ledger or Bookkeeping Simplified which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Seldens copyrighted books. The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright. And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty. 55 | P a g e

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic congestion. The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiffs drawings. In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to construct the object portrayed in the drawing. In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves. In fine, we cannot find SMI liable for infringing Pearl and Deans copyright over the technical drawings of the latters advertising display units. xxx

xxx

xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads: SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants ownership of the 56 | P a g e

mark or trade-name, and of the registrants exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. (underscoring supplied) The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark Poster Ads with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters. With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words Poster Ads, in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration. The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice Conrado V. Sanchez, that: Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. While we do not discount the striking similarity between Pearl and Deans registered trademark and defendants-appellants Poster Ads design, as well as the parallel use by which said words were used in the parties respective advertising copies, we cannot find defendants-appellants 57 | P a g e

liable for infringement of trademark. Poster Ads was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had caused. xxx

xxx

xxx

We are constrained to adopt the view of defendants-appellants that the words Poster Ads are a simple contraction of the generic term poster advertising. In the absence of any convincing proof that Poster Ads has acquired a secondary meaning in this jurisdiction, we find that Pearl and Deans exclusive right to the use of Poster Ads is limited to what is written in its certificate of registration, namely, stationeries. Defendants-appellants cannot thus be held liable for infringement of the trademark Poster Ads. There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary award granted by the lower court to Pearl and Dean has no leg to stand on. xxx

xxx

xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.130[5] Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Courts consideration:

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A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI; B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEANS TRADEMARK POSTER ADS WAS COMMITTED BY RESPONDENTS SM AND NEMI; C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN. D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.131[6] ISSUES In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three. We shall focus then on the following issues: (1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright? (2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer (now Intellectual

59 | P a g e

Property Office) in addition to copyright of the engineering drawings?

the

(3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his goods, services or business? ON THE ISSUE OF COPYRIGHT INFRINGEMENT Petitioner P & Ds complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously, petitioners position was premised on its belief that its copyright over the engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings alone and not to the light box itself. We agree with the appellate court. First, petitioners application for a copyright certificate as well as Copyright Certificate No. PD-R2588 issued by the National Library on January 20, 1981 clearly stated that it was for a class O work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing. Said Section 2 expressly enumerated the works subject to copyright: SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following works: x x x

x x x

x x x

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps; x x x

x x x

x x x

Although petitioners copyright certificate was entitled Advertising Display Units (which depicted the box-type electrical devices), its 60 | P a g e

claim of sustained.

copyright

infringement

cannot

be

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute.132[7] Accordingly, it can cover only the works falling within the statutory enumeration or description.133[8] P & D secured its copyright under the classification class O work. This being so, petitioners copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of prints, pictorial illustrations, advertising copies, labels, tags and box wraps. Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category of pictorial illustrations. It could not have possibly stretched out to include the underlying light box. The strict application134[9] of the laws enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was entitled Advertising Display Units. What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by

61 | P a g e

the National Units.

Library

as

Advertising

Display

In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the public without license from P & D, then no doubt they would have been guilty of copyright infringement. But this was not the case. SMIs and NEMIs acts complained of by P & D were to have units similar or identical to the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers. Was this an infringement of petitioners copyright over the technical drawings? We do not think so. During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an engineering or marketing invention.135[10] Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading case of Kho vs. Court of Appeals,136[11] we ruled that these three legal rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others: Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined

62 | P a g e

to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable. ON THE ISSUE OF PATENT INFRINGEMENT This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringement of P & Ds copyright over its technical drawings of the said light boxes, should they be liable instead for infringement of patent? We do not think so either. For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired no patent rights which could have protected its invention, if in fact it really was. And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,137[12] we held that there can be no infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive right of making, selling or using the invention.138[13] On the

63 | P a g e

assumption that petitioners advertising units were patentable inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library. To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is to bring new designs and technologies into the public domain through disclosure.139[14] Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.140[15] On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected. As held in Bauer & Cie vs. ODonnel,141[16] The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements. The law attempts to strike between the two interests:

an

ideal

balance

(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious

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advances in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to practice it and profit by its use.142[17] The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public.143[18] It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because in rewarding a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight technological advance in art.144[19]

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There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person is claiming the creation of a work. The law confers the copyright from the moment of creation145[20] and the copyright certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation. Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings. Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light boxs eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through the simplified procedure of copyright-registration with the National Library without undergoing the rigor of defending the patentability of its invention before the IPO and the public the petitioner would be protected for 50 years. This situation could not have been the intention of the law. In the oft-cited case of Baker vs. Selden146[21], the United States Supreme Court held that only the expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiffs

66 | P a g e

copyrighted that:

book.

The

US

Supreme

Court

ruled

There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere statement of the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it. The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of great value in the healing art. If the discoverer writes and publishes a book on 67 | P a g e

the subject (as regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book, if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries. The copyright of a book on perspective, matter how many drawings and illustrations may contain, gives no exclusive right to modes of drawing described, though they never have been known or used before. publishing the book without getting a patent the art, the latter is given to the public.

no it the may By for

x x x Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it. The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to correspond more closely than usual with the actual work performed by the operator who uses 68 | P a g e

the art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent. (underscoring supplied) ON THE ISSUE OF TRADEMARK INFRINGEMENT This issue concerns the use by respondents of the mark Poster Ads which petitioners president said was a contraction of poster advertising. P & D was able to secure a trademark certificate for it, but one where the goods specified were stationeries such as letterheads, envelopes, calling cards and newsletters.147[22] Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate. Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,148[23] where we, invoking Section 20 of the old Trademark Law, ruled that the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description.149[24] Faberge, Inc. was

69 | P a g e

correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals.150[25] Assuming arguendo that Poster Ads could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof. ON THE ISSUE OF UNFAIR COMPETITION If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had no registration.151[26] However, while the petitioners complaint in the RTC also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner did not appeal this particular point; hence, it cannot now revive its claim of unfair competition. But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition. By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against unfair competition.152[27] In this case,

70 | P a g e

there was no evidence that P & Ds use of Poster Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners expert witnesses himself had testified that Poster Ads was too generic a name. So it was difficult to identify it with any company, honestly speaking.153[28] This crucial admission by its own expert witness that Poster Ads could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark Poster Ads could not be distinguished from the goods and services of other entities. This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was generic and incapable of being used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. Secondary meaning means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his property.154[29] The admission by petitioners own expert witness that he himself could not associate Poster Ads with petitioner P & D because it was too generic definitely precluded the application of this exception. Having discussed the most important and critical issues, we see no need to belabor the rest. All told, the Court finds no reversible error committed by the Court of Appeals when it

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reversed City.

the

Regional

Trial

Court

of

Makati

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22, 2001 is AFFIRMED in toto. 2. ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY. Before us is a petition for review on certiorari of the Decisioni[1] dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Ordersii[2] dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction. The facts of the case are as follows: On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay. The petitioners complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 01358 and No. 0-3678; that she also has patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioners cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioners business sales and income; and, that the 72 | P a g e

respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner. The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company. After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads: ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto. SO ORDERED.iii[3] The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992.iv[4] On April 24, petition for 73 | P a g e

1992, the certiorari

respondents filed a with the Court of

Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of nonforum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition. On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads: WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-9110926 and resolve the issue raised by the parties on the merits. SO ORDERED.v[5] In granting the petition, the appellate court ruled that: The registration of the trademark or brandname Chin Chun Su by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law. xxx

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xxx

xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393: Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that registrants is presumed to be the owner of the mark until after the registration is declared cancelled is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534). The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained 75 | P a g e

only from Summerville General Merchandising and Co. In the meantime, the trial court went on to hear petitioners complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorneys fees. The petitioner duly appealed the said decision to the Court of Appeals. On June 3, 1994, the Court of Appeals promulgated a Resolution denying the petitioners motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803. Hence, this petition anchored on the following assignment of errors: I RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONERS MOTION TO DISMISS. II RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONERS MOTION FOR RECONSIDERATION. III IN DELAYING THE RESOLUTION OF PETITIONERS MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONERS RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONERS RIGHT TO DUE PROCESS.

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IV RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT. The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioners right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents. We rule in favor of the respondents. Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded. This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage. In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order 77 | P a g e

on the ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream product would entitle the registrant to the use and ownership over the same to the exclusion of others. Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable. Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioners copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven 78 | P a g e

that she has registered a trademark thereto or used the same before anyone did. We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals, to wit: Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiffs right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. (italics supplied) La Vista categorically pronounced that issuance of a final injunction renders 79 | P a g e

the any

question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiffs right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction. The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of non-compliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that (I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied). Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she had earlier tendered. Thirdly, substantial justice and equity require this Court not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The granting of an injunctive writ based on a technical ground rather than compliance with the requisites for the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a means to dispense justice to the deserving party. 80 | P a g e

The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-observance of the period for deciding cases or their incidents does not render such judgments ineffective or void. With respect to the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction. Finally, we rule that the Court of Appeals correctly denied the petitioners several motions for contempt of court. There is nothing contemptuous about the advertisements complained of which, as regards the proceedings in CA-G.R. SP No. 27803 merely announced in plain and straightforward language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately executory. WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner. CHAPTER IV PATENT APPLICATION Section 32. The Application. - 32.1. The patent application shall be in Filipino or English and shall contain the following: (a) A request for the grant of a patent; (b) A description of the invention; 81 | P a g e

(c) Drawings necessary for the understanding of the invention; (d) One or more claims; and (e) An abstract. 32.2. No patent may be granted unless application identifies the inventor. If applicant is not the inventor, the Office require him to submit said authority. (Sec. R.A. No. 165a)

the the may 13,

Section 33. Appointment of Agent or Representative. - An applicant who is not a resident of the Philippines must appoint and maintain a resident agent or representative in the Philippines upon whom notice or process for judicial or administrative procedure relating to the application for patent or the patent may be served. (Sec. 11, R.A. No. 165a) Section 34. The Request. - The request shall contain a petition for the grant of the patent, the name and other data of the applicant, the inventor and the agent and the title of the invention. (n) Section 35. Disclosure and Description of the Invention. - 35.1. Disclosure. - The application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art. Where the application concerns a microbiological process or the product thereof and involves the use of a micro-organism which cannot be sufficiently disclosed in the application in such a way as to enable the invention to be carried out by a person skilled in the art, and such material is not available to the public, the application shall be supplemented by a deposit of such material with an international depository institution. 35.2. Description. - The Regulations shall prescribe the contents of the description and the order of presentation. (Sec. 14, R.A. No. 165a) 82 | P a g e

Section 36. The Claims. - 36.1. The application shall contain one (1) or more claims which shall define the matter for which protection is sought. Each claim shall be clear and concise, and shall be supported by the description. 36.2. The Regulations shall prescribe the manner of the presentation of claims. (n) Section 37. The Abstract. - The abstract shall consist of a concise summary of the disclosure of the invention as contained in the description, claims and drawings in preferably not more than one hundred fifty (150) words. It must be drafted in a way which allows the clear understanding of the technical problem, the gist of the solution of that problem through the invention, and the principal use or uses of the invention. The abstract shall merely serve for technical information. (n) Section 38. Unity of Invention. - 38.1. The application shall relate to one invention only or to a group of inventions forming a single general inventive concept. 38.2. If several independent inventions which do not form a single general inventive concept are claimed in one application, the Director may require that the application be restricted to a single invention. A later application filed for an invention divided out shall be considered as having been filed on the same day as the first application: Provided, That the later application is filed within four (4) months after the requirement to divide becomes final or within such additional time, not exceeding four (4) months, as may be granted: Provided further, That each divisional application shall not go beyond the disclosure in the initial application. 38.3. The fact that a patent has been granted on an application that did not comply with the requirement of unity of invention shall not be a ground to cancel the patent. (Sec. 17, R.A. No. 165a)

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Section 39. Information Concerning Corresponding Foreign Application for Patents. - The applicant shall, at the request of the Director, furnish him with the date and number of any application for a patent filed by him abroad, hereafter referred to as the "foreign application," relating to the same or essentially the same invention as that claimed in the application filed with the Office and other documents relating to the foreign application. (n) CHAPTER PROCEDURE FOR GRANT OF PATENT

V

Section 40. Filing Date Requirements. - 40.1. The filing date of a patent application shall be the date of receipt by the Office of at least the following elements: (a) An express or implicit indication that a Philippine patent is sought; (b) and

Information

identifying

the

applicant;

(c) Description of the invention and one (1) or more claims in Filipino or English. 40.2. If any of these elements is not submitted within the period set by the Regulations, the application shall be considered withdrawn. (n) Section 41. According a Filing Date. - The Office shall examine whether the patent application satisfies the requirements for the grant of date of filing as provided in Section 40 hereof. If the date of filing cannot be accorded, the applicant shall be given an opportunity to correct the deficiencies in accordance with the implementing Regulations. If the application does not contain all the elements indicated in Section 40, the filing date should be that date when all the elements are received. If the deficiencies are not remedied within the prescribed time limit, the application shall be considered withdrawn. (n) Section 42. Formality Examination. - 42.1. After the patent application has been accorded a 84 | P a g e

filing date and the required fees have been paid on time in accordance with the Regulations, the applicant shall comply with the formal requirements specified by Section 32 and the Regulations within the prescribed period, otherwise the application shall be considered withdrawn. 42.2. The Regulations shall determine the procedure for the re-examination and revival of an application as well as the appeal to the Director of Patents from any final action by the examiner. (Sec. 16, R.A. No. 165a) Section 43. Classification and Search. - An application that has complied with the formal requirements shall be classified and a search conducted to determine the prior art. (n) Section 44. Publication of Patent Application. 44.1. The patent application shall be published in the IPO Gazette together with a search document established by or on behalf of the Office citing any documents that reflect prior art, after the expiration of eighteen ( 18) months from the filing date or priority date. 44.2. After publication of a patent application, any interested party may inspect the application documents filed with the Office. 44.3. The Director General subject to the approval of the Secretary of Trade and Industry, may prohibit or restrict the publication of an application, if in his opinion, to do so would be prejudicial to the national security and interests of the Republic of the Philippines. (n) Section 45. Confidentiality Before Publication. - A patent application, which has not yet been published, and all related documents, shall not be made available for inspection without the consent of the applicant. (n) Section 46. Rights Conferred by a Patent Application After Publication. - The applicant shall have all the rights of a patentee under Section 76 against any person who, without his 85 | P a g e

authorization, exercised any of the rights conferred under Section 71 of this Act in relation to the invention claimed in the published patent application, as if a patent had been granted for that invention: Provided, That the said person had: 46.1. Actual knowledge that the invention that he was using was the subject matter of a published application; or 46.2. Received written notice that the invention that he was using was the subject matter of a published application being identified in the said notice by its serial number: Provided, That the action may not be filed until after the grant of a patent on the published application and within four (4) years from the commission of the acts complained of. (n) Section 47. Observation by Third Parties. Following the publication of the patent application, any person may present observations in writing concerning the patentability of the invention. Such observations shall be communicated to the applicant who may comment on them. The Office shall acknowledge and put such observations and comment in the file of the application to which it relates. (n) Section 48. Request for Substantive Examination. 48.1. The application shall be deemed withdrawn unless within six (6) months from the date of publication under Section 41, a written request to determine whether a patent application meets the requirements of Sections 21 to 27 and Sections 32 to 39 and the fees have been paid on time. 48.2. Withdrawal of the request for examination shall be irrevocable and shall not authorize the refund of any fee. (n) Section 49. Amendment of Application. - An applicant may amend the patent application during examination: Provided, That such amendment shall not include new matter outside the scope of the disclosure contained in the application as filed. (n) 86 | P a g e

Section 50. Grant of Patent. - 50.1. If the application meets the requirements of this Act, the Office shall grant the patent: Provided, That all the fees are paid on time. 50.2. If the required fees for grant printing are not paid in due time, application shall be deemed to be withdrawn.

and the

50.3. A patent shall take effect on the date of the publication of the grant of the patent in the IPO Gazette. (Sec. 18, R.A. No. 165a) Section 51. Refusal of the Application. - 51.1. The final order of refusal of the examiner to grant the patent shall be appealable to the Director in accordance with this Act. 51.2. The Regulations shall provide for the procedure by which an appeal from the order of refusal from the Director shall be undertaken. (n) Section 52. Publication Upon Grant of Patent. 52.1. The grant of the patent together with other related information shall be published in the IPO Gazette within the time prescribed by the Regulations. 52.2. Any interested party may inspect the complete description, claims, and drawings of the patent on file with the Office. (Sec. 18, R.A. No. 165a) Section 53. Contents of Patent. - The patent shall be issued in the name of the Republic of the Philippines under the seal of the Office and shall be signed by the Director, and registered together with the description, claims, and drawings, if any, in books and records of the Office. (Secs. 19 and 20, R.A. No. 165a) Section 54. Term of Patent. - The term of a patent shall be twenty (20) years from the filing date of the application. (Sec. 21, R.A. No. 165a) Section 55. Annual Fees. - 55.1. To maintain the patent application or patent, an annual fee 87 | P a g e

shall be paid upon the expiration of four (4) years from the date the application was published pursuant to Section 44 hereof, and on each subsequent anniversary of such date. Payment may be made within three (3) months before the due date. The obligation to pay the annual fees shall terminate should the application be withdrawn, refused, or cancelled. 55.2. If the annual fee is not paid, the patent application shall be deemed withdrawn or the patent considered as lapsed from the day following the expiration of the period within which the annual fees were due. A notice that the application is deemed withdrawn or the lapse of a patent for non-payment of any annual fee shall be published in the IPO Gazette and the lapse shall be recorded in the Register of the Office. 55.3. A grace period of six (6) months shall be granted for the payment of the annual fee, upon payment of the prescribed surcharge for delayed payment. (Sec. 22, R.A. No. 165a) Section 56. Surrender of Patent. - 56.1. The owner of the patent, with the consent of all persons having grants or licenses or other right, title or interest in and to the patent and the invention covered thereby, which have been recorded in the Office, may surrender his patent or any claim or claims forming part thereof to the Office for cancellation. 56.2. A person may give notice to the Office of his opposition to the surrender of a patent under this section, and if he does so, the Bureau shall notify the proprietor of the patent and determine the question. 56.3. If the Office is satisfied that the patent may properly be surrendered, he may accept the offer and, as from the day when notice of his acceptance is published in the IPO Gazette, the patent shall cease to have effect, but no action for infringement shall lie and no right compensation shall accrue for any use of the patented invention before that day for the 88 | P a g e

services of the government. (Sec. 24, R.A. No. 165a) Section 57. Correction of Mistakes of the Office. - The Director shall have the power to correct, without fee, any mistake in a patent incurred through the fault of the Office when clearly disclosed in the records thereof, to make the patent conform to the records. (Sec. 25, R.A. No. 165) Section 58. Correction of Mistake in the Application. - On request of any interested person and payment of the prescribed fee, the Director is authorized to correct any mistake in a patent of a formal and clerical nature, not incurred through the fault of the Office. (Sec. 26, R.A. No. 165a) Section 59. Changes in Patents. - 59.1. The owner of a patent shall have the right to request the Bureau to make the changes in the patent in order to: (a) Limit the extent conferred by it;

of

the

protection

(b) Correct obvious mistakes or to correct clerical errors; and (c) Correct mistakes or errors, other than those referred to in letter (b), made in good faith: Provided, That where the change would result in a broadening of the extent of protection conferred by the patent, no request may be made after the expiration of two (2) years from the grant of a patent and the change shall not affect the rights of any third party which has relied on the patent, as published. 59.2. No change in the patent shall be permitted under this section, where the change would result in the disclosure contained in the patent going beyond the disclosure contained in the application filed.

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59.3. If, and to the extent to which the Office changes the patent according to this section, it shall publish the same. (n) Section 60. Form and Publication of Amendment. An amendment or correction of a patent shall be accomplished by a certificate of such amendment or correction, authenticated by the seal of the Office and signed by the Director, which certificate shall be attached to the patent. Notice of such amendment or correction shall be published in the IPO Gazette and copies of the patent kept or furnished by the Office shall include a copy of the certificate of amendment or correction. (Sec. 27, R.A. No. 165)

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91 | P a g e

Invention Patent Application Procedures 1. Application for Invention Patent The application for a grant of Philippine Patent (for Invention) must be filed with the Bureau of Patents (BOP) of the Intellectual Property Office (IPO) through the Receiving Section/Counter of the Administrative, Financial and Human Resource Development Services Bureau (AFHRDSB) located at the ground floor of the IPO Building. To obtain a filing date, the following has to be submitted: (a) Properly filled-out for a Grant of Philippine Patent;

Request Form

(b) Name, address and signature of applicant(s); for non-resident applicant, the name and address of his/her/their resident agent; and (c) Description of the invention and one or more claims. NOTE: It is advised that any drawing/s necessary to understand the subject invention should be submitted at the time of filing so that there would not be a possible change in filing date due to late submission/filing of said drawing/s . (Rule 602 of the IRR)The other formal requirements, which are not needed to obtain a filing date, but maybe included at the time of filing are: (a) A filing fee (for big or small entities) which maybe paid during application filing or within one month from the date of filing. The application shall be deemed automatically cancelled/withdrawn in case of non-payment of such fees; (b) Drawing(s) necessary to understand the invention; (c) An abstract; and

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(d) If the priority of an earlier filed application is being claimed, the details of the claim, i.e. filing date, file number and country of origin. 2. Formality Examination Upon receipt of the application, the examiner checks if the application satisfies the formal requirements needed for the grant of a filing date. The date of filing is very important under the present “first-to-file” system because it serves to determine, in case of a dispute with another applicant for the same invention, who has the right to the patent. 3. Publication of Unexamined Application After the formality examination, search and the classification of the field of technology to which the invention is assigned, the application together with the results of the search (which contains a list of published patent applications or issued patents for inventions, which are identical or equivalent to those claimed by the application), will be published in the IPO Gazette (after the expiration of 18 months from the filing date or priority date). After the publication of the application, any person may present observations in writing concerning the patentability of the invention. Such observation shall be communicated to the applicant who may comment on them. 4. Request for Substantive Examination Substantive examination is conducted upon request The request for substantive examination of the application must be filed within six (6) months from the date of the publication. The application is considered withdrawn if no request is made within that period. If the examiner finds reason to refuse the registration of the application, i.e. the application is not new, inventive or industrially applicable, the Bureau shall notify the applicant of the reason for 93 | P a g e

refusal/rejection giving the applicant chance to defend or amend the application.

the

5. Decision to Grant Patent Registration or Decision of Refusal If the examiner finds no reason for refusal of the application, or if the notice of reason for refusal is satisfactorily complied with by amendment or correction, the examiner issues a decision to grant the patent registration. Otherwise, the examiner refuses the application. 6. Inspection of Records The grant of a patent together with other information shall be published in the IPO Gazette within six (6) months. Any interested party may inspect the complete description, claims, and drawings of the patent on file with the Office. 7. Appeal (a) Every applicant may appeal to the Director of Patents the final refusal of the examiner to grant the patent within two (2) months from the mailing date of the final refusal. The decision or order of the Director shall become final and executory fifteen (15) days after receipt of a copy by the appellant unless within the same period, a motion for reconsideration is filed with the Director or an appeal to the Director General is filed together with the payment of the required fee. (b) The decision of the Director General may be appealed to the Court of Appeals. If the applicant is still not satisfied with the decision of the Court of Appeals, he may appeal to the Supreme Court.

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CHAPTER VI CANCELLATION OF PATENTS AND SUBSTITUTION OF PATENTEE Section 61. Cancellation of Patents. - 61.1. Any interested person may, upon payment of the required fee, petition to cancel the patent or any claim thereof, or parts of the claim, on any of the following GROUNDS: (a) That what is claimed as the invention is not new or Patentable; (b) That the patent does not disclose the invention in a manner sufficiently clear and complete for it to be carried out by any person skilled in the art; or (c) That the patent is contrary to public order or morality. 61.2. Where the grounds for cancellation relate to some of the claims or parts of the claim, cancellation may be effected to such extent only. (Secs. 28 and 29, R.A. No. 165a) Section 62. Requirement of the Petition. - The petition for cancellation shall be in writing, verified by the petitioner or by any person in his behalf who knows the facts, specify the grounds upon which it is based, include a statement of the facts to be relied upon, and filed with the Office. Copies of printed publications or of patents of other countries, and other supporting documents mentioned in the petition shall be attached thereto, together with the translation thereof in English, if not in the English language. (Sec. 30, R.A. No. 165) Section 63. Notice of Hearing. - Upon filing of a petition for cancellation, the Director of Legal Affairs shall forthwith serve notice of the filing thereof upon the patentee and all persons having grants or licenses, or any other right, title or interest in and to the patent and the invention covered thereby, as appears of record in the Office, and of notice of the date of hearing thereon on such persons and the petitioner. Notice of the filing of the petition 95 | P a g e

shall be published in the IPO Gazette. (Sec. 31, R.A. No. 165a) Section 64. Committee of Three. - In cases involving highly technical issues, on motion of any party, the Director of Legal Affairs may order that the petition be heard and decided by a committee composed of the Director of Legal Affairs as chairman and two (2) members who have the experience or expertise in the field of technology to which the patent sought to be cancelled relates. The decision of the committee shall be appealable to the Director General. (n) Section 65. Cancellation of the Patent. - 65.1. If the Committee finds that a case for cancellation has been proved, it shall order the patent or any specified claim or claims thereof cancelled. 65.2. If the Committee finds that, taking into consideration the amendment made by the patentee during the cancellation proceedings, the patent and the invention to which it relates meet the requirement of this Act, it may decide to maintain the patent as amended: Provided, That the fee for printing of a new patent is paid within the time limit prescribed in the Regulations. 65.3. If the fee for the printing of a new patent is not paid in due time, the patent should be revoked. 65.4. If the patent is amended under Subsection 65.2 hereof, the Bureau shall, at the same time as it publishes the mention of the cancellation decision, publish the abstract, representative claims and drawings indicating clearly what the amendments consist of. (n) Section 66. Effect of Cancellation of Patent or Claim. - The rights conferred by the patent or any specified claim or claims cancelled shall terminate. Notice of the cancellation shall be published in the IPO Gazette. Unless restrained by the Director General, the decision or order to cancel by Director of Legal Affairs shall be 96 | P a g e

immediately executory even pending appeal. (Sec. 32, R.A. No. 165a) CHAPTER VII REMEDIES OF A PERSON WITH A RIGHT TO A PATENT Section 67. Patent Application by Persons Not Having the Right to a Patent. . - 67.1. If a person referred to in Section 29 other than the applicant, is declared by final court order or decision as having the right to the patent, such person may, within three (3) months after the decision has become final: (a) Prosecute the application as his application in place of the applicant;

own

(b) File a new patent application in respect of the same invention; (c) Request that the application be refused; or (d) Seek cancellation of the patent, if one has already been issued. 67.2. The provisions of Subsection 38.2 shall apply mutatis mutandis to a new application filed under Subsection 67. 1(b). (n) Section 68. Remedies of the True and Actual Inventor. - If a person, who was deprived of the patent without his consent or through fraud is declared by final court order or decision to be the true and actual inventor, the court shall order for his substitution as patentee, or at the option of the true inventor, cancel the patent, and award actual and other damages in his favor if warranted by the circumstances. (Sec. 33, R.A. No. 165a) Section 69. Publication of the Court Order. The court shall furnish the Office a copy of the order or decision referred to in Sections 67 and 68, which shall be published in the IPO Gazette within three (3) months from the date such order or decision became final and executory, and shall be recorded in the register of the Office. (n) 97 | P a g e

Section 70. Time to File Action in Court. - The actions indicated in Sections 67 and 68 shall be filed within one (1) year from the date of publication made in accordance with Sections 44 and 51, respectively. (n) CHAPTER VIII RIGHTS OF PATENTEES AND INFRINGEMENT OF PATENTS Section 71. Rights Conferred by Patent. - 71.1. A patent shall confer on its owner the following exclusive rights: (a) Where the subject matter of a patent is a product, to restrain, prohibit and prevent any unauthorized person or entity from making, using, offering for sale, selling or importing that product; (b) Where the subject matter of a patent is a process, to restrain, prevent or prohibit any unauthorized person or entity from using the process, and from manufacturing, dealing in, using, selling or offering for sale, or importing any product obtained directly or indirectly from such process. 71.2. Patent owners shall also have the right to assign, or transfer by succession the patent, and to conclude licensing contracts for the same. (Sec. 37, R.A. No. 165a) Section 72. Limitations of Patent Rights. - The owner of a patent has no right to prevent third parties from performing, without his authorization, the acts referred to in Section 71 hereof in the following circumstances: 72.1. Using a patented product which has been put on the market in the Philippines by the owner of the product, or with his express consent, insofar as such use is performed after that product has been so put on the said market; 72.2. Where the act is done privately and on a non-commercial scale or for a non-commercial purpose: Provided, That it does not significantly prejudice the economic interests of the owner of the patent; 98 | P a g e

72.3. Where the act consists of making or using exclusively for the purpose of experiments that relate to the subject matter of the patented invention; 72.4. Where the act consists of the preparation for individual cases, in a pharmacy or by a medical professional, of a medicine in accordance with a medical prescription or acts concerning the medicine so prepared; 72.5. Where the invention vessel, aircraft, or land country entering the Philippines temporarily Provided, That such exclusively for the needs aircraft, or land vehicle manufacturing of anything Philippines. (Secs. 38 and

is used in any ship, vehicle of any other territory of the or accidentally: invention is used of the ship, vessel, and not used for the to be sold within the 39, R.A. No. 165a)

Section 73. Prior User. - 73.1. Notwithstanding Section 72 hereof, any prior user, who, in good faith was using the invention or has undertaken serious preparations to use the invention in his enterprise or business, before the filing date or priority date of the application on which a patent is granted, shall have the right to continue the use thereof as envisaged in such preparations within the territory where the patent produces its effect. 73.2. The right of the prior user may only be transferred or assigned together with his enterprise or business, or with that part of his enterprise or business in which the use or preparations for use have been made. (Sec. 40, R.A. No. 165a) Section 74. Use of Invention by Government. 74.1. A Government agency or third person authorized by the Government may exploit the invention even without agreement of the patent owner where: (a) The public interest, in particular, national security, nutrition, health or the development of other sectors, as determined 99 | P a g e

by the appropriate agency of the government, so requires; or (b) A judicial or administrative body has determined that the manner of exploitation, by the owner of the patent or his licensee is anti-competitive. 74.2. The use by the Government, or third person authorized by the Government shall be subject, mutatis mutandis, to the conditions set forth in Sections 95 to 97 and 100 to 102. (Sec. 41, R.A. No. 165a) Section 75. Extent of Protection and Interpretation of Claims. - 75.1. The extent of protection conferred by the patent shall be determined by the claims, which are to be interpreted in the light of the description and drawings. 75.2. For the purpose of determining the extent of protection conferred by the patent, due account shall be taken of elements which are equivalent to the elements expressed in the claims, so that a claim shall be considered to cover not only all the elements as expressed therein, but also equivalents. (n)

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Patent Infringement 1. Tests in patent infringement a. Literal Infringement - In using literal infringement as a test, ". . . resort must be had, in the first instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is made out and that is the end of it." To determine whether the particular item falls within the literal meaning of the patent claims, the court must juxtapose the claims of the patent and the accused product within the overall context of the claims and specifications, to determine whether there is exact identity of all material elements. Literal infringement exists when every limitation recited in a patent claim is found in the infringing device (or process). b. Infringement by equivalents happens when a device (or process) appropriates a prior invention by incorporating its innovative concept and, although with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result. This "functionway-result" equation lies at the heart of the doctrine of equivalents. SMITH KLINE BECKMAN CORPORATION vs.CA Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of the laws of the state of Pennsylvania, United States of America (U.S.) and licensed to do business in the Philippines, filed on October 8, 1976, as assignee, before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer) an application for patent over an invention entitled "Methods and Compositions for Producing Biphasic Parasiticide Activity Using Methyl 5 Propylthio-2Benzimidazole Carbamate." The application bore Serial No. 18989.

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On September 24, 1981, Letters Patent No. 14561 1 for the aforesaid invention was issued to petitioner for a term of seventeen (17) years. The letters patent provides in its claims 2 that the patented invention consisted of a new compound named methyl 5 propylthio-2benzimidazole carbamate and the methods or compositions utilizing the compound as an active ingredient in fighting infections caused by gastrointestinal parasites and lungworms in animals such as swine, sheep, cattle, goats, horses, and even pet animals. Tryco Pharma Corporation (private respondent) is a domestic corporation that manufactures, distributes and sells veterinary products including Impregon, a drug that has Albendazole for its active ingredient and is claimed to be effective against gastro-intestinal roundworms, lungworms, tapeworms and fluke infestation in carabaos, cattle and goats. Petitioner sued private respondent for infringement of patent and unfair competition before the Caloocan City Regional Trial Court (RTC).3 It claimed that its patent covers or includes the substance Albendazole such that private respondent, by manufacturing, selling, using, and causing to be sold and used the drug Impregon without its authorization, infringed Claims 2, 3, 4, 7, 8 and 9 of Letters Patent No. 145614 as well as committed unfair competition under Article 189, paragraph 1 of the Revised Penal Code and Section 29 of Republic Act No. 166 (The Trademark Law) for advertising and selling as its own the drug Impregon although the same contained petitioner’s patented 5 Albendazole. On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary restraining order against private respondent enjoining it from committing acts of patent infringement and unfair competition.6 A writ of preliminary injunction was subsequently issued.7

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Private respondent in its Answer8 averred that Letters Patent No. 14561 does not cover the substance Albendazole for nowhere in it does that word appear; that even if the patent were to include Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed it to manufacture and market Impregon with Albendazole as its known ingredient; that there is no proof that it passed off in any way its veterinary products as those of petitioner; that Letters Patent No. 14561 is null and void, the application for the issuance thereof having been filed beyond the one year period from the filing of an application abroad for the same invention covered thereby, in violation of Section 15 of Republic Act No. 165 (The Patent Law); and that petitioner is not the registered patent holder. Private respondent lodged a Counterclaim against petitioner for such amount of actual damages as may be proven; P1,000,000.00 in moral damages; P300,000.00 in exemplary damages; and P150,000.00 in attorney’s fees. Finding for private respondent, the trial court rendered a Decision dated July 23, 1991,9 the dispositive portion of which reads: WHEREFORE, in view of the foregoing, plaintiff’s complaint should be, as it is hereby, DISMISSED. The Writ of injunction issued in connection with the case is hereby ordered DISSOLVED. The Letters Patent No. 14561 issued by the then Philippine Patents Office is hereby declared null and void for being in violation of Sections 7, 9 and 15 of the Patents Law. Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby directed to cancel Letters Patent No. 14561 issued to the plaintiff and to publish such cancellation in the Official Gazette. Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages and P100,000.00 attorney’s fees as prayed for in its counterclaim but said amount awarded to 103 | P a g e

defendant is subject to payment of filing fees.

the

lien

on

correct

SO ORDERED. (Underscoring supplied) On appeal, the Court of Appeals, by Decision of April 21, 1995,10 upheld the trial court’s finding that private respondent was not liable for any infringement of the patent of petitioner in light of the latter’s failure to show that Albendazole is the same as the compound subject of Letters Patent No. 14561. Noting petitioner’s admission of the issuance by the U.S. of a patent for Albendazole in the name of Smith Kline and French Laboratories which was petitioner’s former corporate name, the appellate court considered the U.S. patent as implying that Albendazole is different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found that private respondent was not guilty of deceiving the public by misrepresenting that Impregon is its product. The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained petitioner’s explanation that Patent Application Serial No. 18989 which was filed on October 8, 1976 was a divisional application of Patent Application Serial No. 17280 filed on June 17, 1975 with the Philippine Patent Office, well within one year from petitioner’s filing on June 19, 1974 of its Foreign Application Priority Data No. 480,646 in the U.S. covering the same compound subject of Patent Application Serial No. 17280. Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent Application Serial No. 18989 was deemed filed on June 17, 1995 or still within one year from the filing of a patent application abroad in compliance with the one-year rule under Section 15 of the Patent Law. And it rejected the submission that the compound in Letters Patent No. 14561 was not patentable, citing the jurisprudentially established presumption that the Patent Office’s determination of patentability is correct. Finally, it ruled that petitioner established 104 | P a g e

itself to be the one and the same assignee of the patent notwithstanding changes in its corporate name. Thus the appellate court disposed: WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the orders for the nullification of Letters Patent No. 14561 and for its cancellation are deleted therefrom. SO ORDERED. Petitioner’s motion for reconsideration of the Court of Appeals’ decision having been denied11 the present petition for review on certiorari 12 was filed, assigning as errors the following: I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCO’S "IMPREGON" DRUG, IS INCLUDED IN PETITIONER’S LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT. II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL DAMAGES AND P100,000.00 ATTORNEY’S FEES. Petitioner argues that under the doctrine of equivalents for determining patent infringement, Albendazole, the active ingredient it alleges was appropriated by private respondent for its drug Impregon, is substantially the same as methyl 5 propylthio-2-benzimidazole carbamate covered by its patent since both of them are meant to combat worm or parasite infestation in animals. It cites the "unrebutted" testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the chemical formula in Letters Patent No. 14561 refers to the compound Albendazole. Petitioner adds that the two substances substantially do the same function in substantially the same way to achieve the same results, thereby making them truly identical. Petitioner thus submits that the appellate court should have gone beyond the literal wordings used in Letters Patent No. 14561, beyond merely 105 | P a g e

applying the literal infringement test, for in spite of the fact that the word Albendazole does not appear in petitioner’s letters patent, it has ably shown by evidence its sameness with methyl 5 propylthio-2-benzimidazole carbamate. Petitioner likewise points out that its application with the Philippine Patent Office on account of which it was granted Letters Patent No. 14561 was merely a divisional application of a prior application in the U. S. which granted a patent for Albendazole. Hence, petitioner concludes that both methyl 5 propylthio-2benzimidazole carbamate and the U.S.-patented Albendazole are dependent on each other and mutually contribute to produce a single result, thereby making Albendazole as much a part of Letters Patent No. 14561 as the other substance is. Petitioner concedes in its Sur-Rejoinder13 that although methyl 5 propylthio-2-benzimidazole carbamate is not identical with Albendazole, the former is an improvement or improved version of the latter thereby making both substances still substantially the same. With respect to the award of actual damages in favor of private respondent in the amount of P330,000.00 representing lost profits, petitioner assails the same as highly speculative and conjectural, hence, without basis. It assails too the award of P100,000.00 in attorney’s fees as not falling under any of the instances enumerated by law where recovery of attorney’s fees is allowed. In its Comment,14 private respondent contends that application of the doctrine of equivalents would not alter the outcome of the case, Albendazole and methyl 5 propylthio-2benzimidazole carbamate being two different compounds with different chemical and physical properties. It stresses that the existence of a separate U.S. patent for Albendazole indicates that the same and the compound in Letters Patent No. 14561 are different from each other; and that since it was on account of a divisional 106 | P a g e

application that the patent for methyl 5 propylthio-2-benzimidazole carbamate was issued, then, by definition of a divisional application, such a compound is just one of several independent inventions alongside Albendazole under petitioner’s original patent application. As has repeatedly been held, only questions of law may be raised in a petition for review on certiorari before this Court. Unless the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,15 this Court does not review them. From an examination of the evidence on record, this Court finds nothing infirm in the appellate court’s conclusions with respect to the principal issue of whether private respondent committed patent infringement to the prejudice of petitioner. The burden of proof to substantiate a charge for patent infringement rests on the plaintiff. 16 In the case at bar, petitioner’s evidence consists primarily of its Letters Patent No. 14561, and the testimony of Dr. Orinion, its general manager in the Philippines for its Animal Health Products Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2-benzimidazole carbamate also covers the substance Albendazole. From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other portions thereof, no mention is made of the compound Albendazole. All that the claims disclose are: the covered invention, that is, the compound methyl 5 propylthio-2-benzimidazole carbamate; the compound’s being anthelmintic but nontoxic for animals or its ability to destroy parasites without harming the host animals; and the patented methods, compositions or preparations involving the compound to maximize its efficacy against certain kinds of parasites infecting specified animals.

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When the language of its claims is clear and distinct, the patentee is bound thereby and may not claim anything beyond them.17 And so are the courts bound which may not add to or detract from the claims matters not expressed or necessarily implied, nor may they enlarge the patent beyond the scope of that which the inventor claimed and the patent office allowed, even if the patentee may have been entitled to something more than the words it had chosen would include.18 It bears stressing that the mere absence of the word Albendazole in Letters Patent No. 14561 is not determinative of Albendazole’s non-inclusion in the claims of the patent. While Albendazole is admittedly a chemical compound that exists by a name different from that covered in petitioner’s letters patent, the language of Letter Patent No. 14561 fails to yield anything at all regarding Albendazole. And no extrinsic evidence had been adduced to prove that Albendazole inheres in petitioner’s patent in spite of its omission therefrom or that the meaning of the claims of the patent embraces the same. While petitioner concedes that the mere literal wordings of its patent cannot establish private respondent’s infringement, it urges this Court to apply the doctrine of equivalents. The doctrine of equivalents provides that an infringement also takes place when a device appropriates a prior invention by incorporating its innovative concept and, although with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result.19 Yet again, a scrutiny of petitioner’s evidence fails to convince this Court of the substantial sameness of petitioner’s patented compound and Albendazole. While both compounds have the effect of neutralizing parasites in animals, identity of result does not amount to infringement of patent unless Albendazole operates in substantially the same way or by substantially the same means as the patented 108 | P a g e

compound, even though it performs the same function and achieves the same result.20 In other words, the principle or mode of operation must be the same or substantially the same.21 The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the patentee having the burden to show that all three components of such equivalency test are met.22 As stated early on, petitioner’s evidence fails to explain how Albendazole is in every essential detail identical to methyl 5 propylthio-2benzimidazole carbamate. Apart from the fact that Albendazole is an anthelmintic agent like methyl 5 propylthio-2-benzimidazole carbamate, nothing more is asserted and accordingly substantiated regarding the method or means by which Albendazole weeds out parasites in animals, thus giving no information on whether that method is substantially the same as the manner by which petitioner’s compound works. The testimony of Dr. Orinion lends no support to petitioner’s cause, he not having been presented or qualified as an expert witness who has the knowledge or expertise on the matter of chemical compounds. As for the concept of divisional applications proffered by petitioner, it comes into play when two or more inventions are claimed in a single application but are of such a nature that a single patent may not be issued for them.23 The applicant thus is required "to divide," that is, to limit the claims to whichever invention he may elect, whereas those inventions not elected may be made the subject of separate applications which are called "divisional applications."24 What this only means is that petitioner’s methyl 5 propylthio-2-benzimidazole carbamate is an invention distinct from the other inventions claimed in the original application divided out, Albendazole being one of those other inventions. Otherwise, methyl 5 propylthio-2-benzimidazole carbamate would not have been the subject of a divisional application if a single patent could 109 | P a g e

have been issued Albendazole.1âwphi1

for

it

as

well

as

The foregoing discussions notwithstanding, this Court does not sustain the award of actual damages and attorney’s fees in favor of private respondent. The claimed actual damages of P330,000.00 representing lost profits or revenues incurred by private respondent as a result of the issuance of the injunction against it, computed at the rate of 30% of its alleged P100,000.00 monthly gross sales for eleven months, were supported by the testimonies of private respondent’s President25 and Executive Vice-President that the average monthly sale of Impregon was P100,000.00 and that sales plummeted to zero after the issuance of the injunction.26 While indemnification for actual or compensatory damages covers not only the loss suffered (damnum emergens) but also profits which the obligee failed to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the actual amount of damages with a reasonable degree of certainty based on competent proof and on the best evidence obtainable by the injured party.27 The testimonies of private respondent’s officers are not the competent proof or best evidence obtainable to establish its right to actual or compensatory damages for such damages also require presentation of documentary evidence to substantiate a claim therefor.28 In the same vein, this Court does not sustain the grant by the appellate court of attorney’s fees to private respondent anchored on Article 2208 (2) of the Civil Code, private respondent having been allegedly forced to litigate as a result of petitioner’s suit. Even if a claimant is compelled to litigate with third persons or to incur expenses to protect its rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.29 There exists no evidence on record indicating that petitioner was moved by malice in suing private respondent. 110 | P a g e

This Court, however, grants private respondent temperate or moderate damages in the amount of P20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary loss the amount of which cannot, from the nature of the case, be established with certainty.30 WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. The award of actual or compensatory damages and attorney’s fees to private respondent, Tryco Pharma Corporation, is DELETED; instead, it is hereby awarded the amount of P20,000.00 as temperate or moderate damages.

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Section 76. Civil Action for Infringement. 76.1. The making, using, offering for sale, selling, or importing a patented product or a product obtained directly or indirectly from a patented process, or the use of a patented process without the authorization of the patentee constitutes patent infringement. 76.2. Any patentee, or anyone possessing any right, title or interest in and to the patented invention, whose rights have been infringed, may bring a civil action before a court of competent jurisdiction, to recover from the infringer such damages sustained thereby, plus attorney's fees and other expenses of litigation, and to secure an injunction for the protection of his rights. 76.3. If the damages are inadequate or cannot be readily ascertained with reasonable certainty, the court may award by way of damages a sum equivalent to reasonable royalty. 76.4. The court may, according to the circumstances of the case, award damages in a sum above the amount found as actual damages sustained: Provided, That the award does not exceed three (3) times the amount of such actual damages. 76.5. The court may, in its discretion, order that the infringing goods, materials and implements predominantly used in the infringement be disposed of outside the channels of commerce or destroyed, without compensation. 76.6. Anyone who actively induces the infringement of a patent or provides the infringer with a component of a patented product or of a product produced because of a patented process knowing it to be especially adopted for infringing the patented invention and not suitable for substantial non-infringing use shall be liable as a contributory infringer and shall be jointly and severally liable with the infringer. (Sec. 42, R.A. No. 165a) Section 77. Infringement Action by a Foreign National. - Any foreign national or juridical entity who meets the requirements of Section 3 112 | P a g e

and not engaged in business in the Philippines, to which a patent has been granted or assigned under this Act, may bring an action for infringement of patent, whether or not it is licensed to do business in the Philippines under existing law. (Sec. 41-A, R.A. No. 165a) Section 78. Process Patents; Burden of Proof . If the subject matter of a patent is a process for obtaining a product, any identical product shall be presumed to have been obtained through the use of the patented process if the product is new or there is substantial likelihood that the identical product was made by the process and the owner of the patent has been unable despite reasonable efforts, to determine the process actually used. In ordering the defendant to prove that the process to obtain the identical product is different from the patented process, the court shall adopt measures to protect, as far as practicable, his manufacturing and business secrets. (n) Section 79. Limitation of Action for Damages. No damages can be recovered for acts of infringement committed more than four (4) years before the institution of the action for infringement. (Sec. 43, R.A. No. 165) Section 80. Damages, Requirement of Notice. Damages cannot be recovered for acts of infringement committed before the infringer had known, or had reasonable grounds to know of the patent. It is presumed that the infringer had known of the patent if on the patented product, or on the container or package in which the article is supplied to the public, or on the advertising material relating to the patented product or process, are placed the words "Philippine Patent" with the number of the patent. (Sec. 44, R.A. No. 165a) Section 81. Defenses in Action for Infringement. - In an action for infringement, the defendant, in addition to other defenses available to him, may show the invalidity of the patent, or any claim thereof, on any of the grounds on which a

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petition of cancellation can be brought under Section 61 hereof. (Sec. 45, R.A. No. 165) Section 82. Patent Found Invalid May be Cancelled. - In an action for infringement, if the court shall find the patent or any claim to be invalid, it shall cancel the same, and the Director of Legal Affairs upon receipt of the final judgment of cancellation by the court, shall record that fact in the register of the Office and shall publish a notice to that effect in the IPO Gazette. (Sec. 46, R.A. No. 165a) Section 83. Assessor in Infringement Action. 83.1. Two (2) or more assessors may be appointed by the court. The assessors shall be possessed of the necessary scientific and technical knowledge required by the subject matter in litigation. Either party may challenge the fitness of any assessor proposed for appointment. 83.2. Each assessor shall receive a compensation in an amount to be fixed by the court and advanced by the complaining party, which shall be awarded as part of his costs should he prevail in the action. (Sec. 47, R.A. No. 165a) Section 84. Criminal Action for Repetition of Infringement. - If infringement is repeated by the infringer or by anyone in connivance with him after finality of the judgment of the court against the infringer, the offenders shall, without prejudice to the institution of a civil action for damages, be criminally liable therefor and, upon conviction, shall suffer imprisonment for the period of not less than six (6) months but not more than three (3) years and/or a fine of not less than One hundred thousand pesos (P100,000) but not more than Three hundred thousand pesos (P300,000), at the discretion of the court. The criminal action herein provided shall prescribe in three (3) years from date of the commission of the crime. (Sec. 48, R.A. No. 165a)

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CHAPTER IX VOLUNTARY LICENSING Section 85. Voluntary License Contract. - To encourage the transfer and dissemination of technology, prevent or control practices and conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition and trade, all technology transfer arrangements shall comply with the provisions of this Chapter. (n) Section 86. Jurisdiction to Settle Disputes on Royalties. - The Director of the Documentation, Information and Technology Transfer Bureau shall exercise quasi-judicial jurisdiction in the settlement of disputes between parties to a technology transfer arrangement arising from technology transfer payments, including the fixing of appropriate amount or rate of royalty. (n) Section 87. Prohibited Clauses. - Except in cases under Section 91, the following provisions shall be deemed prima facie to have an adverse effect on competition and trade: 87.1. Those which impose upon the licensee the obligation to acquire from a specific source capital goods, intermediate products, raw materials, and other technologies, or of permanently employing personnel indicated by the licensor; 87.2. Those pursuant to which the licensor reserves the right to fix the sale or resale prices of the products manufactured on the basis of the license; 87.3. Those that contain restrictions regarding the volume and structure of production; 87.4. Those that prohibit the use of competitive technologies in a non-exclusive technology transfer agreement; 87.5. Those that establish a full or partial purchase option in favor of the licensor; 115 | P a g e

87.6. Those that obligate the licensee to transfer for free to the licensor the inventions or improvements that may be obtained through the use of the licensed technology; 87.7. Those that require payment of royalties to the owners of patents for patents which are not used; 87.8. Those that prohibit the licensee to export the licensed product unless justified for the protection of the legitimate interest of the licensor such as exports to countries where exclusive licenses to manufacture and/or distribute the licensed product(s) have already been granted; 87.9. Those which restrict the use of the technology supplied after the expiration of the technology transfer arrangement, except in cases of early termination of the technology transfer arrangement due to reason(s) attributable to the licensee; 87.10. Those which require payments for patents and other industrial property rights after their expiration, termination arrangement; 87.11. Those which require that the technology recipient shall not contest the validity of any of the patents of the technology supplier; 87.12. Those which restrict the research and development activities of the licensee designed to absorb and adapt the transferred technology to local conditions or to initiate research and development programs in connection with new products, processes or equipment; 87.13. Those which prevent the licensee from adapting the imported technology to local conditions, or introducing innovation to it, as long as it does not impair the quality standards prescribed by the licensor; 87.14. Those which exempt the licensor for liability for non-fulfilment of his responsibilities under the technology transfer arrangement and/or liability arising from third 116 | P a g e

party suits brought about by the use of the licensed product or the licensed technology; and 87.15. Other clauses with (Sec. 33-C (2), R.A 165a)

equivalent

effects.

Section 88. Mandatory Provisions. The following provisions shall be included in voluntary license contracts: 88.1. That the laws of the Philippines shall govern the interpretation of the same and in the event of litigation, the venue shall be the proper court in the place where the licensee has its principal office; 88.2. Continued access to improvements in techniques and processes related to the technology shall be made available during the period of the technology transfer arrangement; 88.3. In the event the technology transfer arrangement shall provide for arbitration, the Procedure of Arbitration of the Arbitration Law of the Philippines or the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC) shall apply and the venue of arbitration shall be the Philippines or any neutral country; and 88.4. The Philippine taxes on all payments relating to the technology transfer arrangement shall be borne by the licensor. (n)

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CHAPTER X COMPULSORY LICENSING Section 93. Grounds for Compulsory Licensing. The Director of Legal Affairs may grant a license to exploit a patented invention, even without the agreement of the patent owner, in favor of any person who has shown his capability to exploit the invention, under any of the following circumstances: 93.1. National emergency or other circumstances of extreme urgency; 93.2. Where the public interest, in particular, national security, nutrition, health or the development of other vital sectors of the national economy as determined by the appropriate agency of the Government, so requires; or 93.3. Where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anti-competitive; or 93.4. In case of public non-commercial use of the patent by the patentee, without satisfactory reason; 93.5. If the patented invention is not being worked in the Philippines on a commercial scale, although capable of being worked, without satisfactory reason: Provided, That the importation of the patented article shall constitute working or using the patent. (Secs. 34, 34-A, 34-B, R.A. No. 165a) Section 94. Period for Filing a Petition for a Compulsory License. - 94.1. A compulsory license may not be applied for on the ground stated in Subsection 93.5 before the expiration of a period of four (4) years from the date of filing of the application or three (3) years from the date of the patent whichever period expires last. 94.2. A compulsory license which is applied for on any of the grounds stated in Subsections 118 | P a g e

93.2, 93.3, and 93.4 and Section 97 may be applied for at any time after the grant of the patent. (Sec. 34(1), R.A. No. 165) Section 95. Requirement to Obtain a License on Reasonable Commercial Terms. - 95.1. The license will only be granted after the petitioner has made efforts to obtain authorization from the patent owner on reasonable commercial terms and conditions but such efforts have not been successful within a reasonable period of time. 95.2. The requirement under Subsection shall not apply in the following cases:

95.1

(a) Where the petition for compulsory license seeks to remedy a practice determined after judicial or administrative process to be anti-competitive; (b) In situations of national emergency or other circumstances of extreme urgency; (c) In cases of public non-commercial use. 95.3. In situations of other circumstances of right holder shall be reasonably practicable.

national emergency or extreme urgency, the notified as soon as

95.4. In the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly. (n) Section 96. Compulsory Licensing of Patents Involving Semi-Conductor Technology. - In the case of compulsory licensing of patents involving semi-conductor technology, the license may only be granted in case of public noncommercial use or to remedy a practice determined after judicial or administrative process to be anti-competitive. (n) Section 97. Compulsory License Based on Interdependence of Patents. - If the invention protected by a patent, hereafter referred to as 119 | P a g e

the "second patent," within the country cannot be worked without infringing another patent, hereafter referred to as the "first patent," granted on a prior application or benefiting from an earlier priority, a compulsory license may be granted to the owner of the second patent to the extent necessary for the working of his invention, subject to the following conditions: 97.1. The invention claimed in the second patent involves an important technical advance of considerable economic significance in relation to the first patent; 97.2. The owner of the first patent shall be entitled to a cross-license on reasonable terms to use the invention claimed in the second patent; 97.3. The use authorized in respect of the first patent shall be non-assignable except with the assignment of the second patent; and 97.4. The terms and conditions of Sections 95, 96 and 98 to 100 of this Act. (Sec. 34-C, R.A. No. 165a) Section 98. Form and Contents of Petition. - The petition for compulsory licensing must be in writing, verified by the petitioner and accompanied by payment of the required filing fee. It shall contain the name and address of the petitioner as well as those of the respondents, the number and date of issue of the patent in connection with which compulsory license is sought, the name of the patentee, the title of the invention, the statutory grounds upon which compulsory license is sought, the ultimate facts constituting the petitioner's cause of action, and the relief prayed for. (Sec. 34-D, R.A. No. 165) Section 99. Notice of Hearing. - 99.1. Upon filing of a petition, the Director of Legal Affairs shall forthwith serve notice of the filing thereof upon the patent owner and all persons having grants or licenses, or any other right, title or interest in and to the patent and invention covered thereby as appears of 120 | P a g e

record in the Office, and of notice of the date of hearing thereon, on such persons and petitioner. The resident agent or representative appointed in accordance with Section 33 hereof, shall be bound to accept service of notice of the filing of the petition within the meaning of this Section. 99.2. In every case, the notice shall be published by the said Office in a newspaper of general circulation, once a week for three (3) consecutive weeks and once in the IPO Gazette at applicant's expense. (Sec. 34-E, R.A. No. 165) Section 100. Terms and Conditions of Compulsory License. - The basic terms and conditions including the rate of royalties of a compulsory license shall be fixed by the Director of Legal Affairs subject to the following conditions: 100.1. The scope and duration of such license shall be limited to the purpose for which it was authorized; 100.2. The license shall be non-exclusive; 100.3. The license shall be non-assignable, except with that part of the enterprise or business with which the invention is being exploited; 100.4. Use of the subject matter of the license shall be devoted predominantly for the supply of the Philippine market: Provided, That this limitation shall not apply where the grant of the license is based on the ground that the patentee's manner of exploiting the patent is determined by judicial or administrative process, to be anti-competitive. 100.5. The license may be terminated upon proper showing that circumstances which led to its grant have ceased to exist and are unlikely to recur: Provided, That adequate protection shall be afforded to the legitimate interest of the licensee; and 100.6. The patentee shall be paid remuneration taking into account the 121 | P a g e

adequate economic

value of the grant or authorization, except that in cases where the license was granted to remedy a practice which was determined after judicial or administrative process, to be anticompetitive, the need to correct the anticompetitive practice may be taken into account in fixing the amount of remuneration. (Sec. 35B, R.A. No. 165a) Section 101. Amendment, Cancellation, Surrender of Compulsory License. - 101.1. Upon the request of the patentee or the licensee, the Director of Legal Affairs may amend the decision granting the compulsory license, upon proper showing of new facts or circumstances justifying such amendment. 101.2. Upon the request of the patentee, the said Director may cancel the compulsory license: (a) If the ground for the grant of the compulsory license no longer exists and is unlikely to recur; (b) If the licensee has neither begun to supply the domestic market nor made serious preparation therefor; (c) If the licensee has not complied with the prescribed terms of the license; 101.3. The licensee may surrender the license by a written declaration submitted to the Office. 101.4. The said Director shall cause the amendment, surrender, or cancellation in the Register, notify the patentee, and/or the licensee, and cause notice thereof to be published in the IPO Gazette. (Sec. 35-D, R.A. No. 165a) Section 102. Licensee's Exemption from Liability. - Any person who works a patented product, substance and/or process under a license granted under this Chapter, shall be free from any liability for infringement: Provided however, That in the case of voluntary licensing, no collusion with the licensor is proven. This is without prejudice to the right 122 | P a g e

of the rightful owner of the patent to recover from the licensor whatever he may have received as royalties under the license. (Sec. 35-E, R.A. No. 165a)

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