Republic of the Philippines manufactured by the plaintiff Western Electric Company, Inc.
, its offices in the City of Manila
SUPREME COURT
Manila
EN BANC
G.R. No. L-27897 December 2, 1927
WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC COMPANY, INC., W. Z.
SMITH and FELIX C. REYES, plaintiffs-appellees,  about three fourths of such equipment in use throughout the world are of the manufacture of
vs.
FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY HERMAN,
PETER O'BRIEN, MANUEL B. DIAZ, FELIPE MAPOY and ARTEMIO ZAMORA, defendants-
appellants.
J. W. Ferrier for appellants.
DeWitt, Perkins and Bradly for appellees.
STATEMENT
October 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following complaint against
the defendants:
Now come the plaintiffs in the above entitled case, by the undersigned their attorneys, and to
this Honorable Court respectfully show:
I. That the Western Equipment and Supply Company is a foreign corporation organized under
the laws of the State of Nevada, United States of America; that the Western Electric
Company, Inc., is likewise a foreign corporation organized under the laws of the State of New
York, United States of America; and that the plaintiffs W. Z. Smith and Felix C. Reyes are
both of lawful age and residents of the City of Manila, Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the
Bureau of Commerce and Industry and as such Director is charged with the duty of issuing
and denying the issuance of certificates of incorporation to persons filing articles of
incorporation with the Bureau of Commerce and Industry.
III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and
Artemio Zamora are all of lawful age and are residents of the City of Manila, Philippines
Islands.
IV. That on or about May 4, 1925, the plaintiff the Western Equipment and Supply Company
applied to the defendant Director of the Bureau of Commerce and Industry for the issuance of
a license to engage in business in the Philippine Islands and, accordingly, on May 20, 1926,
a provisional license was by said defendant issued in its favor, which license was made
permanent on August 23, 1926.
V. That from and since the issuance of said provisional license of May 20,. 1926, said plaintiff
Western Equipment and Supply Company has been and still is engaged in importing and
selling in the Philippine Islands the electrical and telephone apparatus and supplies
being at No. 600 Rizal Avenue, in the charge and management of the plaintiff Felix C. Reyes,
its resident agent in the Philippine Islands.
VI. That the electric and telephone apparatus and supplies manufactured by the plaintiff
Western Electric Company, Inc., have been sold in foreign and interstate commerce and
have become well and thoroughly known to the trade in all countries of the world for the past
fifty years; that at present time the greater part of all telephone equipment used in Manila and
elsewhere in the Philippine Islands was manufactured by the said Western Electric Company,
Inc., and sold by it in commerce between the United States and the Philippine Islands; that
said "Western Electric Company, Inc.," and bear its corporate name; and that these facts are
well known to the defendant Henry Herman who for many years up to May 20, 1926, has
himself been buying said products from the plaintiff Western Electric Company, Inc., and
selling them in the Philippine Islands.
VII. That the name `Western Electric Company, Inc., has been registered as a trade-mark
under the provisions of the Act of Congress of February 20, 1905, in the office of the
Commissioner of Patents, at Washington, District of Columbia, and said trade-mark remains
in force to this date.
VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz,
Felipe Mapoy and Artemio Zamora filed articles of incorporation with the defendant Director
of the Bureau of Commerce and Industry with the intention of organizing a domestic
corporation to be known as the "Western Electric Company, Inc.," for the purpose principally
of manufacturing, buying, selling and generally dealing in electrical and telephone apparatus
and supplies.
IX. That the purpose of said defendant in attempting to incorporate under the corporate name
of plaintiff Western Electric Company, Inc., is to profit and trade upon the plaintiff's business
and reputation, by misleading and deceiving the public into purchasing the goods
manufactured or sold by them as those of plaintiff Western Electric Company, Inc., in
violation of the provisions of Act No. 666 of the Philippine Commission, particularly section 4
thereof.
X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board of Directors of
the Western Electric Company, Inc., to take all necessary steps for the issuance of a license
to said company to engage in business in the Philippine Islands and to accept service of
summons and process in all legal proceedings against said company, and on October 21,
1926, said plaintiff W. Z. Smith filed a written application for the issuance of such license with
the defendant Director of Bureau of Commerce and Industry, which application, however, has
not yet been acted upon by said defendant.
XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the defendant
Director of the Bureau of Commerce and Industry his protest, and opposed said attempted
incorporation, by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe
Mapoy and Artemio Zamora, of the `Western Electric Company, Inc.,' as a domestic
corporation, upon the ground among others, that the corporate name by which said
defendants desire to be known, being identical with that of the plaintiff Western Equipment
and Supply Company, will deceive and mislead the public purchasing electrical and
telephone apparatus and supplies. A copy of said protest is hereunto annexed, and hereby
made a part hereof, marked Exhibit A.
 XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and Industry has
announced to these plaintiffs his intention to overrule the protest of plaintiffs, and to issue to
the other defendants a certificate of incorporation constituting said defendants a body politic
and corporate under the name "Western Electric Company, Inc.," unless restrained by this
Honorable Court.
XIII. That the issuance of a certificate of incorporation in favor of said defendants under said
name of "Western Electric Company, Inc.," would, under the circumstances hereinbefore
stated, constitute a gross abuse of the discretionary powers conferred by law upon the
defendant Director of the Bureau of Commerce and Industry.
XIV. That the issuance of said certificate of incorporation would, if carried out, be in violation
of plaintiff's rights and would cause them irreparable injury which could not be compensated
in damages, and from which petitioner would have no appeal or any plain, speedy and
adequate remedy at law, other than that herein prayed for.
They prayed for a temporary injunction, pending the final decision of the court when it should be made
permanent, restraining the issuance of the certificate of incorporation in favor of the defendants under
the name of Western Electric Company, Inc., or the use of that name for any purpose in the exploitation
and sale of electric apparatus and supplies. The preliminary writ was issued.
For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, admits
the allegations of paragraphs 1, 2, 3 and 4 of the complaint, and as to paragraphs 5, 6 and 7, he
alleges that he has no information upon which to form a belief, and therefore denies them. He admits
the allegations of paragraph 8, and denies paragraph 9. He denies the first part of paragraph 10, but
admits that an application for a license to do business was filed by the Western Electric Company, Inc.,
as alleged. He admits paragraphs 11 and 12, and denies paragraphs 13 and 14, and further alleges
that the present action is prematurely brought, in that it is an attempt to coerce his discretion, and that
the mere registration of the articles of incorporation of the locally organized Western Electric Company,
Inc., cannot in any way injure the plaintiffs, and prays that the complaint be dismissed.
For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the allegations of
paragraphs 1, 2, 3, 4 and 5 of the complaint, and deny paragraph 7, but allege that on October 15,
1926, the articles of incorporation in question were presented to the Director of the Bureau of
Commerce and Industry for registration. They deny paragraphs 9 and 10, except as to the filing of the
application. They admit the allegations made in paragraph 11, but alleged that W. Z. Smith was without
any right or authority. Admit the allegations of paragraph 12, but deny the allegations of paragraphs 13
and 14, and allege that the Western Electric Company, Inc., has never transacted business in the
Philippine Islands; that its foreign business has been turned over to the International Standard Electric
Corporation; that the action is prematurely brought; and that the registration of the articles of
incorporation in question cannot in any way injure plaintiffs.
Wherefore, such defendants pray that the preliminary injunction be dissolved, and plaintiffs' cause of
action be dismissed, with costs.
The case was tried and submitted upon the following stipulated facts:
Now come the parties plaintiff and defendants in the above entitled cause, by their respective
undersigned attorneys, and for the purpose of this action, agree that the following facts are
true:
I. That the Western Equipment and Supply Company is a foreign corporation, organized
under the laws of the State of Nevada, United States of America; that the Western Electric
Company, Inc., is likewise a foreign corporation organized under the laws of the State of New
York, United States of America; and that the plaintiff W. Z. Smith and Felix C. Reyes, are
both of lawful age and residents of the City of Manila, Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the
Bureau of Commerce and Industry and as such Director is charge with the duty of issuing
and/or denying the issuance of certificates of incorporation to persons filing articles of
incorporation with the Bureau of Commerce and Industry.
III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and
Artemio Zamora are all of lawful age and all residents of the City of Manila, Philippine Islands.
IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and Supply Company,
through its duly authorized agent, the plaintiff, Felix C. Reyes, applied to the defendant
Director of the Bureau of Commerce and Industry for the issuance of a license to engage in
business in the Philippine Islands and on May 20, 1926, said defendant issued in favor of
said plaintiff a provisional license for that purpose which was permanent on August 23, 1926.
V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to engage in
business in the Philippine Islands, and has never engaged in business therein.
VI. That from and since the issuance of said provisional license of May 20, 1926, to the
plaintiff, Western Equipment and Supply Company, said plaintiff has been and still is
engaged in importing and selling in the Philippine Islands electrical and telephone apparatus
and supplies manufactured by the plaintiff Western Electric Company, Inc. (as well as those
manufactured by other factories), said Western Equipment and Supply Company's offices in
the City of Manila being at No. 600 Rizal Avenue, and at the time of the filing of the complaint
herein was under the charge and management of the plaintiff, Felix C. Reyes, its then
resident agent in the Philippine Islands.
VII. That the electrical and telephone apparatus and supplies manufactured by the plaintiff,
Western Electric Company, Inc., have been sold in foreign and interstate commerce for the
past fifty years, and have acquired high trade reputation throughout the world; that at the
present time the greater part of all telephone equipment used in Manila, and elsewhere in the
Philippine Islands, was manufactured by the said plaintiff, Western Electric Company, Inc.,
and sold by it for exportation to the Philippine Islands; that such equipment, manufactured by
the said Western Electric Company, Inc., and bearing its trade-mark "Western Electric" or its
corporate name is generally sold and used throughout the world; that a Philippine
Corporation known as the `Electric Supply Company, Inc.,' has been importing the
manufactures of the plaintiff, Western Electric Company, Inc., into the Philippine Islands for
the purpose of selling the same therein, and that the defendant Henry Herman, is the
President and General Manager of said corporation.
VIII. That the words `Western Electric' have been registered by the plaintiff, Electric
Company, Inc., as a trade-mark under the provisions of the Act of Congress of February 20,
1905, in the office of the Commissioner of the Patents at Washington, District of Columbia,
and said trade-mark remains in force as the property of said plaintiff to this date.
IX. That the plaintiff, Western Electric Company, Inc., is advertising its manufacturers in its
own name by means of advertising its manufactures in its own name by means of
advertisements inserted in periodicals which circulate generally throughout the English and To which were attached Exhibits A, B, C and D.
Spanish speaking portions of the world, and has never abandoned its corporate name or
trade-mark, but, on the contrary, all of its output bears said corporate name and trade-mark,
The lower court rendered judgment for the plaintiffs as prayed for in their complaint, and made the
either directly upon the manufactured article or upon its container, including that sold and
temporary injunction permanent, from which the defendants appeal and assign the following errors:
used in the Philippine Islands.

The lower court erred:

X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz,
Felipe Mapoy and Artemio Zamora signed and filed articles of incorporation with the
defendant, Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, with the (1) When it granted the writ of preliminary injunction (pages 9 and 10, record; 12 to 14, B. of
intention of organizing a domestic corporation under the Philippine Corporation Law to be E.).
known as the "Western Electric Company, Inc.," for the purpose, among other things or
manufacturing, buying, selling and dealing generally in electrical and telephone apparatus
(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a right to bring
and supplies; that said defendants Peter O'Brien, Felipe Mapoy and Artemio Zamora are
the present suit in courts of the Philippine Islands, wherein it is unregistered and unlicensed,
employees of the said Electrical Supply Company, of which said defendant, Henry Herman, is
as was done in the decision upon the petition for a preliminary injunction (pages 97 to 115
and has been, during the period covered by this stipulation, the president and principal
record), and in repeating such holding in the final decision herein (pages 51 and 52, B. of E.),
stockholder; and that they, together with the said defendant Herman, signed said articles of
as well as in basing such holding upon the decision of this Honorable Supreme Court in
incorporation for the incorporation of a domestic company to be known and the "Western
Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70.)
Electric Company, Inc.," with full knowledge of the existence of the plaintiff Western Electric
Company, Inc., of its corporate name, of its trade-mark, "Western Electric," and of the fact
that the manufactures of said plaintiff bearing its trade-mark or corporate name are in general (3) When it found that the plaintiff, the Western Electric Co., Inc., has any such standing in
use in the Philippine Islands and in the United States. the Philippine Islands or before the courts thereof as to authorize it to maintain an action
therein under the present case.
XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the Board of
Directors of the plaintiff, Western Electric Company, Inc., to take all necessary steps for the (4) When it found that the other plaintiffs herein have any rights in the present controversy or
issuance of a license to said company to engage in business in the Philippine Islands, and to any legal standing therein.lawphi1.net
accept service of summons and process in all legal proceedings against said company, and
on October 21, 1926, said plaintiff, W. Z. Smith, filed a written application for the issuance of
such license with the defendant Director of the Bureau of Commerce and Industry, which (5) In ordering the issuance of a permanent injunction restraining the defendant Fidel A.
application, however, has not yet been acted upon by said defendant. Reyes, as Director of the Bureau of Commerce and Industry, from issuing a certificate of
incorporation in favor of the other defendants under the name of "Western Electric Co., Inc.,"
or any similar name, and restraining the other defendants from using the name "Western
XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its general Electric Co., Inc.," or any like name, in the manufacture of sale of electrical and telephone
manager, the plaintiff W. Z. Smith. lodged with the defendant Director of the registration of apparatus and supplies or as a business name or style in the Philippine Islands.
the proposed corporation by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz,
Felipe Mapoy and Artemio Zamora, to be known as the Western Electric Company, Inc., as a
domestic corporation under the Philippine Corporation Law. A copy of said protest, marked (6) In finding that the purpose of the defendants, other than the defendant Fidel A. Reyes, in
Exhibit A, hereunto attached and is hereby made a part of this stipulation. seeking to secure the registration of a local corporation under the name of "Western Electric
Co., Inc.," was "certainly not an innocent one," thereby imputing to said defendants a
fraudulent and wrongful intent.
XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and Industry,
announced his intention of overrule said protest and will, unless judicially restrained
therefrom, issue to the other defendants herein a certificate of incorporation, constituting said (7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.
defendants a Philippine body politic and corporate under the name of "Western Electric
Company, Inc." (8) In overruling and denying defendants' motion for a new trial. 

XIV. That the defendant, Henry Herman, acting in behalf of said corporation, Electrical Supply JOHNS, J.:
Company, Inc., has written letters to Messrs. Fisher, DeWitt, Perkins & Brady, acting as
attorneys for plaintiff, Western Electric Company, Inc., copies of which are hereunto annexed
and hereby made a part hereof, marked Exhibits B, C and D. The appellants say that the two questions presented are:

XV. That the defendants, while admitting the facts set out in paragraph VII and IX regarding
the business done, merchandise sold and advertisements made throughout the world by the
plaintiff Western Electric Company, Inc., insist and maintain that said allegations of fact are
immaterial and irrelevant to the issues in the present case, contending that such issued
should be determined upon the facts as they exist in the Philippine Islands alone.
Has a foreign corporation, which has never done business in the Philippine Islands, and
which is unlicensed and unregistered therein, any right to maintain an action to restrain
residents and inhabitants of the Philippine Islands from organizing a corporation therein
bearing the same name as such foreign corporation?
 Has such foreign corporation a legal right to restrain an officer of the Government of the
Philippine Islands, i. e., the Director of the Bureau of Commerce and Industry from exercising
his discretion, and from registering a corporation so organized by residents and inhabitants of
the Philippine Islands?
As to the first question, the appellees say that it should be revised, so as to read as follows:
Has a foreign corporation which has never done business in the Philippine Islands, and which
is unlicensed and unregistered therein, any right to maintain an action to restrain residents
and inhabitants of the Philippine Islands from organizing a corporation therein bearing the
same name as such foreign corporation, when said residents and inhabitants have
knowledge of the existence of such foreign corporation, having dealt with it, and sold its
manufactures, and when said foreign corporation is widely and favorably known in the
Philippine Islands through the use therein of its products bearing its corporate and trade
name, and when the purpose of the proposed domestic corporation is to deal in precisely the
same goods as those of the foreign corporation?
As to the second, the appellees say that the question as propounded by the appellants is not fully and
fairly stated, in that it overlooks and disregards paragraphs 12 and 13 of the stipulation of facts, and
that the second question should be revised to read as follows:
Has an unregistered corporation which has not transacted business in the Philippine Islands,
but which has acquired a valuable goodwill and high reputation therein, through the sale, by
importers, and the extensive use within the Islands of products bearing either its corporate
name, or trade-mark consisting of its corporate name, a legal right to restrain an officer of the
Commerce and Industry, with knowledge of those facts, from issuing a certificate of
incorporation to residents of the Philippine Islands who attempt to organize a corporation for
the purpose of pirating the corporate name of such foreign corporation, of engaging in the
same business as such foreign corporation, and of defrauding the public into thinking that its
goods are those of such foreign corporation, and of defrauding such foreign corporation and
its local dealers of their legitimate trade?
We agree with the revisions of both questions as made by the appellees, for the reason that they are
more in accord with the stipulated facts. First, it is stipulated that the Western Electric Company, Inc.,
"has never engaged in business in the Philippine Islands."
In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this court held:
The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative
defense. Thereafter, it must appear from the evidence, first, that the plaintiff is a foreign
corporation, second, that it is doing business in the Philippines, and third, that it has not
obtained the proper license as provided by the statute.
If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been doing business in
the Philippine Islands without first obtaining a license, another and a very different question would be
presented. That company is not here seeking to enforce any legal or contract rights arising from, or
growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the
action:
"Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name
or goodwill have, through the natural development of its trade, established themselves." And it
contends that its rights to the use of its corporate and trade name:
Is a property right, a right in rem, which may assert and protect against all the world, in any of the
courts of 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. Citing sec. 10, Nims
on Unfair Competition and Trade-Marks and cases cited; secs. 21-22, Hopkins on Trade-Marks, Trade
Names and Unfair Competition and cases cited." That point is sustained by the authorities, and is well
stated in Hanover Star Milling Co. vs. Allen and Wheeler Co. (208 Fed., 513), in which they syllabus
says:
Since it is the trade and not the mark that is to be protect, a trade-mark acknowledges no
territorial boundaries of municipalities or states or nations, but extends to every market where
the trader's goods have become known and identified by the use of the mark.
In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:
In order that competition in business should be unfair in the sense necessary to justify the
granting of an injunction to restrain such competition it must appear that there has been, or is
likely to be, a diversion of trade from the business of the complainant to that of the
wrongdoer, or methods generally recognized as unfair; . . . In most, if not all, of the cases in
which relief has hitherto been granted against unfair competition the means and methods
adopted by the wrongdoer in order to divert the coveted trade from his rival have been such
as were calculated to deceive and mislead the public into thinking that the goods or business
of the wrongdoer are the goods or business of the rival. Diversion of trade is really the
fundamental thing here, and if diversion of trade be accomplished by any means which
according to accepted legal canons are unfair, the aggrieved party is entitled to relief.
In Shaver vs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,. 881), it is said:
The contention of counsel for the appellants here is a confusion of the bases of two classes
of suits, — those for infringements of trade-marks, and those for unfair competition in
trade. . . . In the former, title to the trade-marks is indispensable to a good cause of action; in
the latter, no proprietary interest in the words, names, or means by which the fraud is
perpetrated is requisite to maintain a suit to enjoin it. It is sufficient that the complainant is
entitled to the custom — the goodwill — of a business, and that this goodwill is injured, or is
about to be injured, by the palming off of the goods of another as his.
The remaining question as to the jurisdiction of the courts over the defendant Reyes, as Director of the
Bureau of Commerce and Industry, has been adversely decided to his contention in the case
of Asuncion vs. De Yriarte (28 Phil., 67), in which, among other things, it is said:
If, therefore, the defendant erred in determining the question presented when the articles
were offered for registration, then that error will be corrected by this court in this action and
he will be compelled to register the articles as offered. If, however, he did not commit an
error, but decided that question correctly, then, of course, his action will be affirmed to the
extent that we will deny the relief prayed for.
It is very apparent that the purpose and intent of Herman and his associates in seeking to incorporate
under the name of Western Electric Company, Inc., was to unfairly and unjustly compete in the
Philippine Islands with the Western Electric Company, Inc., in articles which are manufactured by, and
bear the name of, that company, all of which is prohibited by Act No. 666, and was made known to the
defendant Reyes by the letter known in the record to the defendant Reyes by the letter known in the
record as Exhibit A.
As appellees say:

These defendant, Herman and his associates, are actually asking the Government of the
Philippine Island to permit them to pirate the name of the Western Electric Company, Inc., by
incorporating thereunder, so that they may deceive the people of the Philippine Islands into
thinking that the goods they propose to sell are goods of the manufacture of the real Western
Electric Company. 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. It would
be the grossest abuse of discretion to permit these defendants to usurp the corporate mane
of the plaintiff, and to trade thereupon in these Islands, in fraud of the Philippine public and of
the true owners of the name and the goodwill incidental thereto.

The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for over fifty
years, during which time it has established a reputation all over the world including the Philippine
Islands, for the kind and quality of its manufactured articles, and it is very apparent that the whole
purpose and intent of Herman and his associates in seeking to incorporate another corporation under
the identical name of Western Electric Company, Inc., and for the same identical purpose as that of the
plaintiff, is to trespass upon and profit by its good name and business reputation. The very fact that
Herman and his associates have sought the use of that particular name for that identical purpose is
conclusive evidence of the fraudulent intent with which it is done.

The judgment of the lower court is affirmed, with costs. So ordered.

Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand and Villa-Real, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19906               April 30, 1969
STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant,  "medicines for human beings and animals, disinfectants preservatives, tar dyestuffs and chemical
vs.
FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING AND
TRADING CO., INC., defendant-appellants.
SANCHEZ, J.:
In this, a case for trademark infringement and unfair competition, each of the principal suitors, namely,
plaintiff Sterling Products International, Inc., 1 and defendant Farbenfabriken Bayer
Aktiengesellschaft,2 seeks to exclude the other from use in the Philippines of the trademarks BAYER
and BAYER CROSS IN CIRCLE. SPI asks this Court to strike down FBA's registration of BAYER
CROSS IN CIRCLE covering industrial and agricultural products — insecticides and other chemicals,
not medicines — from the supplemental register. FBA, for its part, prays for the cancellation from the
principal register of SPI's certificates of registration of the trademarks aforesaid for medicines.
Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin, Aspirin for
Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are being used by SPI in the
Philippines only for said products — Bayer Aspirin, Cafiaspirina and Bayer Aspirin for Children. On the
containers (bottles or printed celophane strips, which, in turn, are placed in cardboard boxes) of Bayer
Aspirin, Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and BAYER CROSS
IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc. 3 distributes "Folidol" and other industrial
and agricultural chemicals. FBA's "Folidol" (in steel or fiber drums or aluminum containers) displays a
replica of SPI's trademark BAYER CROSS IN CIRCLE; on the tin cap and label of the container.
The conflict apparent, suit followed.
The trial court declared itself "in favor of the solution that favors division of the market rather than
monopoly." But to avoid confusion, it directed defendants "to add a distinctive word, or words in their
mark to indicate that their products come from Germany." The judgment below reads:
IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the Court sustains
plaintiff's right to use the Bayer trademark for its medicines, and defendants' right to use it for
chemicals, insecticides, and other products not medicines, but the Court orders defendants to add a
distinctive word or words in their mark to indicate that their products come from Germany. 4
Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint and sustains
defendants' right to use the BAYER trademark for their chemicals, insecticides, and other products not
medicines";5 and defendants, from the portions of the aforementioned decision particularly those which
dismiss the counterclaim of the defendants for the cancellation of the registrations by the plaintiff of the
trademarks Bayer and Bayer Cross and which allow the plaintiff "to continue using the Bayer
trademarks for medicines."6
And now to the facts.
The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1868, organized a
drug company bearing his name — Friedr Bayer et comp. — at Barmen, Germany. The company was
at first engaged in the manufacture and sale of chemicals. At about the year 1888 it started to
manufacture pharmaceutical preparations also. A change of name from Friedr Bayer to Farbenfabriken
vorm. Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was followed in 1912 by a change of
principal place of business from Elberfeld to Luverkusen, Germany.7 Its products came to be known
outside Germany. With the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige.
The time was ripe to register the trademarks. The record, however, does not clearly show when the
word BAYER was registered as a trademark in Germany. The BAYER CROSS IN CIRCLE trademark
was registered in Germany on January 6, 1904 — No. 65777.8 It was intended to be used on
preparations for dyes and for photographic purposes." 9 This registered trademark consists of the
BAYER CROSS encircled by the company's name Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld.
When the company was merged with other German companies in 1925 to form the I.G.
Farbenindustrie, the name of the former company was deleted from the trademark and what remained
was the present BAYER CROSS IN CIRCLE. A new registration was effected on June 17, 1929 in
Germany and for which it was issued a certificate with serial no. 404341. The trademark BAYER
CROSS IN CIRCLE was registered by FFB and its subsidiaries in other parts of the world, viz, in
Norway, England, Denmark, and Argentina in 1904; in Japan and the United States in 1908; in Spain in
1911; in Peru in 1913.
Sometime in 1895, FFB established a subsidiary in New York, United States. It was named
Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the United States and
Canada. It was this subsidiary that registered the trademarks BAYER and BAYER CROSS IN CIRCLE
in the United States between the years 1907-1908.
Sometime in 1913, FFB organized another subsidiary — The Bayer Co., Inc. of New York. This new
subsidiary was authorized by FFB to negotiate for and acquire the trademarks, goodwill, assets and
property of Farbenfabriken of Elberfeld Co. By an agreement dated June 12, 1913 (Exh. 106) Bayer of
New York purchased for the sum of US $750,000.00 Farbenfabriken of Elberfeld Co.'s "right for the sale
in the United States and Canada of the drugs, chemicals, pharmaceuticals and any and all other
products and articles manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, good
will and other assets and property."
On April 6, 1917,10 the United States declared war on Germany. Pursuant to the provisions of the
Trading with the Enemy Act, the Alien Property Custodian classified The Bayer Co., Inc. of New York as
an enemy-controlled corporation. Hence, the Alien Property Custodian seized its assets about the early
part of 1918. Between December 1918 and January 1919, all the assets of The Bayer Co., Inc. of New
York were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US $5,310,000.00.
The Bayer Co., Inc. of New York then became a subsidiary of Sterling Drug, Inc. Winthrop Chemical
Co., Inc. was later organized as a new subsidiary of Sterling Drug, Inc. to manufacture and sell the
physicians' drugs which had been acquired" by the purchase of the Bayer Co., Inc. Winthrop's
operation was evidently hampered because 'the Germans had kept manufacturing processes secret, so
that the manufacture of physicians' drugs on a commercial scale became an almost insoluble
problem.11
Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of the world. 12
It would appear that the trademark BAYER for medicines was known in the Philippines about the close
of the 19th century. This appears on page 88 of the Revista Farmaceutica de Filipinos Año I, Numero 7,
3 de Julio de 1893. Before World War I, BAYER products entering the Philippines came from Germany.
In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm. Friedrich Bayer & Co.
and The Bayer Co., Inc. of New York, in reference to the trademarks BAYER and BAYER CROSS IN
CIRCLE as they were applied to various products.
Two agreements resolved this conflict, both executed on April 9, 1923 in London, England: one,
between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB and Bayer New
York (Exh. WWW). Under the terms of the agreement with Winthrop Chemical Co., Inc., FFB stipulated,
amongst others: (1) not to contest anymore Winthrop's right over the trademarks BAYER and BAYER
CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United States which was
understood to include the Philippines under par. 16 of said agreement; and (3) to disclose all secrets of
other processes relating to the manufacture of pharmaceuticals.
Paragraph 26 of the FFB — Bayer New York agreement reads —
26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer for sale
any goods other than hereunder or those they may market for Winthrop as hereinbefore provided and
other than Aspirin and compounds of Aspirin which New York shall continue to market for their own
account in the United States of America, Puerto Rico, the Philippines and Hawaiian Islands and the
Panama Zone.13
In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This
necessitated a new agreement incorporating Exh. 66 with modifications. Said new agreement was
signed on November 15, 1926 between I.G. Farbenindustrie and Winthrop.
On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop Chemicals Co. and
The Bayer Co., of New York, two consent decrees [Exh. 68 (No. 15-363) and Exh. 69: (No. 15-364)]
were promulgated by the U.S. District Court for Southern New York. Said consent decrees declared the
April 9 1923, cartel agreements violative of the U.S. anti-trust laws. One reason given is that the
German company, FFB (later I.G. Farbenindustrie) — FBA's predecessors — was excluded from the
U.S. pharmaceutical market. The sentence, however, contains a saving clause, thus —
The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or supplements
thereto are declared and adjudged to be unlawful under the Anti-Trust Laws of the United States, and
the defendants Bayer and Sterling, and their respective successors an subsidiaries, or any of them, be
and they are hereby enjoined and restrained from carrying out or enforcing any of the aforesaid
contracts, or any supplements, amendments or modifications thereof, or from paying to I.G. Farben, its
subsidiaries, successors, or assigns, any royalties or share of profits pursuant to said contracts with
respect to sales following the effective date of this decree.
Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.nêt
xxx     xxx     xxx
Affect in any way the rights or title of the defendant Bayer, its successors, subsidiaries or assigns, in or
to the name "Bayer" and the "Bayer Cross" mark or registrations thereof, or
Affect or diminish any right, title or interest of said defendants, their successor subsidiaries or assigns,
in or to or under any heretofore acquired and presently existing patents, patent applications, patent
licenses, trade-marks, trade-names (such as the name "Bayer" and the "Bayer Cross" mark and
registrations thereof), processes or formulae relating to the manufacturing, processing, use or sale of
aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or impair any rights or
remedies of said defendants, their successors, subsidiaries or assigns, provided by statute or
convention, and by suits for damages, injunction or other remedy with respect to any such patents,
patent applications, patent licenses or trademarks....14
Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware corporation, a
subsidiary of Sterling Drug, Inc. of New York, was issued a license to do business in the
Philippines.15 The trademarks BAYER and BAYER CROSS IN CIRCLE were then registered in the
Philippines under the old Trademark Law (Act 666) by The Bayer Co., Inc.; the BAYER CROSS IN
CIRCLE trademark on April 18, 1939 for which it was issued Certificate of Registration No. 13081; the
BAYER trademark on April 22, 1939 for which it was issued Registration Certificate No. 13089. These
trademark rights were assigned to SPI on December 30, 1942 and the assignment was recorded in the
Philippines Patent Office on March 5, 1947. With the passage of Republic Act 166 repealing the old
Trademark Law (Act 666), SPI was issued by the Philippines Patent Office on June 18, 1948 two new
certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The
registration of these trademarks was only for "Medicines".
Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In 1945, after World War
II, I.G. Farbenindustrie AG. was decartelized by the Allied High Commission. The unit known as
Farbenfabriken Bayer was transferred in 1953 to Farbenfabriken Bayer Aktiengesellschaft (FBA), one
of the defendants in this case, which was organized in 1951.
Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started selling FBA's
products especially "Folidol" a chemical insecticide which bears the BAYER CROSS IN CIRCLE
trademark.16
On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE trademark
with the Philippines Patent Office for animal and plant destroying agents. The examiner's report dated
December 17, 1959 stated that the subject mark appears to be similar to SPI's registered BAYER
trademarks as covered by Certificates of Registration Nos. 1260-S and 1262-S. He concluded that
"[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because it would cause
confusion or mistake or [to] deceive purchasers."17 This action of the Philippines Patent Office drew a
reply from FBA. In its letter dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no
question or objection to the assertion of the Examiner that the registrant's mark and that of the applicant
are similar to each other. It emphasized the fact that it was seeking registration in the Supplemental
Register. Its concluding statement runs thus:.
Being aware of the duties and obligations of a trademark user in the Philippines and the penalties
provided for in the pertinent law on tradermarks and being aware also that Supplemental Registration is
not a prima facie evidence of ownership of mark but merely a recordation of the use as in fact the mark
is actually being used by the applicant in the Philippines, it is respectfully urged that this [application] be
given due course.18
On February 25, 1960, FBA was issued a certificate of registration in the Supplemental Register, SR-
304.
We now grapple with the problems raised in the separate appeals.
1. 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 to the acquisition of the right of ownership over a
trademark. This rule is spelled out in our. Trademark Law thus:
SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how acquired. — Anyone
who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or
who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in
business, and in the service rendered, may appropriate to his, exclusive use a trademark, a trade-
name, or a service-mark not so appropriated by another, to distinguish his merchandise, business, or
service from the merchandise, business or service of others. The ownership or possession of a
trademark, trade-name, service mark, heretofore or hereafter appropriated, as in this section provided,
shall be recognized and protected in the same manner and to the same extent as are other property
rights known to the law. (As inserted by Section 1 of Republic Act 638)
It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto.
Such right grows out of their actual use."19 Adoption is not use. One may make advertisements, issue
circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For
trademark is a creation of use. The underlying reason for all these is that Purchasers have come to
understand the mark as indicating the origin of the wares.20 Flowing from this is the trader's right to
protection in the trade he has built up and the goodwill he has accumulated from use of the trademark.
Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing
right. Registration does not, however, perfect a trademark right.
The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as correctly
stated in the decision below, are those which cover medicines only. For, it was on said goods that the
BAYER trademarks were actually used by it in the Philippines. Therefore, the certificates of registration
for medicines issued by the Director of Patents upon which the protection is enjoyed are only for
medicines. Nothing in those certificates recited would include chemical or insecticides.
But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its registrations of the
BAYER marks states that "the merchandise for which the trademark is appropriated is d. — Chemicals,
Medicines and Pharmaceutical Preparations." Plaintiff's position is that such statement determines the
goods for which said marks had been registered. Validity does not attach to this proposition. First, the
statement itself admits that "the particular description of the articles comprised in said class (d) on
which the trademark is used is Medicines." 21 It is not used for chemicals.
Then, Section 11 of the Trademark Law requires that the certificate of registration state "the particular
goods . . . for which it is registered." This is controlling. Under Section 11 aforesaid, likewise to be
entered in the certificate of registration is "the date of the first use in commerce or business. SPI may
not claim "first use" of the trademarks prior to the registrations thereof on any product other than
medicines.
Besides, Section 7 of the same Trademark Act directs that upon the filing of the application and the
payment of the required fee, the "Director [of Patents] shall cause an examination of the application" —
for registration of the trademark — "to be made, and, if on such examination it shall appear that the
applicant is entitled to registration, the Director . . . shall cause the mark . . . to be published in the
Official Gazette." This examination, it would seem to us, is necessary in order that the Director of
Patents may be satisfied that the application conforms to the requirement of actual use in commerce of
the trademark in Section 2 and 2-A of the Trademark Law; and that the statement in said application —
as to the "first use" thereof and "the goods . . . in connection with which the mark . . . is used" (Section
5) — is true.
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.
Because of this and of the fact that the Bayer trademarks were never used in the Philippines by plaintiff
except for medicines — Aspirin, Aspirin for Children and Cafiaspirina — we find ourselves unwilling to
draw a hard and fast rule which would absolutely and under all circumstances give unqualified
protection to plaintiff against the use of said trademarks by all others on goods other than medicines.
2. Neither will the 1927 registration in the United States of the BAYER trademark for insecticides serve
plaintiff any. The United States is not the Philippines. Registration in the United States is not registration
in the Philippines. At the time of the United States registration in 1927, we had our own Trademark Law,
Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks
owned by persons domiciled in the United States.
What is to be secured from unfair competition in a given territory is the trade which one has in that
particular territory. There is where his business is carried on; where the goodwill symbolized by the
trademark has immediate value; where the infringer may profit by infringement.
There is nothing new in what we now say. Plaintiff itself concedes 22 that the principle of territoriality of
the Trademark Law has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 71 L.
ed. 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or
territoriality."23
Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself
afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the
same or different products.
3. A question basic in the field of trademarks and unfair competition is the extent to which a registrant of
a trademark covering one product may invoke the right to protection against the use by other(s) of the
same trademark to identify merchandise different from those for which the trademark has been
appropriated.
Plaintiff's trenchant claim is that it should not be turned away because its case comes within the
protection of the confusion of origin rule. Callmann notes two types of confusion. The first is
the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase
one product in the belief that he was purchasing the other." In which case, "defendant's goods are then
bought as the plaintiff's, and the poorer quality of the former reflects adversely on the plaintiff's
reputation." The other is the confusion of business: "Here though the goods of the parties are different,
the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the
public would then be deceived either into that belief or into the belief that there is some connection
between the plaintiff and defendant which, in fact, does not exist."24
A judicial test giving the scope of the rule of confusion of origin is Ang vs. Teodoro (December 14,
1942), 74 Phil. 50. Briefly, the facts of the just cited case are as follows: Toribio Teodoro, at first in
partnership with Juan Katindig and later as sole proprietor, had continuously used "Ang Tibay" both as
trademark and as tradename in the manufacture and sale of slippers, shoes and indoor baseballs since
1910. He formally registered it as a trademark on September 29, 1915 and as a tradename on January
3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April 11, 1932
and established a factory for the manufacture of said articles in 1937. Suit was lodged by Teodoro
against Ang to cancel the latter's registration of the trademark "Ang Tibay" and to perpetually enjoin her
from using the said trademark on goods manufactured and sold by her. The judgment of the trial court
absolved defendant (Ana L. Ang) from the complaint with costs against the plaintiff. The Court of
Appeals reversed. On appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there
said:
"In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair
Trading, the test employed by the courts to determine whether noncompeting goods are or are not of
the same class is confusion as to the origin of the goods of the second user. Although two
noncompeting articles may be classified under two different classes by the Patent Office because they
are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the
courts to belong to the same class if the simultaneous use on them of identical or closely similar
trademarks would be likely to cause confusion as to the origin, or personal source, of the second user's
goods. They would be considered as not falling under the same class only if they are so dissimilar or so
foreign to each other as to make it unlikely that the purchaser would think the first user made the
second user's goods.
Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have
come to realize that there can be unfair competition or unfair trading even if the goods are
noncompeting, and that such unfair trading can cause injury or damage to the first user of a given
trademark, first, by prevention of the natural expansion of his business and, second, by having his
business reputation confused with and put at the mercy of the second user. When noncompetitive
products are sold under the mark, the gradual whittling away or dispersion of the identity and hold upon
the public mind of the mark created by its first user, inevitably results. The original owner is entitled to
the preservation of the vauable link between him and the public that has been created by his ingenuity
and the merit of his wares or services. Experience has demonstrated that when a well-known trademark
is adopted by another even for a totally different class of goods, it is done to get the benefit of the
reputation and advertisements of the originator of said mark, to convey to the public a false impression
of some supposed connection between the manufacturer of the article sold under the original mark and
the new articles being tendered to the public under the same or similar mark. As trade has developed
and commercial changes have come about, the law of unfair competition has expanded to keep pace
with the times and the element of strict competition in itself has ceased to be the determining factor.
The owner of a trademark or trade-name has a property right in which he is entitled to protection, since
there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from
confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify
and treat the issue as a fraud.25
The thoughts expressed in Ang Tibay command respect Conduct of business should conform to ethical
business standards. Unfairness is proscribed. The invocation of equity is bottomed upon the injunction
that no one should "reap where he has not sown."26
Nonetheless, "[i]t has been emphasized that each case presents a unique problem which must be
answered by weighing the conflicting interests of the litigants." 27 With this in mind, we are convinced
that the case before us is not to be analogized with Ang Tibay. The factual setting is different. His
Honor, Judge Magno S. Gatmaitan (now Associate Justice of the Court of Appeals), the trial judge, so
found. He reached a conclusion likewise different. And the reasons, so well stated by His Honor, are
these:
1st). — It was not plaintiff's predecessor but defendant's namely Farbenfabriken or Bayer
Germany that first introduced the medical products into the Philippine market and household
with the Bayer mark half a century ago; this is what the Court gathers from the testimony of
Frederick Umbreit and this is the implication even of Exhs. 48, 49, 66 and as already shown a
few pages back;28
2nd). — There is thus reason plausible enough for defendant' plea that as Sterling was not
the "originator" of the Bayer mark, the rule in Ang vs. Teodoro, supra, is not applicable; and
this is correct notwithstanding Exhs. 106 and 63 and even giving unto these documents full
force and virtue, because purchase of the assets of Elberfeld, defendants' previous affiliate in
New York, by Bayer of New York, even if that were to be held to include purchase of the
Bayer mark, did not make the purchaser Bayer of New York the originator of the mark;
especially since Bayer of New York was only another subsidiary of Bayer Germany or
Farbenfabriken which was the real originator;
3rd). — The Court is also impelled to believe that the evidence establishes that among the
common people of the Philippines the "Bayer" medicines come from Germany; this the Court
deduces from the testimony of witness Florisa Pestano who only reproduced the belief of her
grandmother; the Court might as well say that plaintiff itself has not discouraged that belief
because the drug and its literature that came from the plaintiff and its affiliate would show that
it represented its medicines to have come from defendant29 and were manufactured in
Germany with that Bayer mark; thus Exh. 7030 which is the price list of 1928 of Botica de Sta.
Cruz on page 6 indicates that Winthrop Chemical Company of New York, — plaintiff's
subsidiary — was a distributor of I.G. Farbenindustrie, A.G. Leverkusen Germany; Exh.
8031 which is a medical diary published by Winthrop for 1934 on page 148 manifested that the
journal, "Practical Therapeutics" was published by I.G. Farbenindustrie Aktiengesellachaft for
Winthrop Chemical Company, Inc.; "with particular reference to the pharmacological
products, sera and vaccines originated and prepared in the laboratories of the I.G.
Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are prospectuses for the medicines,
Mitigal, Afridol, Aspirins, Novalgina and My-Salvarsan 32 showed that these products were
manufactured for Winthrop by I.G. Farbenindustrie; and then Exh. 81 the Revista Boie of
1928 would show that Winthrop represented itself as the distributor of the products of Bayer
of Germany otherwise known as I.G. Farbenindustrie, "segun la alta calidad de la marca
original";33 the Court being also impelled to add in this connection that it has to take judicial
notice of a belief of long standing common among the people in the Philippines that German
products are of very high quality and it is only natural for a distributor or a retailer to take
advantage of that, and as it is not debated that "Bayer" is a German surname, (see plaintiff's
rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply memorandum wherein it is said that this
surname is a "pretty common one among members of the Germany race") it is all so very
easy to associate the Bayer trademark with products that come from Germany and to believe
that they are of high quality;
4th). — The rationale of the doctrine in Ang vs. Teodoro, supra being that:
The Courts have come to realize that there can be unfair competition or unfair trading even if the goods
are non-competing, and that such unfair trading can cause injury or damage to the first user of a given
trade mark, first, by prevention of the natural expansion of his business, and second, by having his
business reputation confused with and put at the mercy of the second user. 74 Phil. 55-56;
and the Court having found out that the 'first user' was Bayer Germany and it was this that had built up
the Bayer mark and plaintiff apparently having itself encouraged that belief even after it had acquired
the Bayer mark in America, thru forced sale, of defendant's subsidiary there in 1918, Exhs. 79, 80, 81,
to apply the Ang Tibay rule in the manner advocated by Sterling would, the Court fears, produce the
reverse result and the consequence would be not equity but injustice.34
It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer trademark has
diluted the rationally of its exclusionary claim. Not that the free ride in the name of defendant's German
predecessor was sporadic. It is continuing. Proof of this is the label on the box used by plaintiff (Exhibit
U) in the distribution of Bayer Aspirin. This box bears prominently on the front part the legend "Genuine"
in red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE, and the second, to
BAYER Aspirin. At the back thereof in big letters are the words "BAYER ASPIRIN", followed in small
letters "Used since 1900" and down below the small words "Mfd. in the Phil. by Winthrop Stearns, Inc.
for STERLING PRODUCTS INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1)
found in the box of Bayer Aspirin tablets, children's size, there is the significant statement: "GENUINE
BAYER — Each Children's Size Bayer Aspirin tablet is stamped with the Bayer Cross, the trademark of
the genuine Bayer product. This means that your child is getting the same gentle-to-the-system Bayer
Aspirin that has been used for over 50 years by millions of normal people without ill effect."
With the background of prior use in the Philippines of the word BAYER by FBA's German predecessor
and the prior representations that plaintiff's medicines sold in the Philippines were manufactured in
Germany, the facts just recited hammer on the mind of the public that the Aspirin. Cafiaspirina and
Aspirin for Children being marketed for plaintiff in the Philippines come from the same source — the
German source — and in use since 1900. That this view is far from far-fetched, is illustrated by the
testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz:
Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a company in
Germany named Bayer?
A. Yes, sir.
Q. Since when have you heard of this pharmaceutical company in Germany with the name
Bayer, since when have you heard of that?
A. I have always taken the name Bayer as associated with Winthrop & Stearns.
Q. But, you said a while ago....
Witness.
.... Yes .....
xxx     xxx     xxx
Q. ... that you have heard of a pharmaceutical company with the name of Bayer in Germany?
A. Yes, sir.
Q. Do you know if this Winthrop & Stearns you mentioned has ever been connected with
Bayer Company of Germany?
A. I have always understood that they were distributing drugs of Bayer & Company. 35
4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored teaching
that he who comes into equity must do so with clean hands.36 Plaintiff cannot now say that the present
worth of its BAYER trademarks it owes solely to its own efforts; it is not insulated from the charge that
as it marketed its medicines it did so with an eye to the goodwill as to quality that defendants'
predecessor had established.
There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first user thereof in
the Philippines. The trademarks do not necessarily link plaintiff with the public. Plaintiff must show
injury; it has not. On the contrary, representations as to the place of manufacture of plaintiff's medicines
were untrue, misleading. Plaintiff could still be tagged with the same deception "which (it) complains of
in the defendant(s)."37 Appropriate it is to recall here our observation in the Ang Tibay opinion, viz: "On
our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the
shelter of another but builds one of his own."38
Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus forfeited its right to
protection from the use of the same trademarks by defendants for products different therefrom —
insecticides and other chemicals.
5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from the Principal
Register, claiming right thereto for said use. Said trademarks had been registered since 1939 by
plaintiff's predecessor. The Bayer Co., Inc.
Defendants' claim is stale; it suffers from the defect of non-use.39 While it is conceded that FBA's
predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it
is equally true that, after World War I, no definite evidence there is that defendants or their professors
traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably
voice its objection. Lack of protest thereto connoted acquiescence. And this; notwithstanding the fact
that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the
marks; but it was much later, i.e., in 1958 — and on chemicals and insecticides — not on medicines.
FBA only bestirred itself and challenged plaintiff's right to the trademarks on medicines when this suit
was filed. Vigilantibus non dormientibus equitas subvenit.40
The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for
medicines. And defendants may continue using the same trademarks for insecticides and other
chemicals, not medicines.
6. Defendants balk at the ruling below which directs them "to add a distinctive word or words in their
mark to indicate that their products come from Germany." 41
We are left under no doubt as to the reasonableness of the formula thus fashioned. It avoids the
mischief of confusion of origin — defendant FBA's product would not be mistaken for those of plaintiff. It
reduces friction. We perceive of no prejudice to defendants. The order does not visit defendant FBA
with reprobation or condemnation. Rather, said defendant would be enhancing the value of and would
be sponsoring its own products. Anyway, a statement that its products come from Germany is but a
statement of fact.
FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and
Barredo, JJ., concur.
Castro, J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-63796-97 May 2, 1984
LA CHEMISE LACOSTE, S. A., petitioner, 
vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National
Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.
G.R. No. L-65659 May 2l, 1984
GOBINDRAM HEMANDAS SUJANANI, petitioner, 
vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR
SAN DIEGO, in his capacity as Director of Patents, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.
Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.
GUTIERREZ, JR., J.:
It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation
among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating
and illegally profiting from trademarks and tradenames which have established themselves in
international or foreign trade.
Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A.,
a well known European manufacturer of clothings and sporting apparels sold in the international market
and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a
composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The
petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX,
Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants
previously issued by him and ordering the return of the seized items.
The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing
under the laws of France and not doing business in the Philippines, It is undeniable from the records
that it is the actual owner of the abovementioned trademarks used on clothings and other goods
specifically sporting apparels sold in many parts of the world and which have been marketed in the
Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior
registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225
(SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE
DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of
the company. Two years later, it applied for the registration of the same trademark under the Principal
Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:
xxx xxx xxx
... Considering that the mark was already registered in the Supplemental Register
in favor of herein applicant, the Office has no other recourse but to allow the
application, however, Reg. No. SR-2225 is now being contested in a Petition for
Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner
of the mark until after the registration is declared cancelled.
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest
in the trademark "CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile
Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was
approved for publication while the latter was opposed by Games and Garments in Inter Partes Case
No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as
Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon.
Roberto Ongpin (G.R. No. 65659).
On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint
alleging therein the acts of unfair competition being committed by Hemandas and requesting their
assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently
filed with the respondent court two applications for the issuance of search warrants which would
authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and
Garments both owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the
Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant
and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ...
has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67
and 69) The NBI agents executed the two search warrants and as a result of the search found and
seized various goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was
different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent
Office, any criminal or civil action on the same subject matter and between the same parties would be
premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as
it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the
motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds
that the goods seized were instrument of a crime and necessary for the resolution of the case on
preliminary investigation and that the release of the said goods would be fatal to the case of the People
should prosecution follow in court.
The respondent court was, however, convinced that there was no probable cause to justify the
issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were
recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to
return the same to Hemandas. (Rollo, p. 25)
The petitioner anchors the present petition on the following issues:
Did respondent judge act with grave abuse of discretion amounting to lack of
jurisdiction,
(i) in reversing the finding of probable cause which he himself had made in issuing
the search warrants, upon allegations which are matters of defense and as such
can be raised and resolved only upon trial on the merits; and
(ii) in finding that the issuance of the search warrants is premature in the face of
the fact that (a) Lacoste's registration of the subject trademarks is still pending with
the Patent Office with opposition from Hemandas; and (b) the subject trademarks
had been earlier registered by Hemandas in his name in the Supplemental
Register of the Philippine Patent Office?
Respondent, on the other hand, centers his arguments on the following issues:
I itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT
TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign
corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He
states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do
business in the Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to
support his contention The Leviton case, however, involved a complaint for unfair competition under
Section 21-A of Republic Act No. 166 which provides:
Sec. 21 — A. Any foreign corporation or juristic person to which a mark or
tradename has been registered or assigned under this Act may bring an action
hereunder for infringement, for unfair competition, or false designation of origin and
false description, whether or not it has been licensed to do business in the
Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended,
otherwise known as the Corporation Law, at the time it brings the
complaint; Provided, That the country of which the said foreign corporation or
juristic person is a citizen, or in which it is domiciled, by treaty, convention or law,
grants a similar privilege to corporate or juristic persons of the Philippines.
We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws
of the State of New York, United States of America, to merely allege that it is a foreign corporation. It
averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section
21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the
abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly
laid down certain conditions in a specific proviso, the same must be expressly averred before a
successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with
these requirements or aver why it should be exempted from them, if such was the case. The foreign
corporation may have the right to sue before Philippine courts, but our rules on pleadings require that
the qualifying circumstances necessary for the assertion of such right should first be affirmatively
pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised
Penal Code. The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that
the petitioner was doing business in the Philippines but was not licensed to do so. To support this
argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72
Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the
former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark
and unfair competition against the Mangalimans.
The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar.
Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co.,
Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the
Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it
license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of
trademark and unfair competition."
In the present case, however, the petitioner is a foreign corporation not doing business in the
Philippines. The marketing of its products in the Philippines is done through an exclusive distributor,
Rustan Commercial Corporation The latter is an independent entity which buys and then markets not
only products of the petitioner but also many other products bearing equally well-known and
established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the
petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power
under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a
finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and
regulations defines "doing business" as one" which includes, inter alia:
(1) ... A foreign firm which does business through middlemen acting on their own
names, such as indentors, commercial brokers or commission merchants, shall not
be deemed doing business in the Philippines. But such indentors, commercial
brokers or commission merchants shall be the ones deemed to be doing business
in the Philippines.
(2) Appointing a representative or distributor who is domiciled in the Philippines,
unless said representative or distributor has an independent status, i.e., it transacts
business in its name and for its account, and not in the name or for the account of
a principal Thus, where a foreign firm is represented by a person or local company
which does not act in its name but in the name of the foreign firm the latter is doing
business in the Philippines.
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not
doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its
own name and or its own account and not in the name or for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner failed to allege
material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit
against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign
corporation not doing business in the Philippines needs no license to sue before Philippine courts for
infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v.
Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any business in
the Philippines and which is unlicensed and unregistered to do business here, but is widely and
favorably known in the Philippines through the use therein of its products bearing its corporate and
tradename, has a legal right to maintain an action in the Philippines to restrain the residents and
inhabitants thereof from organizing a corporation therein bearing the same name as the foreign
corporation, when it appears that they have personal knowledge of the existence of such a foreign
corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and
trade in the same goods as those of the foreign corporation.
We further held:
xxx xxx xxx
... That company is not here seeking to enforce any legal or control rights arising
from, or growing out of, any business which it has transacted in the Philippine
Islands. The sole purpose of the action:
preliminary investigation being conducted by the Special Prosecutor the information shall be in the
name of the People of the Philippines and no longer the petitioner which is only an aggrieved party
since a criminal offense is essentially an act against the State. It is the latter which is principally the
injured party although there is a private right violated. Petitioner's capacity to sue would become,
therefore, of not much significance in the main case. We cannot snow a possible violator of our criminal
statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a
crime has no standing to sue.
In upholding the right of the petitioner to maintain the present suit before our courts for unfair
competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our
duties and the rights of foreign states under the Paris Convention for the Protection of Industrial
Property to which the Philippines and France are parties. We are simply interpreting and enforcing a
solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a
party and which we entered into because it is in our national interest to do so.
The Paris Convention provides in part that:
ARTICLE 1
(1) The countries to which the present Convention applies constitute themselves
into a Union for the protection of industrial property.

Is to protect its reputation, its corporate name, its goodwill, whenever that
(2) The protection of industrial property is concerned with patents, utility models,
reputation, corporate name or goodwill have, through the natural development of its
industrial designs, trademarks service marks, trade names, and indications of
trade, established themselves.' And it contends that its rights to the use of its
source or appellations of origin, and the repression of unfair competition.
corporate and trade name:

xxx xxx xxx

Is a property right, a right in rem, which it may assert and protect against all the
world, in any of the courts of the world-even in jurisdictions where it does not
transact business-just the same as it may protect its tangible property, real or ARTICLE 2
personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair
Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on
(2) Nationals of each of the countries of the Union shall as regards the protection of
TradeMarks, Trade Names and Unfair Competition and cases cited.' That point is
industrial property, enjoy in all the other countries of the Union the advantages that
sustained by the authorities, and is well stated in Hanover Star Mining Co. v. Allen
their respective laws now grant, or may hereafter grant, to nationals, without
and Wheeler Co. (208 Fed., 513). in which the syllabus says:
prejudice to the rights specially provided by the present Convention. Consequently,
they shall have the same protection as the latter, and the same legal remedy
Since it is the trade and not the mark that is to be protected, a trade-mark against any infringement of their rights, provided they observe the conditions and
acknowledges no territorial boundaries of municipalities or states or nations, but formalities imposed upon nationals.
extends to every market where the trader's goods have become known and
Identified by the use of the mark.
xxx xxx xxx

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting.
ARTICLE 6
Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing
business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael
and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. (1) The countries of the Union undertake, either administratively if their legislation
In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan so permits, or at the request of an interested party, to refuse or to cancel the
Sportswear Corp., a foreign corporation not licensed to do and not doing business in the Philippines, to registration and to prohibit the use of a trademark which constitutes a reproduction,
file a petition for cancellation of a trademark before the Patent Office. imitation or translation, liable to create confusion, of a mark considered by the
competent authority of the country of registration or use to be well-known in that
country as being already the mark of a person entitled to the benefits of the present
More important is the nature of the case which led to this petition. What preceded this petition
Convention and used for Identical or similar goods. These provisions shall also
for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e.,
apply when the essential part of the mark constitutes a reproduction of any such
violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the
well-known mark or an imitation liable to create confusion therewith.
 xxx xxx xxx
ARTICLE 8
A trade name shall be protected in all the countries of the Union without the
obligation of filing or registration, whether or not it forms part of a trademark.
xxx xxx xxx
ARTICLE 10bis
(1) The countries of the Union are bound to assure to persons entitled to the
benefits of the Union effective protection against unfair competition.
xxx xxx xxx
ARTICLE 10ter
(1) The countries of the Union undertake to assure to nationals of the other
countries of the Union appropriate legal remedies to repress effectively all the acts
referred to in Articles 9, 10 and l0bis.
(2) They undertake, further, to provide measures to permit syndicates and
associations which represent the industrialists, producers or traders concerned and
the existence of which is not contrary to the laws of their countries, to take action in
the Courts or before the administrative authorities, with a view to the repression of
the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in
which protection is claimed allows such action by the syndicates and associations
of that country.
xxx xxx xxx
ARTICLE 17
Every country party to this Convention undertakes to adopt, in accordance with its
constitution, the measures necessary to ensure the application of this Convention.
It is understood that at the time an instrument of ratification or accession is
deposited on behalf of a country; such country will be in a position under its
domestic law to give effect to the provisions of this Convention. (61 O.G. 8010)
xxx xxx xxx
In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had
occasion to comment on the extraterritorial application of the Paris Convention It said that:
[11] The International Convention is essentially a compact between the various
member countries to accord in their own countries to citizens of the other
contracting parties trademark and other rights comparable to those accorded their
own citizens by their domestic law. The underlying principle is that foreign nationals
should be given the same treatment in each of the member countries as that
country makes available to its own citizens. In addition, the Convention sought to
create uniformity in certain respects by obligating each member nation 'to assure to
nationals of countries of the Union an effective protection against unfair
competition.'
[12] The Convention is not premised upon the Idea that the trade-mark and related
laws of each member nation shall be given extra-territorial application, but on
exactly the converse principle that each nation's law shall have only territorial
application. Thus a foreign national of a member nation using his trademark in
commerce in the United States is accorded extensive protection here against
infringement and other types of unfair competition by virtue of United States
membership in the Convention. But that protection has its source in, and is subject
to the limitations of, American law, not the law of the foreign national's own country.
...
By the same token, the petitioner should be given the same treatment in the Philippines as we make
available to our own citizens. We are obligated to assure to nationals of "countries of the Union" an
effective protection against unfair competition in the same way that they are obligated to similarly
protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum
addressed to the Director of the Patents Office directing the latter:
xxx xxx xxx
... to reject all pending applications for Philippine registration of signature and other
world famous trademarks by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name
brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey
Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine registrants of such
trademarks should be asked to surrender their certificates of registration, if any, to
avoid suits for damages and other legal action by the trademarks' foreign or local
owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and
amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of
Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or convention
is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It
creates a legally binding obligation on the parties founded on the generally accepted principle of
international law of pacta sunt servanda which has been adopted as part of the law of our land.
(Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey
both law and treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of discretion in
issuing the questioned order of April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of
fact that they are not appropriate for quashing a warrant. They are matters of defense which should be registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such
ventilated during the trial on the merits of the case. For instance, on the basis of the facts before the registration is only in the Supplemental Register.
Judge, we fail to understand how he could treat a bare allegation that the respondent's trademark is
different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat
A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of
the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the
registration, of the registrant's exclusive right to use the same in connection with the goods, business,
absence of probable cause, we, nonetheless, hold the arguments to be untenable.
or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with
the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement
As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark
uncertain terms the determination of probable cause by the judge after examination under oath or Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).
affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3).
Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the
Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental
warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in
register in addition to the principal register but specifically directs that:
pursuance thereof (People v. Sy Juco, 64 Phil. 667).

xxx xxx xxx

This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20
SCRA 383) that probable cause "presupposes the introduction of competent proof that the party against
whom it is sought has performed particular acts, or committed specific omissions, violating a given The certificates of registration for marks and trade names registered on the
provision of our criminal laws." supplemental register shall be conspicuously different from certificates issued for
marks and trade names on the principal register.
The question of whether or not probable cause exists is one which must be decided in the light of the
conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is xxx xxx xxx
no general formula or fixed rule for the determination of the existence of probable cause since, as we
have recognized in Luna v. Plaza (26 SCRA 310), the existence depends to a large degree upon the
The reason is explained by a leading commentator on Philippine Commercial Laws:
finding or opinion of the judge conducting the examination. However, the findings of the judge should
not disregard the facts before him nor run counter to the clear dictates of reason. More so it is plain that
our country's ability to abide by international commitments is at stake. The registration of a mark upon the supplemental register is not, as in the case of
the principal register, prima facie evidence of (1) the validity of registration; (2)
registrant's ownership of the mark; and (3) registrant's exclusive right to use the
The records show that the NBI agents at the hearing of the application for the warrants before
mark. It is not subject to opposition, although it may be cancelled after its issuance.
respondent court presented three witnesses under oath, sworn statements, and various exhibits in the
Neither may it be the subject of interference proceedings. Registration on the
form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The
supplemental register is not constructive notice of registrant's claim of ownership. A
respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by
supplemental register is provided for the registration of marks which are not
means of searching questions. After hearing the testimonies and examining the documentary evidence,
registrable on the principal register because of some defects (conversely, defects
the respondent court was convinced that there were good and sufficient reasons for the issuance of the
which make a mark unregistrable on the principal register, yet do not bar them from
warrant. And it then issued the warrant.
the supplemental register.) (Agbayani, II Commercial Laws of the Philippines,
1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of
The respondent court, therefore, complied with the constitutional and statutory requirements for the Patents, Apr. 30, 1963);
issuance of a valid search warrant. At that point in time, it was fully convinced that there existed
probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent
Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has
court executed a complete turnabout and declared that there was no probable cause to justify its earlier
appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the
issuance of the warrants.
Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles
which the user must Still overcome before he can claim legal ownership of the mark or ask the courts to
True, the lower court should be given the opportunity to correct its errors, if there be any, but the vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with
rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no nothing more than a registration in the Supplemental Register to posture before courts of justice as if
compelling justification for the about face. The allegation that vital facts were deliberately suppressed or the registration is in the Principal Register.
concealed by the petitioner should have been assessed more carefully because the object of the
quashal was the return of items already seized and easily examined by the court. The items were
The reliance of the private respondent on the last sentence of the Patent office action on application
alleged to be fake and quite obviously would be needed as evidence in the criminal prosecution.
Serial No. 30954 that "registrant is presumed to be the owner of the mark until after the registration is
Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial.
declared cancelled" is, therefore, misplaced and grounded on shaky foundation, The supposed
Action on these applications must be expedited for time is of the essence. Great reliance has to be
presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of
accorded by the judge to the testimonies under oath of the complainant and the witnesses. The
Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated
allegation of Hemandas that the applicant withheld information from the respondent court was clearly
before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of
no basis to order the return of the seized items.
factual basis. And 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. L10612, 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).
By the same token, the argument that the application was premature in view of the pending case before
the Patent Office is likewise without legal basis.
The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature
of a prejudicial question which must first be definitely resolved.
Section 5 of Rule 111 of the Rules of Court provides that:
A petition for the suspension of the criminal action based upon the pendency of a
pre-judicial question in a civil case, may only be presented by any party before or
during the trial of the criminal action.
The case which suspends the criminal prosecution must be a civil case which is determinative of the
innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case
before the Patent Office is an administrative proceeding and not a civil case. The decision of the Patent
Office cannot be finally determinative of the private respondent's innocence of the charges against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:
As clearly delineated in the aforecited provisions of the new Civil Code and the
Rules of Court, and as uniformly applied in numerous decisions of this Court,
(Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427
(1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab &
Garage, Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v.
Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia,
22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of
prejudicial question was held inapplicable because no criminal case but merely an
administrative case and a civil suit were involved. The Court, however, held that, in
view of the peculiar circumstances of that case, the respondents' suit for damages
in the lower court was premature as it was filed during the pendency of an
administrative case against the respondents before the POLCOM. 'The possibility
cannot be overlooked,' said the Court, 'that the POLCOM may hand down a
decision adverse to the respondents, in which case the damage suit will become
unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial
question comes into play generally in a situation where a civil action and a criminal
action both penned and there exists in the former an issue which must be
preemptively resolved before the criminal action may proceed, because howsoever
the issue raised in the civil action is resolved would be determinative juris et de
jure of the guilt or innocence of the accused in the criminal case.
In the present case, no civil action pends nor has any been instituted. What was pending was an
administrative case before the Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or special
circumstances which render a criminal prosecution premature pending the promulgation of the
administrative decision, no such peculiar circumstances are present in this case.
Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed
by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-
G.R. No. SP-13356, June 17, 1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was
involved in the appellate court's decision. The Minister as the "implementing authority" under Article
6bis of the Paris Convention for the protection of Industrial Property instructed the Director of Patents to
reject applications for Philippine registration of signature and other world famous trademarks by
applicants other than its original owners or users. The brand "Lacoste" was specifically cited together
with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta,
Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of
Patents was likewise ordered to require Philippine registrants of such trademarks to surrender their
certificates of registration. Compliance by the Director of Patents was challenged.
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite
with approval sustained the power of the Minister of Trade to issue the implementing memorandum
and, after going over the evidence in the records, affirmed the decision of the Director of Patents
declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or alligator
device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:
In the case at bar, the Minister of Trade, as 'the competent authority of the country
of registration,' has found that among other well-known trademarks 'Lacoste' is the
subject of conflicting claims. For this reason, applications for its registration must
be rejected or refused, pursuant to the treaty obligation of the Philippines.
Apart from this finding, the annexes to the opposition, which La Chemise Lacoste
S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste'
and the device consisting of a representation of a crocodile or alligator by the prior
adoption and use of such mark and device on clothing, sports apparel and the like.
La Chemise Lacoste S.A, obtained registration of these mark and device and was
in fact issued renewal certificates by the French National Industry Property Office.
xxx xxx xxx
Indeed, due process is a rule of reason. In the case at bar the order of the Patent
Office is based not only on the undisputed fact of ownership of the trademark by
the appellee but on a prior determination by the Minister of Trade, as the
competent authority under the Paris Convention, that the trademark and device
sought to be registered by the appellant are well-known marks which the
Philippines, as party to the Convention, is bound to protect in favor of its owners. it
would be to exalt form over substance to say that under the circumstances, due
process requires that a hearing should be held before the application is acted
upon.
The appellant cites section 9 of Republic Act No. 166, which requires notice and
hearing whenever an opposition to the registration of a trademark is made. This
provision does not apply, however, to situations covered by the Paris Convention,
where the appropriate authorities have determined that a well-known trademark is
already that of another person. In such cases, the countries signatories to the
Convention are obliged to refuse or to cancel the registration of the mark by any
other person or authority. In this case, it is not disputed that the trademark Lacoste
is such a well-known mark that a hearing, such as that provided in Republic Act
No. 166, would be superfluous.
The issue of due process was raised and fully discussed in the appellate court's decision. The court IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the
ruled that due process was not violated. Resolutions of the respondent Court of January 3, 1983 and February 24, 1983 be
nullified; and that the Decision of the same respondent Court of June 30, 1983 be
declared to be the law on the matter; (b) that the Director of Patents be directed to
In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.
issue the corresponding registration certificate in the Principal Register; and (c)
granting upon the petitioner such other legal and equitable remedies as are
We have carefully gone over the records of all the cases filed in this Court and find more than enough justified by the premises.
evidence to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE
LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and the
On December 5, 1983, we issued the following resolution:
representation of the crocodile or alligator. Any pretensions of the private respondent that he is the
owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent
Office will be a superfluity and a dilatory tactic. Considering the allegations contained, issues raised and the arguments adduced in
the petition for review, the respondent's comment thereon, and petitioner's reply to
said comment, the Court Resolved to DENY the petition for lack of merit.
The issue of whether or not the trademark used by the private respondent is different from the
petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings
before a court of justice instead of raising it as a preliminary matter in an administrative proceeding. The Court further Resolved to CALL the attention of the Philippine Patent Office to
the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste,
S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due
The purpose of the law protecting a trademark cannot be overemphasized. They are to point out
course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled
distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been
'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983
instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill,
was dismissed for lack of merit on September 12, 1983. Both petitions involve the
and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495).
same dispute over the use of the trademark 'Chemise Lacoste'.

The legislature has enacted laws to regulate the use of trademarks and provide for the protection
The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29)
thereof. Modern trade and commerce demands that depredations on legitimate trade marks of non-
prayed for the following:
nationals including those who have not shown prior registration thereof should not be countenanced.
The law against such depredations is not only for the protection of the owner of the trademark but also,
and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the I. On the petition for issuance of writ of preliminary injunction, an order be issued
goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. after due hearing:
Director of Patents, 41 SCRA 50).
l. Enjoining and restraining respondents Company, attorneys-in-fact, and
The law on trademarks and tradenames is based on the principle of business integrity and common Estanislao Granados from further proceedings in the unfair competition charges
justice' This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in pending with the Ministry of Justice filed against petitioner;
every way and aims to foster, and not to hamper, competition, no one, especially a trader, is justified in
damaging or jeopardizing another's business by fraud, deceipt, trickery or unfair methods of any sort.
2. Enjoining and restraining respondents Company and its attorneys-in-fact from
This necessarily precludes the trading by one dealer upon the good name and reputation built up by
causing undue publication in newspapers of general circulation on their
another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).
unwarranted claim that petitioner's products are FAKE pending proceedings
hereof; and
The records show that the goodwill and reputation of the petitioner's products bearing the trademark
LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the
3. Enjoining and restraining respondents Company and its attorneys-in-fact from
Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he
sending further threatening letters to petitioner's customers unjustly stating that
was the first registrant in the Supplemental Register of a trademark used in international commerce and
petitioner's products they are dealing in are FAKE and threatening them with
not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.
confiscation and seizure thereof.

We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon.

II. On the main petition, judgment be rendered:
Roberto V Ongpin, et al. (G.R. No. 65659).

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting,

Actually, three other petitions involving the same trademark and device have been filed with this Court.
stopping, and restraining respondents from further committing the acts complained
of;
In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the
following relief:
2. Awarding and granting the issuance of the Writ of Mandamus, ordering and
compelling respondents National Bureau of Investigation, its aforenamed agents,
and State Prosecutor Estanislao Granados to immediately comply with the Order of
 the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila,
dated April 22, 1983, which directs the immediate return of the seized items under
Search Warrants Nos. 83-128 and 83-129;
3. Making permanent any writ of injunction that may have been previously issued
by this Honorable Court in the petition at bar: and
4. Awarding such other and further relief as may be just and equitable in the
premises.
As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a
motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of
merit and declared the denial to be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of
the enforcement of the following memorandum of respondent Minister Roberto Ongpin:
MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
xxx xxx xxx
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and
adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making
and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can
...apply more swift and effective solutions and remedies to old and new problems ... such as the
infringement of internationally-known tradenames and trademarks ...'and in view of the decision of the
Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM
SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the MEMORANDUM
of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the
PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic
of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect
compliance with our obligations under said convention in general, and, more specifically, to honor our
commitment under Section 6 bis thereof, as follows:
1. Whether the trademark under consideration is well-known in the Philippines or is
a mark already belonging to a person entitled to the benefits of the CONVENTION,
this should be established, pursuant to Philippine Patent Office procedures in inter
partes and ex parte cases, according to any of the following criteria or any
combination thereof:
(a) a declaration by the Minister of Trade and Industry that' the trademark being
considered is already well-known in the Philippines such that permission for its use
by other than its original owner will constitute a reproduction, imitation, translation
or other infringement;
(b) that the trademark is used in commerce internationally, supported by proof that
goods bearing the trademark are sold on an international scale, advertisements,
the establishment of factories, sales offices, distributorships, and the like, in
different countries, including volume or other measure of international trade and
commerce;
(c) that the trademark is duly registered in the industrial property office(s) of
another country or countries, taking into consideration the dates of such
registration;
(d) that the trademark has been long established and obtained goodwill and
general international consumer recognition as belonging to one owner or source;
(e) that the trademark actually belongs to a party claiming ownership and has the
right to registration under the provisions of the aforestated PARIS CONVENTION.
2. The word trademark, as used in this MEMORANDUM, shall include tradenames,
service marks, logos, signs, emblems, insignia or other similar devices used for
Identification and recognition by consumers.
3. The Philippine Patent Office shall refuse all applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or imitation
of a trademark owned by a person, natural or corporate, who is a citizen of a
country signatory to the PARIS CONVENTION FOR THE PROTECTION OF
INDUSTRIAL PROPERTY.
4. The Philippine Patent Office shall give due course to the Opposition in cases
already or hereafter filed against the registration of trademarks entitled to
protection of Section 6 bis of said PARIS CONVENTION as outlined above, by
remanding applications filed by one not entitled to such protection for final
disallowance by the Examination Division.
5. All pending applications for Philippine registration of signature and other world
famous trademarks filed by applicants other than their original owners or users
shall be rejected forthwith. Where such applicants have already obtained
registration contrary to the abovementioned PARIS CONVENTION and/or
Philippine Law, they shall be directed to surrender their Certificates of Registration
to the Philippine Patent Office for immediate cancellation proceedings.
6. Consistent with the foregoing, you are hereby directed to expedite the hearing
and to decide without delay the following cases pending before your Office:
1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for
the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram
Hemandas, assignee of Hemandas and Company;
2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co.
against the registration of the trademark Lacoste sought by La Chemise Lacoste,
S.A.;
 3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A.
against the registration of trademark Crocodile Device and Skiva sought by one
Wilson Chua.
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be
patently without merit and accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the memorandum, the
Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this
decision and apply the law as expounded by this Court to those facts.
One final point. It is essential that we stress our concern at the seeming inability of law enforcement
officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or
exported abroad from our country. The greater victim is not so much the manufacturer whose product is
being faked but the Filipino consuming public and in the case of exportations, our image abroad. No
less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the
powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other
acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of
internationally known tradenames and trademarks, and the unfair trade practices of business firms has
reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a
household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of
clothing like jeans, T-shirts, neck, ties, etc. — the list is quite length — and pay good money relying on
the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and
genuine nature on helpless anger because the purchased item turns out to be a shoddy imitation, albeit
a clever looking counterfeit, of the quality product. Judges all over the country are well advised to
remember that court processes should not be used as instruments to, unwittingly or otherwise, aid
counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino
consuming public and frustrate executive and administrative implementation of solemn commitments
pursuant to international conventions and treaties.
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22,
1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining
Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due
course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and SET
ASIDE, effective immediately.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-46720             June 28, 1940
WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,  irrespective of the situs of the corresponding certificates of stock. But it is contended that the doctrine in
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici curiæ.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles, California, the
place of her alleged last residence and domicile. Among the properties she left her one-half conjugal
share in 70,000 shares of stock in the Benguet Consolidated Mining Company, an anonymous
partnership (sociedad anonima), organized and existing under the laws of the Philippines, with is
principal office in the City of Manila. She left a will which was duly admitted to probate in California
where her estate was administered and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust
Company, was duly appointed trustee of the created by the said will. The Federal and State of
California's inheritance taxes due on said shares have been duly paid. Respondent Collector of Internal
Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax, to
which petitioner-appellant objected. Wherefore, a petition for a declaratory judgment was filed in the
lower court, with the statement that, "if it should be held by a final declaratory judgment that the transfer
of the aforesaid shares of stock is legally subject to the Philippine inheritance tax, the petitioner will pay
such tax, interest and penalties (saving error in computation) without protest and will not file to recover
the same; and the petitioner believes and t herefore alleges that it should be held that such transfer is
not subject to said tax, the respondent will not proceed to assess and collect the same." The Court of
First Instance of Manila rendered judgment, holding that the transmission by will of the said 35,000
shares of stock is subject to Philippine inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon transmission
by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible
personal property of a non-resident decedent, located in the Philippines, the Philippine inheritance tax
may be imposed upon their transmission by death, for the self-evident reason that, being a property
situated in this country, its transfer is, in some way, defendant, for its effectiveness, upon Philippine
laws. It is contended, however, that, as to intangibles, like the shares of stock in question, their situs is
in the domicile of the owner thereof, and, therefore, their transmission by death necessarily takes place
under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of
inheritance of any share issued by any corporation of sociedad anonima organized or constituted in the
Philippines, is subject to the tax therein provided. This provision has already been applied to shares of
stock in a domestic corporation which were owned by a British subject residing and domiciled in Great
Britain. (Knowles vs. Yatco, G. R. No. 42967. See also Gibbs vs. Government of P. I., G. R. No.
35694.) Petitioner, however, invokes the rule laid down by the United States Supreme Court in four
cases (Farmers Loan & Trust Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371;
Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission
282 U. S., 1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174,
76 Law. ed., 313; 77 A. L. R., 1401), to the effect that an inheritance tax can be imposed with respect to
intangibles only by the State where the decedent was domiciled at the time of his death, and that, under
the due-process clause, the State in which a corporation has been incorporated has no power to
impose such tax if the shares of stock in such corporation are owned by a non-resident decedent. It is
to be observed, however, that in a later case (Burnet vs. Brooks, 288 U. S., 378; 77 Law. ed., 844), the
United States Supreme Court upheld the authority of the Federal Government to impose an inheritance
tax on the transmission, by death of a non-resident, of stock in a domestic (America) corporation,
the foregoing case is not applicable, because the due-process clause is directed at the State and not at
the Federal Government, and that the federal or national power of the United States is to be determined
in relation to other countries and their subjects by applying the principles of jurisdiction recognized in
international relations. Be that as it may, the truth is that the due-process clause is "directed at the
protection of the individual and he is entitled to its immunity as much against the state as against the
national government." (Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed,
the rule laid down in the four cases relied upon by the appellant was predicated on a proper regard for
the relation of the states of the American Union, which requires that property should be taxed in only
one state and that jurisdiction to tax is restricted accordingly. In other words, the application to the
states of the due-process rule springs from a proper distribution of their powers and spheres of activity
as ordained by the United States Constitution, and such distribution is enforced and protected by not
allowing one state to reach out and tax property in another. And these considerations do not apply to
the Philippines. Our status rests upon a wholly distinct basis and no analogy, however remote, cam be
suggested in the relation of one state of the Union with another or with the United States. The status of
the Philippines has been aptly defined as one which, though a part of the United States in the
international sense, is, nevertheless, foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U.
S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and effect of
the due-process clause as it applies to the individual states and to the national government of the
United States. The question here involved is essentially not one of due-process, but of the power of the
Philippine Government to tax. If that power be conceded, the guaranty of due process cannot certainly
be invoked to frustrate it, unless the law involved is challenged, which is not, on considerations
repugnant to such guaranty of due process of that of the equal protection of the laws, as, when the law
is alleged to be arbitrary, oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of
inheritance tax, and that such situs is in the domicile of the decedent at the time of his death. But this
rule has, of late, been relaxed. The maxim mobilia sequuntur personam, upon which the rule rests, has
been described as a mere "fiction of law having its origin in consideration of general convenience and
public policy, and cannot be applied to limit or control the right of the state to tax property within its
jurisdiction" (State Board of Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404),
and must "yield to established fact of legal ownership, actual presence and control elsewhere, and
cannot be applied if to do so result in inescapable and patent injustice." (Safe Deposit & Trust
Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from artificial postulates of law,
formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule rests on either
of two fundamental considerations: (1) upon the recognition of the inherent power of each government
to tax persons, properties and rights within its jurisdiction and enjoying, thus, the protection of its laws;
and (2) upon the principle that as o intangibles, a single location in space is hardly possible,
considering the multiple, distinct relationships which may be entered into with respect thereto. It is on
the basis of the first consideration that the case of Burnet vs.Brooks, supra, was decided by the Federal
Supreme Court, sustaining the power of the Government to impose an inheritance tax upon
transmission, by death of a non-resident, of shares of stock in a domestic (America) corporation,
regardless of the situs of their corresponding certificates; and on the basis of the second consideration,
the case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal estate tax
is precluded by the due-process clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other consideration
raised by confiscatory or arbitrary legislation inconsistent with the fundamental conceptions of
justice which are embodied in the due-process clause for the protection of life, liberty, and
property of all persons — citizens and friendly aliens alike. Russian Volunteer
Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct., 229;
Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L.
R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326; 76 Law ed., 772, 779; 52 S. Ct., 358. If in
the instant case the Federal Government had jurisdiction to impose the tax, there is
manifestly no ground for assailing it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed.,
969, 996; 20 S. Ct., 747; MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24
S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law.
ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R. Co.,
240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas,
1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39 S. Ct.,
214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders, wherever
its owner may have been domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of international
law, or hurtful to the polity of nations, in a State's taxing property physically situated within its
borders, wherever its owner may have been domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct
grounds — the citizenship of the owner, his domicile, the source of income, the situs of the
property — efforts have been made to preclude multiple taxation through the negotiation of
appropriate international conventions. These endeavors, however, have proceeded upon
express or implied recognition, and not in denial, of the sovereign taxing power as exerted by
governments in the exercise of jurisdiction upon any one of these grounds. . . . (See pages
396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of Alabama
and Tennessee may each constitutionally impose death taxes upon the transfer of an interest in
intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent
domiciles in Tennessee, sustained the power of each State to impose the tax. In arriving at this
conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his domicile it has
been found convenient to substitute a rule for a reason, cf. New York ex rel.,
Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466; 108 A. L. R.,
721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061, 1065; 57
S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are taxed at their situs and not
elsewhere, or perhaps less artificially, by invoking the maxim mobilia sequuntur personam.
Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed., 749; S. Ct., 410, supra;
Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R.,
1303, supra, which means only that it is the identify owner at his domicile which gives
jurisdiction to tax. But when the taxpayer extends his activities with respect to his intangibles,
so as to avail himself of the protection and benefit of the laws of another state, in such a way
as to bring his person or properly within the reach of the tax gatherer there, the reason for a
single place of taxation no longer obtains, and the rule even workable substitute for the
reasons may exist in any particular case to support the constitutional power of each state
concerned to tax. Whether we regard the right of a state to tax as founded on power over the
object taxed, as declared by Chief Justice Marshall in McCulloch vs. Maryland, 4 Wheat.,
316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons whose
relationships are source of intangibles rights, or on the benefit and protection conferred by
the taxing sovereignty, or both, it is undeniable that the state of domicile is not deprived, by
the taxpayer's activities elsewhere, of its constitutional jurisdiction to tax, and consequently
that there are many circumstances in which more than one state may have jurisdiction to
impose a tax and measure it by some or all of the taxpayer's intangibles. Shares or corporate
 stock be taxed at the domicile of the shareholder and also at that of the corporation which the
taxing state has created and controls; and income may be taxed both by the state where it is
earned and by the state of the recipient's domicile. protection, benefit, and power over the
subject matter are not confined to either state. . . .(p. 1347-1349.)

. . . We find it impossible to say that taxation of intangibles can be reduced in every case to
the mere mechanical operation of locating at a single place, and there taxing, every legal
interest growing out of all the complex legal relationships which may be entered into between
persons. This is the case because in point of actuality those interests may be too diverse in
their relationships to various taxing jurisdictions to admit of unitary treatment without
discarding modes of taxation long accepted and applied before the Fourteen Amendment
was adopted, and still recognized by this Court as valid. (P. 1351.)

We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the issue here
involved is controlled by those doctrines. In the instant case, the actual situs of the shares of stock is in
the Philippines, the corporation being domiciled therein. And besides, the certificates of stock have
remained in this country up to the time when the deceased died in California, and they were in
possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom
they have been delivered and indorsed in blank. This indorsement gave Syrena McKee the right to vote
the certificates at the general meetings of the stockholders, to collect dividends, and dispose of the
shares in the manner she may deem fit, without prejudice to her liability to the owner for violation of
instructions. For all practical purposes, then, Syrena McKee had the legal title to the certificates of stock
held in trust for the true owner thereof. In other words, the owner residing in California has extended
here her activities with respect to her intangibles so as to avail herself of the protection and benefit of
the Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.

Judgment is affirmed, with costs against petitioner-appellant.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.


THIRD DIVISION
G.R. No. 154342             July 14, 2004
MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC., petitioner, 
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.
DECISION
CORONA, J.:
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 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998
decision,2 as modified by the June 24, 1999 order,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 reconsideration 4and (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. 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 Winery’s exclusive wine importer and
distributor in the Philippines since 1991, selling these products in its own name and for its own
account.5
Gallo Winery’s 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 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
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
The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s cigarette
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 manufacturer’s
sworn statement as basis for BIR’s collection of specific tax on GALLO cigarettes. 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
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 On July 17, 1985, the
National Library issued Certificate of Copyright Registration No. 5834 for La Campana’s lifetime
copyright claim over GALLO cigarette labels.12
Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing
the GALLO trademark.13 BIR approved Mighty Corporation’s use of GALLO 100’s cigarette brand, under
licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL
100’s cigarette brand on April 3, 1989.14
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
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 circa1974 within the then U.S. military facilities only. By 1979, they had expanded
their Philippine market through authorized distributors and independent outlets. 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 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 a. permanently restraining and enjoining defendants, their distributors, trade
infringement and unfair competition, with a prayer for damages and preliminary injunction. outlets, and all persons acting for them or under their instructions, from (i) using E
& J’s registered trademark GALLO or any other reproduction, counterfeit, copy or
colorable imitation of said trademark, either singly or in conjunction with other
Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of
words, designs or emblems and other acts of similar nature, and (ii) committing
Industrial Property (Paris Convention)18 and RA 166 (Trademark Law),19 specifically, Sections 22 and 23
other acts of unfair competition against plaintiffs by manufacturing and selling their
(for trademark infringement),20 29 and 3021 (for unfair competition and false designation of origin) and 37
cigarettes in the domestic or export markets under the GALLO trademark.
(for tradename infringement). 22 They claimed that petitioners adopted the GALLO trademark to ride on
Gallo Winery’s 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 b. ordering defendants to pay plaintiffs –
always associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winery’s wines.
Respondents prayed for the issuance of a writ of preliminary injunction and ex parte restraining order,
(i) actual and compensatory damages for the injury and prejudice and
plus P2 million as actual and compensatory damages, at least P500,000 as exemplary and moral
impairment of plaintiffs’ business and goodwill as a result of the acts and
damages, and at least P500,000 as attorney’s fees and litigation expenses. 23
conduct pleaded as basis for this suit, in an amount equal to 10% of
FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND
In their answer, petitioners alleged, among other affirmative defenses, that: petitioner’s GALLO PESOS (PHP14,235,000.00) from the filing of the complaint until fully
cigarettes and Gallo Winery’s wines were totally unrelated products; Gallo Winery’s GALLO trademark paid;
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
(ii) exemplary damages in the amount of PHP100,000.00;
GALLO menthols, were low-cost items compared to Gallo Winery’s high-priced luxury wines which cost
between P98 to P242.50; the target market of Gallo Winery’s wines was the middle or high-income
bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, (iii) attorney’s fees and expenses of litigation in the amount of
laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the PHP1,130,068.91;
rooster device with the manufacturer’s name clearly indicated as MIGHTY CORPORATION while, in
the case of Gallo Winery’s wines, it was the full names of the founders-owners ERNEST & JULIO
(iv) the cost of suit.
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. SO ORDERED."29

In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit, respondent’s prayer for the
issuance of a writ of preliminary injunction,25 holding that respondent’s 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
On June 24, 1999, the Makati RTC granted respondent’s motion for partial reconsideration and
increased the award of actual and compensatory damages to 10% of P199,290,000 or P19,929,000.30
On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioner’s motion for
reconsideration.

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 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
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 RTC’s denial of the application for
issuance of a writ of preliminary injunction against petitioners.28
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 liable for trademark infringement, unfair
competition and damages.31

After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure
and permanently enjoined them from, committing trademark infringement and unfair competition with questions of law, and hence, must be dismissed outright.
respect to the GALLO trademark:
IV.
WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant
(sic), to wit:
Discussion
THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CA’S FACTUAL FINDINGS
As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of
law"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 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
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 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
(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 based on a misapprehension of facts;
(5) the appellate court, in making its findings, went beyond the issues of the case, and the
same are contrary to the admissions of both the appellant and the appellee;
(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
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.
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 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 (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 Article 6bis of the Paris Convention.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 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 There
are only a few instances when laws may be given retroactive effect,42 none of which is present in this
case.
The IP Code, repealing the Trademark Law,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 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 competitor’s 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
In Del Monte Corporation vs. Court of Appeals, 45 we distinguished trademark infringement from unfair
competition:
(1) 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 an international agreement binding on the Philippines and the
United States (Gallo Winery’s 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 well-known 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
createconfusion therewith." There is no time limit for seeking the prohibition of the use of marks used in
bad faith.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,
(b) of a mark considered by the competent authority of the country of registration or use48 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 Trademark registration and actual use are material to the
complaining party’s cause of action.
Corollary to this, Section 20 of the Trademark Law50 considers the trademark registration certificate
as prima facieevidence of the validity of the registration, the registrant’s ownership and exclusive right
to use the trademark in connection with the goods, business or services as classified by the Director of
Patents51 and as specified in the certificate, subject to the conditions and limitations stated therein.
Sections 2 and 2-A52 of the Trademark Law emphasize the importance of the trademark’s 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
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,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.
In summary, the Paris Convention protects well-known 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
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 registrant’s express or implied consent to another’s
use of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may
defeat the registrant’s 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 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 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
manufacturer’s sworn statement, it appears that petitioners and its predecessor-in-interest, Tobacco
Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or
before July 9, 1981.56
In Emerald Garment Manufacturing Corporation vs. Court of Appeals, 57 we reiterated our rulings
in Pagasa Industrial Corporation vs. Court of Appeals, 58 Converse Rubber Corporation vs. Universal
Rubber Products, Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken Bayer
Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. Intermediate Appellate Court,61 and Philip Morris vs.
Court of Appeals,62 giving utmost importance to the actual commercial useof 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 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 (27 SCRA 1214 [1969]; Reiterated inKabushi
Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared:
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 facieevidence. 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
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 1-o)
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 infringement must
necessarily fail. (Emphasis supplied.)
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
Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s 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
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
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 so-called "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.
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 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
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 defendant’s goods are then bought as the plaintiff’s and its poor quality reflects
badly on the plaintiff’s reputation. The other is "confusion of business" wherein the goods of the parties
are different but the defendant’s 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
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 registrant’s 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 we ordered the approval of Acoje
Mining’s 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 we upheld the Patent
Director’s registration of the same trademark CAMIA for Ng Sam’s ham under Class 47,
despite Philippine Refining Company’s 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 we
dismissed Hickok’s petition to cancel private respondent’s HICKOK trademark registration for
its Marikina shoes as against petitioner’s earlier registration of the same trademark for
handkerchiefs, briefs, belts and wallets;
(d) in Shell Company of the Philippines vs. Court of Appeals, 70 in a minute resolution, we
dismissed the petition for review for lack of merit and affirmed the Patent Office’s registration
of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco
Corporation, notwithstanding Shell Company’s 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 we dismissed ESSO’s 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 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 Kaisha’s 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
imitation"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
Jurisprudence has developed two tests in determining similarity and likelihood of confusion in
trademark resemblance:75
(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals 76 and other
cases,77 and
(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals 78 and its
preceding cases.79
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
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
In comparing the resemblance or colorable imitation of marks, various factors have been considered,
such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the
likelihood of deception of the mark or name's tendency to confuse82 and the commercial impression
likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties. 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
rooster’s 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
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
Also, as admitted by respondents themselves, 86 on the side of the GALLO cigarette packs are the words
"MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the identity of the
manufacturer of the cigarettes.
On the other hand, GALLO Winery’s 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 Directly below or above these sketches is the entire printed name of the founder-owners,
"ERNEST & JULIO GALLO" or just their surname "GALLO," 88which appears in different fonts, sizes,
styles and labels, unlike petitioners’ uniform casque-font bold-lettered GALLO mark.
Moreover, on the labels of Gallo Winery’s wines are printed the words "VINTED AND BOTTLED BY
ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."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 Winery’s 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 non-competing interests as well.90
Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6 bis 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."91Simply 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
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 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 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
In resolving whether goods are related,96 several factors come into play:
(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
(d) the nature and cost of the articles98
(e) the descriptive properties, physical attributes or essential characteristics with reference to their form,
composition, texture or quality
(f) the purpose of the goods99
(g) whether the article is bought for immediate consumption, 100 that is, day-to-day household items101
(h) the fields of manufacture102
(i) the conditions under which the article is usually purchased 103 and
(j) the channels of trade through which the goods flow,104 how they are distributed, marketed, displayed
and sold.105
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 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
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 The "purchaser" is not the "completely unwary consumer" but is the "ordinarily intelligent
buyer" considering the type of product involved. 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
Hence, in the adjudication of trademark infringement, we give due regard to the goods’ usual
purchaser’s character, attitude, habits, age, training and education. 111
Applying these legal precepts to the present case, petitioner’s 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] 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
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 with respect to
their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or
containers.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
In this regard, we adopted the Director of Patents’ finding in Philippine Refining Co., Inc. vs. Ng Sam
and the Director of Patents:115
In his decision, the Director of Patents enumerated the factors that set respondent’s 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. Opposer’s products are ordinary 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-à-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 low-income workers.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
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 imported or
emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant
and sidewalk vendors, small local sari-saristores and grocery stores in Philippine rural areas, mainly in
Misamis Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are imported,
distributed and sold in the Philippines through Gallo Winery’s 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
Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip
Morris, Inc.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
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), aff’d, 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
plaintiff’s mark for scotch whiskey and because the plaintiff 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 likelihood of confusion. The similarity of products analysis, therefore, augers against
defendant’s use of the mark "BLACK LABEL" for cigarettes because it was likely to finding that there is a likelihood of confusion. (Emphasis supplied).
cause confusion with the plaintiff’s well-known mark "BLACK LABEL" for beer.
In short, tobacco and alcohol products may be considered related only in cases involving special
xxx xxx xxx circumstanceswhich 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.
Those decisions, however, must be considered in perspective of the principle that
tobacco products and alcohol products should be considered related only in cases THE GALLO WINE TRADEMARK IS NOT A
involving special circumstances.Schenley Distillers, Inc. v. General Cigar WELL-KNOWN MARK IN THE CONTEXT
Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances OF THE PARIS CONVENTION IN THIS CASE
has been found to exist where there is a finding of unfair competition or where a SINCE WINES AND CIGARETTES ARE NOT
‘famous’ or ‘well-known mark’ is involved and there is a demonstrated intent to IDENTICAL OR SIMILAR GOODS
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
First, the records bear out that most of the trademark registrations took place in the late 1980s and the
plaintiff’s long use and extensive advertising of its mark and placed great emphasis on the
1990s, that is, after Tobacco Industries’ use of the GALLO cigarette trademark in 1973 and petitioners’
fact that the defendant used the trademark ‘Johnnie Walker with full knowledge of its fame
use of the same mark in 1984.
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 GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods,
law on the particular case based upon its own peculiar facts’); see also Alfred Dunhill, 350 F. a requisite elementunder both the Trademark Law and the Paris Convention.
Supp. At 1363 (defendant’s adoption of ‘Dunhill’ mark was not innocent). However,
in Schenley, the court noted that the relation between tobacco and whiskey products is
Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines.
significant where a widely known arbitrary mark has long been used for diversified products
Respondents do not dispute the documentary evidence that aside from Gallo Winery’s GALLO
emanating from a single source and a newcomer seeks to use the same mark on unrelated
trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on
goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry
September 4, 1992 Certificate of Registration No. 53356 under the Principal Register
practice and the facts of the case in order to determine the nature and extent of the
approving Productos Alimenticios Gallo, S.A’s April 19, 1990 application for GALLO trademark
relationship between the mark on the tobacco product and the mark on the alcohol product.
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, molasses
The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in syrup, yeast, baking powder, salt, mustard, vinegar, species and ice."122
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
Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and
liqueur related products, with its cigarettes. The advertising and promotional materials
NSR Rubber Corporation,123 "GALLO" cannot be considered a "well-known" mark within the
presented a trial in this action demonstrate a complete lack of affiliation between the tobacco
contemplation and protection of the Paris Convention in this case since wines and cigarettes are not
and liqueur products bearing the marks here at issue.
identical or similar goods:

xxx xxx xxx

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.
Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT:
name ‘Bailey’s’ 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,
"Regarding the applicability of Article 8 of the Paris Convention, this Office
and as found in Mckesson & Robbins, the survey evidence refutes the contention that
believes that there is no automatic protection afforded an entity whose
cigarettes and alcoholic beverages are so intimately associated in the public mind that
tradename is alleged to have been infringed through the use of that name as
they cannot under any circumstances be sold under the same mark without causing
a trademark by a local entity.
confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.

In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No.
Taken as a whole, the evidence here demonstrates the absence of the ‘special
75420, 15 November 1991, the Honorable Supreme Court held that:
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 world’s best ‘The Paris Convention for the Protection of Industrial Property does
selling liqueur and the second best selling in the United States, is a well-known not automatically exclude all countries of the world which have
product. That fact alone, however, is insufficient to invoke the special circumstances signed it from using a tradename which happens to be used in one
connection here where so much other evidence and so many other factors disprove a 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.
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 implementation of Article 6bis of the Treaty of Paris. These
conditions are:
a) the mark must be internationally known;
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.)
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
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 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 man’s goods or business as that of another constitutes unfair competition.
Actual or probable deception and confusion on the part of customers by reason of defendant’s practices
must always appear.125 On this score, we find that petitioners never attempted to pass off their
cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in
using their GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws as well as those recognized by
jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair competition
or damages.
WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The
questioned decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175 and the
November 26, 1998 decision and the June 24, 1999 order of the Regional Trial Court of Makati, Branch
57 in Civil Case No. 93-850 are hereby REVERSED and SET ASIDE and the complaint against
petitioners DISMISSED.
Costs against respondents.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
 
G.R. No. 91332 July 16, 1993
PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC
REUNIES, S.A., petitioners  this admission, defendant asks: ". . . how could defendant's "MARK" cigarettes
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.
MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and
Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty conferred upon
magistrates by Section 6, Rule 58 of the Revised Rules of Court when respondent Court of Appeals
lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco Corporation, herein
private respondent, from manufacturing and selling "MARK" cigarettes in the local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also
for cigarettes, must be protected against unauthorized appropriation, petitioners twice solicited the
ancillary writ in the course the main suit for infringement but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of
the issue on the propriety of lifting the writ of preliminary injunction should not be construed as a
prejudgment of the suit below. Aware of the fact that the discussion we are about to enter into involves
a mere interlocutory order, a discourse on the aspect infringement must thus be avoided. With
these caveat, we shall now shift our attention to the events which spawned the controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under the laws
of the State of Virginia, United States of America, and does business at 100 Park Avenue, New York,
New York, United States of America. The two other plaintiff foreign corporations, which are wholly-
owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the Philippines but are
suing on an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per
certificates of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and
March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no right
to manufacture and sell cigarettes bearing the allegedly identical or confusingly similar trademark
"MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be precluded
during the pendency of the case from performing the acts complained of via a preliminary injunction (p.
75, Court of Appeals Rollo in AC-G.R. SP No. 13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration with the
Philippine Patent Office subject to the affirmative and special defense on misjoinder of party plaintiffs.
Private respondent alleged further that it has been authorized by the Bureau of Internal Revenue to
manufacture and sell cigarettes bearing the trademark "MARK", and that "MARK" is a common word
which cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132).
On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the Presiding Judge of
Branch 166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig,
premised upon the following propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are 
not doing business in the Philippines and are suing on an isolated transaction . . .".
This simply means that they are not engaged in the sale, manufacture, importation,
expor[t]ation and advertisement of their cigarette products in the Philippines. With
cause the former "irreparable damage" within the territorial limits of the
Philippines?" Plaintiffs maintain that since their trademarks are entitled to
protection by treaty obligation under Article 2 of the Paris Convention of which the
Philippines is a member and ratified by Resolution No. 69 of the Senate of the
Philippines and as such, have the force and effect of law under Section 12, Article
XVII of our Constitution and since this is an action for a violation or infringement of
a trademark or trade name by defendant, such mere allegation is sufficient even in
the absence of proof to support it. To the mind of the Court, precisely, this is the
issue in the main case to determine whether or not there has been an invasion of
plaintiffs' right of property to such trademark or trade name. This claim of plaintiffs
is disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this cannot
be made a basis for the issuance of a writ of preliminary injunction.
There is no dispute that the First Plaintiff is the registered owner of trademar[k]
"MARK VII" with Certificate of Registration No. 18723, dated April 26,1973 while
the Second Plaintiff is likewise the registered owner of trademark "MARK TEN"
under Certificate of Registration No. 11147, dated May 28, 1963 and the Third
Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration
No. 10953 dated March 23, 1964, in addition to a pending application for
registration of trademark "MARK VII" filed on November 21, 1980 under Application
Serial No. 43243, all in the Philippine Patent Office. In same the manner, defendant
has a pending application for registration of the trademark "LARK" cigarettes with
the Philippine Patent Office under Application Serial No. 44008. Defendant
contends that since plaintiffs are "not doing business in the Philippines" coupled
the fact that the Director of Patents has not denied their pending application for
registration of its trademark "MARK", the grant of a writ of preliminary injunction is
premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge to give
semblance of good faith intended to deceive the public and patronizers into buying
the products and create the impression that defendant's goods are identical with or
come from the same source as plaintiffs' products or that the defendant is a
licensee of plaintiffs when in truth and in fact the former is not. But the fact remains
that with its pending application, defendant has embarked in the manufacturing,
selling, distributing and advertising of "MARK" cigarettes. The question of good
faith or bad faith on the part of defendant are matters which are evidentiary in
character which have to be proven during the hearing on the merits; hence, until
and unless the Director of Patents has denied defendant's application, the Court is
of the opinion and so holds that issuance a writ of preliminary injunction would not
lie.
There is no question that defendant has been authorized by the Bureau of Internal
Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of
Ruben B. Ancheta, Acting Commissioner addressed to Fortune Tobacco
Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION,
etc." dated September 24, 1982). However, this authority is qualified . . . that the
said brands have been accepted and registered by the Patent Office not later than
six (6) months after you have been manufacturing the cigarettes and placed the
same in the market." However, this grant ". . . does not give you protection against
any person or entity whose rights may be prejudiced by infringement or unfair
competition in relation to your indicated trademarks/brands". As aforestated, the
registration of defendant's application is still pending in the Philippine Patent Office.
It has been repeatedly held in this jurisdiction as well as in the United States that
the right or title of the applicant for injunction remedy must be clear and free from
doubt. Because of the disastrous and painful effects of an injunction, Courts should
be extremely careful, cautious and conscionable in the exercise of its discretion
consistent with justice, equity and fair play.
There is no power the exercise of which is more delicate which
requires greater caution, deliberation, and sound discretion, or
(which is) more dangerous in a doubtful case than the issuing
of an injunction; it is the strong arm of equity that never ought
to be extended unless to cases of great injury, where courts of
law cannot afford an adequate or commensurate remedy in
damages. The right must be clear, the injury impending or
threatened, so as to be averted only by the protecting
preventive process of injunction. (Bonaparte v. Camden, etc.
N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)
Courts of equity constantly decline to lay down any rule which
injunction shall be granted or withheld. There is wisdom in this
course, for it is impossible to foresee all exigencies of society
which may require their aid to protect rights and restrain
wrongs. (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am.
Dec. 262.)
It is the strong arm of the court; and to render its operation
begin and useful, it must be exercised with great discretion,
and when necessary requires it. (Attorney-General v. Utica Inc.
Co., P. John Ch. (N.Y.) 371.)
Having taken a panoramic view of the position[s] of both parties as viewed from
their pleadings, the picture reduced to its minimum size would be this: At the
crossroads are the two (2) contending parties, plaintiffs vigorously asserting the
rights granted by law, treaty and jurisprudence to restrain defendant in its activities
of manufacturing, selling, distributing and advertising its "MARK" cigarettes and
now comes defendant who countered and refused to be restrained claiming that it
has been authorized temporarily by the Bureau of Internal Revenue under certain
conditions to do so as aforestated coupled by its pending application for
registration of trademark "MARK" in the Philippine Patent Office. This circumstance
in itself has created a dispute between the parties which to the mind of the Court
does not warrant the issuance of a writ of preliminary injunction.
It is well-settled principle that courts of equity will refuse an
application for the injunctive remedy where the principle of law
on which the right to preliminary injunction rests is disputed
and will admit of doubt, without a decision of the court of law
establishing such principle although satisfied as to what is a
correct conclusion of law upon the facts. The fact, however,
that there is no such dispute or conflict does not in itself
constitute a justifiable ground for the court to refuse an
application for the injunctive relief. (Hackensack Impr. Commn.
v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)
Hence, the status quo existing between the parties prior to the filing of this case
should be maintained. For after all, an injunction, without reference to the parties,
should be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No.
91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the order denying
issuance of the requested writ, the court of origin took cognizance of the certification executed on
January 30, 1984 by the Philippine Patent Office attesting to the fact that private respondent's
application for registration is still pending appropriate action. Apart from this communication, what
prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners'
application for a writ of preliminary injunction was the letter from the Bureau of Internal Revenue date
February 2, 1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your query as to
whether your label approval automatically expires or becomes null and void after
six (6) months if the brand is not accepted and by the patent office, please be
informed that no provision in the Tax Code or revenue regulation that requires an
applicant to comply with the aforementioned condition order that his label approved
will remain valid and existing.
Based on the document you presented, it shows that registration of this particular
label still pending resolution by the Patent Office. These being so , you may
therefore continue with the production said brand of cigarette until this Office is
officially notified that the question of ownership of "MARK" brand is finally resolved.
(p. 348, Rollo.)
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division of the then
Philippine Patent Office that Fortune's application for its trademark is still pending before said office (p.
311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since March 28, 1983,
when the trial court first declined issuing a writ of preliminary injunction, that could alter the results of
the case in that Fortune's application had been rejected, nay, barred by the Philippine Patent Office,
and that the application had been forfeited by abandonment, but the trial court nonetheless denied the
second motion for issuance of the injunctive writ on April 22, 1987, thus:
 For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-
movants have fallen far short of the legal requisites that would justify the grant of
the writ of preliminary injunction prayed for. For one, they did not even bother to
establish by competent evidence that the products supposedly affected adversely
by defendant's trademark now subject of an application for registration with the
Philippine Patents Office, are in actual use in the Philippines. For another, they
concentrated their fire on the alleged abandonment and forfeiture by defendant of
said application for registration.
The Court cannot help but take note of the fact that in their complaint plaintiffs
included a prayer for issuance preliminary injunction. The petition was duly heard,
and thereafter matter was assiduously discussed lengthily and resolved against
plaintiffs in a 15-page Order issued by the undersigned's predecessor on March
28, 1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8
page Order issued on April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of this case,
plaintiffs came up with the present motion citing therein the said changes which
are: that defendant's application had been rejected and barred by the Philippine
Patents Office, and that said application has been deemed abandoned and
forfeited. But defendant has refiled the same.
Plaintiffs' arguments in support of the present motion appear to be a mere rehash
of their stand in the first above-mentioned petition which has already been ruled
upon adversely against them. Granting that the alleged changes in the material
facts are sufficient grounds for a motion seeking a favorable grant of what has
already been denied, this motion just the same cannot prosper.
In the first place there is no proof whatsoever that any of plaintiffs' products which
they seek to protect from any adverse effect of the trademark applied for by
defendant, is in actual use and available for commercial purposes anywhere in the
Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less
than the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique
Madarang, the abandonment of an application is of no moment, for the same can
always be refiled. He said there is no specific provision in the rules prohibiting such
refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to
Madarang, the refiled application of defendant is now pending before the Patents
Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-
351, Rolloin G. R. No. 91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed
as G.R. No. 78141, but the petition was referred to the Court of Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April
22, 1987, and granted the issuance of a writ of preliminary injunction enjoining Fortune, its agents,
employees, and representatives, from manufacturing, selling, and advertising "MARK" cigarettes. The
late Justice Cacdac, speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132,
remarked:
There is no dispute that petitioners are the registered owners of the trademarks for
cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition).
As found and reiterated by the Philippine Patent Office in two (2) official
communications dated April 6, 1983 and January 24, 1984, the trademark "MARK"
is "confusingly similar" to the trademarks of petitioners, hence registration was
barred under Sec. 4 (d) of Rep. Act. No. 166, as amended (pp. 106, 139,
SCA rollo). In a third official communication dated April 8, 1986, the trademark
application of private respondent for the "MARK" under Serial No. 44008 filed on
February 13, 1981 which was declared abandoned as of February 16, 1986, is now
deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised
Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing
documents or communications mentioned by petitioners as "the changes in
material facts which occurred after March 28, 1983", are not also questioned by
respondents.
Pitted against the petitioners' documentary evidence, respondents pointed to (1)
the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting
Commissioner of Internal Revenue, temporarily granting the request of private
respondent for a permit to manufacture two (2) new brands of cigarettes one of
which is brand "MARK" filter-type blend, and (2) the certification dated September
26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon
the written request of private respondents' counsel dated September 17, 1986
attesting that the records of his office would show that the "trademark MARK" for
cigarettes is now the subject of a pending application under Serial No. 59872 filed
on September 16, 1986.
Private respondent's documentary evidence provides the reasons neutralizing or
weakening their probative values. The penultimate paragraph of Commissioner
Diaz' letter of authority reads:
Please be informed further that the authority herein granted
does not give you protection against any person or entity
whose rights may be prejudiced by infringement or unfair
competition in relation to your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as follows:
This Certification, however, does not give protection as against
any person or entity whose right may be prejudiced by
infringement or unfair competition in relation to the aforesaid
trademark nor the right to register if contrary to the provisions
of the Trademark Law, Rep. Act No. 166 as amended and the
Revised Rules of Practice in Trademark Cases.
The temporary permit to manufacture under the trademark "MARK" for cigarettes
and the acceptance of the second application filed by private respondent in the
height of their dispute in the main case were evidently made subject to the
outcome of the said main case or Civil Case No. 47374 of the respondent Court.
Thus, the Court has not missed to note the absence of a mention in the Sandico
letter of September 26, 1986 of any reference to the pendency of the instant action
filed on August 18, 1982. We believe and hold that petitioners have shown a prima
facie case for the issuance of the writ of prohibitory injunction for the purposes
stated in their complaint and subsequent motions for the issuance of the prohibitory
writ. (Buayan Cattle Co. vs. Quintillan, 125 SCRA 276)
The requisites for the granting of preliminary injunction are the existence of the
right protected and the facts against which the injunction is to be directed as
 violative of said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. good reasons to lift the preliminary injunction, the motion to file a counterbond is
Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the granted. (pp. 53-54, Rollo in G.R. No. 91332.)
case commanding an act which the Court regards as essential to justice and
restraining an act it deems contrary to equity and good conscience (Rosauro vs.
Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of
Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final
preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332).
judgment, do or continue the doing of the act which the plaintiff asks the court to
restrain, and thus make ineffectual the final judgment rendered afterwards granting
the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion
or denial rests upon the sound discretion of the Court except on a clear case of tantamount to excess of jurisdiction when:
abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636).
Petitioners' right of exclusivity to their registered trademarks being clear and
I. . . . it required, contrary to law and jurisprudence, that in order that petitioners
beyond question, the respondent court's denial of the prohibitive writ constituted
may suffer irreparable injury due to the lifting of the injunction, petitioners should be
excess of jurisdiction and grave abuse discretion. If the lower court does not grant
using actually their registered trademarks in commerce in the Philippines;
preliminary injunction, the appellate court may grant the same. (Service Specialists,
Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court;
and
After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the
disputed writ of preliminary injunction with offer to post a counterbond was submitted which was
favorably acted upon by the Court of Appeals, premised on the filing of a sufficient counterbond to III. . . . after having found that the trial court had committed grave abuse of
answer for whatever perjuicio petitioners may suffer as a result thereof, to wit: discretion and exceeded its jurisdiction for having refused to issue the writ of
injunction to restrain private respondent's acts that are contrary to equity and good
conscience, it made a complete about face for legally insufficient grounds and
The private respondent seeks to dissolve the preliminary injunction previously
authorized the private respondent to continue performing the very same acts that it
granted by this Court with an offer to file a counterbond. It was pointed out in its
had considered contrary to equity and good conscience, thereby ignoring not only
supplemental motion that lots of workers employed will be laid off as a
the mandates of the Trademark Law, the international commitments of the
consequence of the injunction and that the government will stand to lose the
Philippines, the judicial admission of private respondent that it will have no more
amount of specific taxes being paid by the 
right to use the trademark "MARK" after the Director of Patents shall have rejected
private respondent. The specific taxes being paid is the sum total of P120,120,
the application to register it, and the admonitions of the Supreme Court. (pp. 24-25,
295.98 from January to July 1989.
Petition; pp. 25-26, Rollo.)

The petitioners argued in their comment that the damages caused by the
To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not
infringement of their trademark as well as the goodwill it generates are incapable of
engaged in local commerce, rely on section 21-A of the Trademark Law reading as follows:
pecuniary estimation and monetary evaluation and not even the counterbond could
adequately compensate for the damages it will incur as a result of the dissolution of
the bond. In addition, the petitioner further argued that doing business in the Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name
Philippines is not relevant as the injunction pertains to an infringement of a has been registered or assigned under this act may bring an action hereunder for
trademark right. infringement, for unfair competition, or false designation of origin and false
description, whether or not it has been licensed to do business in the Philippines
under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise
After a thorough re-examination of the issues involved and the arguments
known as the Corporation Law, at the time it brings complaint: Provided, That the
advanced by both parties in the offer to file a counterbond and the opposition
country of which the said foreign corporation or juristic person is a citizen or in
thereto, WE believe that there are sound and cogent reasons for US to grant the
which it is domiciled, by treaty, convention or law, grants a similar privilege to
dissolution of the writ of preliminary injunction by the offer of the private respondent
corporate or juristic persons of the Philippines. (As inserted by Sec. 7 of Republic
to put up a counterbond to answer for whatever damages the petitioner may suffer
Act No. 638.)
as a consequence of the dissolution of the preliminary injunction.

to drive home the point that they are not precluded from initiating a cause of action
The petitioner will not be prejudiced nor stand to suffer irreparably as a
in the Philippines on account of the principal perception that another entity is
consequence of the lifting of the preliminary injunction considering that they are not
pirating their symbol without any lawful authority to do so. Judging from a perusal
actually engaged in the manufacture of the cigarettes with the trademark in
of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly
question and the filing of the counterbond will amply answer for such damages.
correct for the proposition in support thereof is embedded in the Philippine legal
jurisprudence.
While the rule is that an offer of a counterbond does not operate to dissolve an
injunction previously granted, nevertheless, it is equally true that an injunction
Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971])
could be dissolved only upon good and valid grounds subject to the sound
by then Justice (later Chief Justice) Makalintal that:
discretion of the court. As WE have maintained the view that there are sound and
 Parenthetically, it may be stated that the ruling in the Mentholatum case was
subsequently derogated when Congress, purposely to "counteract the effects" of
said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark
Law, which allows a foreign corporation or juristic person to bring an action in
Philippine courts for infringement of a mark or tradename, for unfair competition, or
false designation of origin and false description, "whether or not it has been
licensed to do business in the Philippines under Act Numbered Fourteen hundred
and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it
brings complaint."
Petitioner argues that Section 21-A militates against respondent's capacity to
maintain a suit for cancellation, since it requires, before a foreign corporation may
bring an action, that its trademark or tradename has been registered under the
Trademark Law. The argument misses the essential point in the said provision,
which is that the foreign corporation is allowed thereunder to sue "whether or not it
has been licensed to do business in the Philippines" pursuant to the Corporation
Law (precisely to counteract the effects of the decision in the Mentholatum case).
(at p. 57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this
Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign
corporation not doing business in the Philippines may have the right to sue before Philippine Courts,
but existing adjective axioms require that qualifying circumstances necessary for the assertion of such
right should first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p.
598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a
foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally
allege its personality to sue. Relative to this condition precedent, it may be observed that petitioners
were not remiss in averring their personality to lodge a complaint for infringement (p. 75, Rollo in AC-
G.R. SP No. 13132) especially so when they asserted that the main action for infringement is anchored
on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu
Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed.,
1988, p. 103).
Another point which petitioners considered to be of significant interest, and which they desire to impress
upon us is the protection they enjoy under the Paris Convention of 1965 to which the Philippines is a
signatory. Yet, insofar as this discourse is concerned, there is no necessity to treat the matter with an
extensive response because adherence of the Philippines to the 1965 international covenant due
to pact sunt servanda had been acknowledged in La Chemise (supra at page 390).
Given these confluence of existing laws amidst the cases involving trademarks, there can be no
disagreement to the guiding principle in commercial law that foreign corporations not engaged in
business in the Philippines may maintain a cause of action for infringement primarily because of
Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have
done in the case at hand.
In assailing the justification arrived at by respondent court when it recalled the writ of preliminary
injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial
dealings is not an indispensable element under Article 2 of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or establishment in the
country where protection is claimed may be required of persons entitled to the
benefits of the Union for the enjoyment of any industrial property of any industrial
property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)
Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the
Trademark Law which speak loudly, about necessity of actual commercial use of the trademark in the
local forum:
Sec. 2. What are registrable. — Trademarks, tradenames and service marks
owned by persons, corporations, partnerships or associations domiciled in the
Philippines and by persons, corporations, partnerships or associations domiciled in
any foreign country may be registered in accordance with the provisions of this
Act; Provided, That said trademarks, tradenames, or service marks are actually in
use in commerce and services not less than two months in the Philippines before
the time the applications for registration are filed; And provided, further, That the
country of which the applicant for registration is a citizen grants by law substantially
similar privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English language, by
the government of the foreign country to the Government of the Republic of the
Philippines. (As amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired.
— Anyone who lawfully produces or deals in merchandise of any kind or who
engages in any lawful business, or who renders any lawful service in
commerce, by actual use thereof in manufacture or trade, in business,and in the
service rendered, may appropriate to his exclusive use a trademark, a tradename,
or a service mark not so appropriated by another, to distinguish his merchandise,
business or service from the merchandise, business or service of others. The
ownership or possession of a trademark, tradename, service mark, heretofore or
hereafter appropriated, as in this section provided, shall be recognized and
protected in the same manner and to the same extent as are other property rights
known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha Isetan vs.
Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis
supplied.)
Following universal acquiescence and comity, our municipal law on trademarks regarding the
requirement of actual use in the Philippines must subordinate an international agreement inasmuch as
the apparent clash is being decided by a municipal tribunal (Mortensen 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 (Salonga and Yap, Public International
Law, Fourth ed., 1974, p. 16).
The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi
Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this
manner:
A fundamental principle of Philippine Trademark Law is that actual use in
commerce in the Philippines is a pre-requisite to the acquisition of ownership over
a trademark or a tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products International, Inc. v.
Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:
 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 to the acquisition of the right of
ownership over a trademark.
x x x           x x x          x x x
. . . Adoption alone of a trademark would not give exclusive
right thereto. Such right grows out of their actual use. Adoption
is not use. One may make advertisements, issue circulars,
give out price lists on certain goods; but these alone would not
give exclusive right of use. For trademark is a creation of use.
The underlying reason for all these is that purchasers have
come to understand the mark as indicating the origin of the
wares. Flowing from this is the trader's right to protection in the
trade he has built up and the goodwill he has accumulated
from use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses
it in commerce.
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526
[1982]):
3. 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 (Exhibits 7, 7-a, and
8-b) 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. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) "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 the 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. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982];
Emphasis Supplied)
The records show that the petitioner has never conducted any business in the
Philippines. It has never promoted its tradename or trademark in the Philippines. It
is unknown to Filipino except the very few who may have noticed it while travelling
abroad. It has never paid a single centavo of tax to the Philippine government.
Under the law, it has no right to the remedy it seeks. (at pp. 589-591.)
In other words, petitioners 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 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
Philippines files a complaint for infringement, the entity need not be actually using its trademark in
commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for
infringement but it may not necessarily be entitled to protection due to absence of actual use of the
emblem in the local market.
Going back to the first assigned error, we can not help but notice the manner the ascription was framed
which carries with it the implied but unwarranted assumption of the existence of petitioners' right to
relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the
corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite
quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary
injunction is due to judicial deference to the lower courts, involved as there is mere interlocutory order
(Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a
remedial measure which is but ancillary to the main action for infringement still pending factual
determination before the court of origin. It is virtually needless to stress the obvious reality that critical
facts in an infringement case are not before us more so when even Justice Feliciano's opinion observes
that "the evidence is scanty" and that petitioners "have yet to submit copies or photographs of their
registered marks as used in cigarettes" while private respondent has not, for its part, "submitted the
actual labels or packaging materials used in selling its "Mark" cigarettes." Petitioners therefore, may not
be permitted to presume a given state of facts on their so called right to the trademarks which could be
subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy would
practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable
barrier to petitioners' portrayal of whimsical exercise of discretion by the Court of Appeals is the well-
taken remark of said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that they are not
actually engaged in the manufacture of the cigarettes with the trademark in
question and the filing of the counterbond will amply answer for such damages. (p.
54. Rollo in G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No. 91332) as well
as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not
doing business in the Philippines, for these frank representations are inconsistent and incongruent with
any pretense of a right which can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section
3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show
that there exists a right to be protected and that the facts against which injunction is directed are
violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It
may be added in this connection that albeit petitioners are holders of certificate of registration in the
Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot
be made to rest solely on these documents since dominion over trademarks is not acquired by the
mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises,
Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]).
Even if we disregard the candid statements of petitioners anent the absence of business activity here
and rely on the remaining statements of the complaint below, still, when these averments are
juxtaposed with the denials and propositions of the answer submitted by private respondent, the
supposed right of petitioners to the symbol have thereby been controverted. This is not to say,
however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of
justice in favor of private respondent. Far from it. What we are simply conveying is another basic tenet
in remedial law that before injunctive relief may properly issue, complainant's right or title must be
undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably
exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as
the possibility of irreparable damage, without prior proof of transgression of an actual existing right, is
no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of
Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 In view of the explicit representation of petitioners in the complaint that they are not engaged in
Martin, Rules of Court, 1986 ed., p. 82). business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them
not to mention the foremost consideration heretofore discussed on the absence of their "right" to be
protected. At any rate, and assuming in gratia argumenti that respondent court erroneously lifted the
On the economic repercussion of this case, we are extremely bothered by the thought of having to
writ it previously issued, the same may be cured by appeal and not in the form of a petition
participate in throwing into the streets Filipino workers engaged in the manufacture and sale of private
for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of
respondent's "MARK" cigarettes who might be retrenched and forced to join the ranks of the many
the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of
unemployed and unproductive as a result of the issuance of a simple writ of preliminary injunction and
the court before final judgment, petitioners' criticism must fall flat on the ground, so to speak, more so
this, during the pendency of the case before the trial court, not to mention the diminution of tax
when extinction of the previously issued writ can even be made without previous notice to the adverse
revenues represented to be close to a quarter million pesos annually. On the other hand, if the status
party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed.,
quo is maintained, there will be no damage that would be suffered by petitioners inasmuch as they are
p. 81).
not doing business in the Philippines.

WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated
With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary
September 14, 1989 and November 29, 1989 are hereby AFFIRMED.
injunction, it cannot be gainsaid that respondent court acted well within its prerogatives under Section
6, Rule 58 of the Revised Rules of Court:
SO ORDERED.
Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. — The
injunction may be refused or, if granted ex parte, may be dissolved, upon the Bidin, J., concurs.
insufficiency of the complaint as shown by the complaint itself, with or without
notice to the adverse party. It may also be refused or dissolved on other grounds
upon affidavits on the part of the defendants which may be opposed by the plaintiff
also by affidavits. It may further be refused or, if granted, may be dissolved, if it
appears after hearing that although the plaintiff is entitled to the injunction, the
issuance or continuance thereof, as the case may be, would cause great damage
to the defendant while the plaintiff can be fully compensated for such damages as
he may suffer, and the defendant files a bond in an amount fixed by the judge
conditioned that he will pay all damages which the plaintiff may suffer by the refusal
or the dissolution of the injunction. If it appears that the extent of the preliminary
injunction granted is too great, it must be modified.

Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following
instances:

(1) If there is insufficiency of the complaint as shown by the allegations

therein. Refusal or dissolution may be granted in this case with or without notice to
the adverse party.

(2) If it appears after hearing that although the plaintiff is entitled to the injunction,
the issuance or continuance thereof would cause great damage to the defendant,
while the plaintiff can be fully compensated for such damages as he may suffer.
The defendant, in this case, must file a bond in an amount fixed by the judge
conditioned that he will pay all damages which plaintiff may suffer by the refusal or
the dissolution of the injunction.

(3) On the other grounds upon affidavits on the part of the defendant which may be
opposed by the plaintiff also affidavits.

Modification of the injunction may also be ordered by the court if it appears that the
extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court,
1986 ed., p. 99; Francisco, supra, at p. 268.)