104.

Western Equipment v Reyes

Dec. 2, 1927
Johns, J.
Short Version:
Herman et. al. incorporated under the name Western Electric Company,
inc., which is the name of an already-existing NY corporation. the NY
corporation sued for unfair competition.
And won. Despite being unlicensed to do business in the Philippines, The
sole purpose of the action is to protect its reputation, its corporate name, its
goodwill which it has established. The rights to use the corporate and trade
name is a property right, a right in rem, which it may assert and protect
against all the world, even in jurisdictions where it does not transact
business, just the same as it may protect its tangible property, real or
personal, against trespass or conversion
Facts:
Western Equipment and Supply Company, a Nevada Corporation licensed to
do business in the Philippines, filed a case against Henry Herman, Peter
OBrien, Manuel Diaz, Felix Mapoy and Artemio Zamora for unfair
competition, done by incorporating under the name Western Electric
Company, Inc..
Western Electric Company, Inc. is a New York corporation which
manufactures electrical and telephone apparatuses and supplies. Western
Equipment and Supply Company imports this equipment. Such equipment,
and in turn the trademark of Western Electric Company has acquired high
trade reputation throughout the world.
Despite this, Herman et. al. incorporated under the name Western Electric
Company Inc. Philippine Telephone and Telegraph Co. Filed a protest to
the registration of the proposed corporation.
Fidel A. Reyes, Director of the Bureau of Commerce and Industry, overruled
the protest an issued a certificate of incorporation in favor of Western
Electric Company, Inc, which to avoid confusion, I will refer to as Herman.
RTC ruled in favor of the actual Western Equipment. Hence this appeal.

Issues:
1. WON a foreign corporation which has never done business in the
Philippines, and which is unlicensed and unregistered therein, can
maintain an action to restrain residents and inhabitants of the
Philippine Islands from organizing a corporation therein bearing the
name of such foreign corporation. (Yes)
2. WON a foreign corporation has a legal right to restrain the Director of
Bureau of Commerce and Industry from exercising his discretion.
(Yes)
Ratio:
1. The sole purpose of the action is to protect its reputation, its
corporate name, its goodwill which it has established. The rights to
use the corporate and trade name is a property right, a right in rem,
which it may assert and protect against all the world, even in
jurisdictions where it does not transact business, just the same as it
may protect its tangible property, real or personal, against trespass or
conversion. Since it is the trade and not the mark that is to be
protected, a trademark acknowledges no territorial boundaries, but
extends to every market where the traders goods have become
known and identified by the use of the mark. Diversion of trade is
really the fundamental thing here, and if diversion of trade be
accomplished by any means which are unfair, the aggrieved party is
entitled to relief.
2. The Directors discretion is subject to review. If it was correct, it will
be upheld. If it is incorrect, it will be reversed by the court. It is
apparent here that the purpose of Herman in incorporating under the
name Western Electric Company, Inc, was to unfairly and unjustly
compete with the real Western Electric Company, Inc. in articles
which are manufactured and bear the name of the latter.
Herman et al are actually asking the Government to permit
them to pirate the name of the Western Electric Company Inc by
incorporating thereunder,s o they may deceive the people of the
Philippine Islands into thinking that the goods they propose to
sell are goods manufactured by the real Western Electric. It
would be a gross prostitution of the powers of government to
utilize those powers in such a way as to authorize such a fraud
upon the people governed.

Appeal denied. Judgment affirmed.

Gabe.