Protection and Guarantees under International Instruments

Universal Declaration of Human Rights

Preamble

Whereas recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom,
justice and peace in the world,

Whereas disregard and contempt for human rights have resulted in barbarous acts which have outraged the conscience of mankind, and the advent
of a world in which human beings shall enjoy freedom of speech and belief and freedom from fear and want has been proclaimed as the highest
aspiration of the common people,

Whereas it is essential, if man is not to be compelled to have recourse, as a last resort, to rebellion against tyranny and oppression, that human
rights should be protected by the rule of law,

Whereas it is essential to promote the development of friendly relations between nations,

Whereas the peoples of the United Nations have in the Charter reaffirmed their faith in fundamental human rights, in the dignity and worth of the
human person and in the equal rights of men and women and have determined to promote social progress and better standards of life in larger
freedom,

Whereas Member States have pledged themselves to achieve, in co-operation with the United Nations, the promotion of universal respect for and
observance of human rights and fundamental freedoms,

Whereas a common understanding of these rights and freedoms is of the greatest importance for the full realization of this pledge,

Now, therefore,

The General Assembly,

Proclaims this Universal Declaration of Human Rights as a common standard of achievement for all peoples and all nations, to the end that every
individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these
rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance,
both among the peoples of Member States themselves and among the peoples of territories under their jurisdiction.

Article 1

All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another
in a spirit of brotherhood.

Article 2

Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language,
religion, political or other opinion, national or social origin, property, birth or other status. Furthermore, no distinction shall be made on the basis of
the political, jurisdictional or international status of the country or territory to which a person belongs, whether it be independent, trust, non-self-
governing or under any other limitation of sovereignty.

Article 3

Everyone has the right to life, liberty and security of person.

Article 4

No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms.

Article 5

No one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment.

Article 6

Everyone has the right to recognition everywhere as a person before the law.

Article 7

All are equal before the law and are entitled without any discrimination to equal protection of the law. All are entitled to equal protection against any
discrimination in violation of this Declaration and against any incitement to such discrimination.

Article 8

Everyone has the right to an effective remedy by the competent national tribunals for acts violating the fundamental rights granted him by the
constitution or by law.

Article 9
No one shall be subjected to arbitrary arrest, detention or exile.

Article 10

Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and
obligations and of any criminal charge against him.

Article 11

Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in a public trial at which he has had
all the guarantees necessary for his defence.

No one shall be held guilty of any penal offence on account of any act or omission which did not constitute a penal offence, under national or
international law, at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the penal
offence was committed.

Article 12

No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation.
Everyone has the right to the protection of the law against such interference or attacks.

Article 13

Everyone has the right to freedom of movement and residence within the borders of each state.

Everyone has the right to leave any country, including his own, and to return to his country.

Article 14

Everyone has the right to seek and to enjoy in other countries asylum from persecution.

This right may not be invoked in the case of prosecutions genuinely arising from non-political crimes or from acts contrary to the purposes and
principles of the United Nations.

Article 15

Everyone has the right to a nationality.

No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.

Article 16

Men and women of full age, without any limitation due to race, nationality or religion, have the right to marry and to found a family. They are entitled
to equal rights as to marriage, during marriage and at its dissolution.

Marriage shall be entered into only with the free and full consent of the intending spouses.

The family is the natural and fundamental group unit of society and is entitled to protection by society and the State.

Article 17

Everyone has the right to own property alone as well as in association with others.

No one shall be arbitrarily deprived of his property.

Article 18

Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either
alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance.

Article 19

Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive
and impart information and ideas through any media and regardless of frontiers.

Article 20

Everyone has the right to freedom of peaceful assembly and association.

No one may be compelled to belong to an association.

Article 21

Everyone has the right to take part in the government of his country, directly or through freely chosen representatives.

Everyone has the right of equal access to public service in his country.

The will of the people shall be the basis of the authority of government; this will shall be expressed in periodic and genuine elections which shall be
by universal and equal suffrage and shall be held by secret vote or by equivalent free voting procedures.

Article 22
Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation
and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the
free development of his personality.

Article 23

Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.

Everyone, without any discrimination, has the right to equal pay for equal work.

Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and
supplemented, if necessary, by other means of social protection.

Everyone has the right to form and to join trade unions for the protection of his interests.

Article 24

Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.

Article 25

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing
and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or
other lack of livelihood in circumstances beyond his control.

Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social
protection.

Article 26

Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be
compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the
basis of merit.

Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental
freedoms. It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the
United Nations for the maintenance of peace.

Parents have a prior right to choose the kind of education that shall be given to their children.

Article 27

Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its
benefits.

Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is
the author.

Article 28

Everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized.

Article 29

Everyone has duties to the community in which alone the free and full development of his personality is possible.

In the exercise of his rights and freedoms, everyone shall be subject only to such limitations as are determined by law solely for the purpose of
securing due recognition and respect for the rights and freedoms of others and of meeting the just requirements of morality, public order and the
general welfare in a democratic society.

These rights and freedoms may in no case be exercised contrary to the purposes and principles of the United Nations.

Article 30

Nothing in this Declaration may be interpreted as implying for any State, group or person any right to engage in any activity or to perform any act
aimed at the destruction of any of the rights and freedoms set forth herein.

Summary of the Berne Convention for the Protection of Literary and Artistic Works (1886)

The Berne Convention deals with the protection of works and the rights of their authors. It is based on three basic principles and contains a series
of provisions determining the minimum protection to be granted, as well as special provisions available to developing countries that want to make
use of them.
(1) The three basic principles are the following:
(a) Works originating in one of the Contracting States (that is, works the author of which is a national of such a State or works first published in such
a State) must be given the same protection in each of the other Contracting States as the latter grants to the works of its own nationals (principle of
"national treatment") [1].
(b) Protection must not be conditional upon compliance with any formality (principle of "automatic" protection) [2].
(c) Protection is independent of the existence of protection in the country of origin of the work (principle of "independence" of protection). If, however,
a Contracting State provides for a longer term of protection than the minimum prescribed by the Convention and the work ceases to be protected in
the country of origin, protection may be denied once protection in the country of origin ceases [3].
(2) The minimum standards of protection relate to the works and rights to be protected, and to the duration of protection:
(a) As to works, protection must include "every production in the literary, scientific and artistic domain, whatever the mode or form of its expression"
(Article 2(1) of the Convention).

(b) Subject to certain allowed reservations, limitations or exceptions, the following are among the rights that must be recognized as exclusive rights
of authorization:
▪ the right to translate,
▪ the right to make adaptations and arrangements of the work,
▪ the right to perform in public dramatic, dramatico-musical and musical works,
▪ the right to recite literary works in public,
▪ the right to communicate to the public the performance of such works,
▪ the right to broadcast (with the possibility that a Contracting State may provide for a mere right to equitable remuneration instead of a
right of authorization),
▪ the right to make reproductions in any manner or form (with the possibility that a Contracting State may permit, in certain special cases,
reproduction without authorization, provided that the reproduction does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the legitimate interests of the author; and the possibility that a Contracting State may provide, in the case of sound
recordings of musical works, for a right to equitable remuneration),
▪ the right to use the work as a basis for an audiovisual work, and the right to reproduce, distribute, perform in public or communicate to
the public that audiovisual work [4].
The Convention also provides for "moral rights", that is, the right to claim authorship of the work and the right to object to any mutilation,
deformation or other modification of, or other derogatory action in relation to, the work that would be prejudicial to the author's honor or reputation.
(c) As to the duration of protection, the general rule is that protection must be granted until the expiration of the 50th year after the author's death.
There are, however, exceptions to this general rule. In the case of anonymous or pseudonymous works, the term of protection expires 50 years after
the work has been lawfully made available to the public, except if the pseudonym leaves no doubt as to the author's identity or if the author discloses
his or her identity during that period; in the latter case, the general rule applies. In the case of audiovisual (cinematographic) works, the minimum
term of protection is 50 years after the making available of the work to the public ("release") or – failing such an event – from the creation of the work.
In the case of works of applied art and photographic works, the minimum term is 25 years from the creation of the work [5].
(3) The Berne Convention allows certain limitations and exceptions on economic rights, that is, cases in which protected works may be used without
the authorization of the owner of the copyright, and without payment of compensation. These limitations are commonly referred to as "free uses" of
protected works, and are set forth in Articles 9(2) (reproduction in certain special cases), 10 (quotations and use of works by way of illustration for
teaching purposes), 10bis (reproduction of newspaper or similar articles and use of works for the purpose of reporting current events) and 11bis(3)
(ephemeral recordings for broadcasting purposes).
(4) The Appendix to the Paris Act of the Convention also permits developing countries to implement non-voluntary licenses for translation and
reproduction of works in certain cases, in connection with educational activities. In these cases, the described use is allowed without the
authorization of the right holder, subject to the payment of remuneration to be fixed by the law.

The Berne Union has an Assembly and an Executive Committee. Every country that is a member of the Union and has adhered to at least the
administrative and final provisions of the Stockholm Act is a member of the Assembly. The members of the Executive Committee are elected from
among the members of the Union, except for Switzerland, which is a member ex officio.
The establishment of the biennial program and budget of the WIPO Secretariat – as far as the Berne Union is concerned – is the task of its
Assembly.

The Berne Convention, concluded in 1886, was revised at Paris in 1896 and at Berlin in 1908, completed at Berne in 1914, revised at Rome in 1928,
at Brussels in 1948, at Stockholm in 1967 and at Paris in 1971, and was amended in 1979.

The Convention is open to all States. Instruments of ratification or accession must be deposited with the Director General of WIPO [6].

[1] Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the principles of national treatment,
automatic protection and independence of protection also bind those World Trade Organization (WTO) Members not party to the Berne Convention.
In addition, the TRIPS Agreement imposes an obligation of "most-favored-nation treatment", under which advantages accorded by a WTO Member
to the nationals of any other country must also be accorded to the nationals of all WTO Members. It is to be noted that the possibility of delayed
application of the TRIPS Agreement does not apply to national treatment and most-favored obligations.
[2] Idem.
[3] Idem.
[4] Under the TRIPS Agreement, an exclusive right of rental must be recognized in respect of computer programs and, under certain conditions,
audiovisual works.
[5] Under the TRIPS Agreement, any term of protection that is calculated on a basis other than the life of a natural person must be at least 50 years
from the first authorized publication of the work, or – failing such an event – 50 years from the making of the work. However, this rule does not apply
to photographic works, or to works of applied art.
[6] It is to be noted that WTO Members, even those not party to the Berne Convention, must comply with the substantive law provisions of the Berne
Convention, except that WTO Members not party to the Convention are not bound by the moral rights provisions of the Convention.
FIRST DIVISION

G.R. No. 114508 November 19, 1999

PRIBHDAS J. MIRPURI, petitioner,

vs.

COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.:

The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this
country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar
trademark is the principal issue in this case.

On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for
the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and
selling these products under the firm name "L & BM Commercial" since March 3, 1970.

Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application.
It claimed that:

The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned.

That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable
injury.

That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an
unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic
Act No. 166, as amended. 1

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision.

On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus:

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark
BARBIZON, of respondent Lolita R. Escobar, is given due course.

IT IS SO ORDERED. 2

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The
trademark was "for use in "brassieres and lady's underwear garments like panties." 3

Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito
Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products.

In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act
(R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration.

On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's
trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was
docketed as Inter Partes Case No. 2049 (IPC No. 2049).

In its opposition, private respondent alleged that:

(a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel.
On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of
Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said
trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration covers
the following goods — wearing apparel: robes, pajamas, lingerie, nightgowns and slips;

(b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of
wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of
Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said Certificate of Registration covers the following goods: robes,
pajamas, lingerie, nightgowns and slips;

(c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said
trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983
under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said
certificate of registration is herewith enclosed as Annex "C."

(d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through
a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and
selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation
of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and
prejudice of Opposer and its wholly-owned subsidiary.

(e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and
has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the
registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu
Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong,
Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa,
Zambia, Egypt, and Iran, among others;

(f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has
extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries
around the world, including the Philippines;

(g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on
September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant
acquired by assignment the "rights" to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the
same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein
respondent-applicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this
opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar.

(h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-
known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by
the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive Order No. 913 dated
October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983.

(i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's
two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-
applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if
allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to
an international treaty. 5

Replying to private respondent's opposition, petitioner raised the defense of res judicata.

On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the
Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987.

Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name.

On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner
and prior user of the business name "Barbizon International." Thus:

WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON
INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby
ordered revoked and cancelled. . . . . 6

Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a
decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit:

WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED.
Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE.

SO ORDERED. 7

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed
the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau
of Patents for further proceedings, viz:

WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET
ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9 Hence, this recourse.

Before us, petitioner raises the following issues:

1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974,
ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED;

2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE
RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON,
WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992;

3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS" REQUIRED A "HEARING WHERE BOTH PARTIES ARE
SUPPOSED TO ADDUCE EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR
RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF
"JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE RES JUDICATA;

4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME "BARBIZON
INTERNATIONAL" AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE
DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF
THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION
AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF
PATENTS. 10

Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark
law.

A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination
thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by
others. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any
visible sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or
ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of
merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to
protect the manufacturer against substitution and sale of an inferior and different article as his product. 13

Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to
which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they
symbolize. 14

Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As early as 5,000 B.C., markings on pottery have
been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of
ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which
are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the
payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17

In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of
identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper,
etc. 18 Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police
marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild
had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19 For a similar reason, merchants also used
merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon
recovery after shipwreck or piracy. 20

With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the
customer an index or guarantee of quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass production and
distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not
merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming
public. 23 Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right
protected by law. 24 The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as
another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25 Subsequently, England and
the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the trademark owner
to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the
same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27

Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of
goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other
words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the
trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling
point than even the quality of the article to which it refers. 29 In the last half century, the unparalleled growth of industry and the rapid development of
communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner
does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones
where the marked article has been fixed in the public mind through advertising. 30 Whether in the print, broadcast or electronic communications
medium, particularly on the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning a reputation
that crosses over borders, virtually turning the whole world into one vast marketplace.

This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines
since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of
the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering
hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented from appropriating
what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res
judicata. 33

Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34 In res judicata, the
judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might
have been offered for that purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a subsequent
action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits;
(c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second
actions, identity of parties, of subject matter and of causes of action. 36

The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res
judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over
the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because
substantial issues were raised by the parties and passed upon by the Director of Patents. 37

The decision in IPC No. 686 reads as follows:

xxx xxx xxx.

Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with
the pertinent records, have all been carefully considered.

Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark
BARBIZON sought by the respondent-applicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the
former to be "likely to cause confusion, mistake or to deceive purchasers."

On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to
opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective
appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the
opposer is offered in stylish script letters.

It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the
registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is
devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date
(or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition,
Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the
identical mark by the herein respondent-applicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any
proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings.

On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for
brassiere (or "brasseire") and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken
as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173,
Rules of Practice in Trademark Cases).

From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark
BARBIZON.

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark
BARBIZON of respondent Lolita R. Escobar, is given due course.38

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the
merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections.
39 It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection,
and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual
hearing or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a
sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence.
They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the
Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the
parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld.

The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the
fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action.

Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar
while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private
respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in
IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines,
and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the
trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article
6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as
Executive Order (E.O.) No. 913.

The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to
protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source
or appellations of origin, and at the same time aims to repress unfair competition. 41 The Convention is essentially a compact among various
countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable
to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42 In short, foreign nationals are to
be given the same treatment in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various
member nations are thus assured of a certain minimum of international protection of their industrial property. 44
The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several revisions — at Brussels in 1900, at
Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the Philippines and the United
States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the
Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from
this date, the country obligated itself to honor and enforce the provisions of the Convention. 49

In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as
follows:

Article 6bis

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to
cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a 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 this Convention and used for identical or similar goods. These provisions shall also apply when the
essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

(2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union
may provide for a period within which the prohibition of use must be sought.

(3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 50

This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or
cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark
constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to
be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods.

Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-executing provision and does not require
legislative enactment to give it effect in the member country. 52 It may be applied directly by the tribunals and officials of each member country by
the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution.
53

The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought.
The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent
authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a
court. 54

Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of
Patents. The Minister ordered the Director that:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed 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, 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.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance. 55

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz:

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 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] 56 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 6bis 57 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 date of such
registration;

(d) that the trademark has long been established and obtained goodwill and 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 6bis 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.

xxx xxx xxx. 58

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of
signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several
internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of
registration.

In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of
Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris
Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria
enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a
reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for
registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was
issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory
powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and
industry. 59

Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v.
Fernandez. 60 This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the
"competent authority" to determine whether a trademark is well-known in this country. 61

The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the
first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris
Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection
of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and
the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent.

The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda is barred by res
judicata has already been answered in Wolverine Worldwide, Inc. v. Court of

Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the
registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the
registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the
Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's
predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-in-interest. The Patent Office
dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for
registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63

Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new
cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said
Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with
respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the finding that Wolverine's two previous
petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65 In other words, since the first and second cases
involved the same issue of ownership, then the first case was a bar to the second case.

In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was
merely anchored on:

(a) "confusing similarity" of its trademark with that of Escobar's;

(b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and
(c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized
under Section 4 (d) of the Trademark Law.

In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows:

(a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips;

(b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same
trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office
in 1961 and 1976;

(c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been
advertised in international publications and the marks registered in 36 countries worldwide;

(d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979,
stripping Escobar of whatsoever right she had to the said mark;

(e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No.
913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents;

(f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the
Trademark Law and Article 189 of the Revised Penal Code.

IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries,
and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products
for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use
may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private
respondent's claim as originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to its products which
have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in
the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res
judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes
of action and were not put in issue in the former action. 67

Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The
cancellation of petitioner's certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have
occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and
conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. 68
When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no
longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 69

It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific
provisions of the Trademark Law, i.e., Section 4 (d) 70 on confusing similarity of trademarks and Section 8 71 on the requisite damage to file an
opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913
and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute
totally different from the Trademark Law. 72 Causes of action which are distinct and independent from each other, although arising out of the same
contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. 73 The mere fact
that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the
two actions are based on different statutes. 74 Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err
in so ruling.

Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological function of symbols and the
effect of these symbols on the public at large. 75 Trademarks play a significant role in communication, commerce and trade, and serve valuable and
interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on
trademarks and tradenames, are intimately connected with economic development. 76 Industrial property encourages investments in new ideas and
inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and
thereby bring about social and economic progress. 77 These advantages have been acknowledged by the Philippine government itself. The
Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of
domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." 78 The
Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79 repealed the Trademark Law, 80 the Patent Law, 81
Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the Decree on Compulsory Reprinting of Foreign
Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's
accession to the Agreement Establishing the World Trade Organization (WTO). 84

The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and
plurilateral trade agreements annexed to the WTO Agreement. 85 The WTO framework ensures a "single undertaking approach" to the
administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on
Trade-Related Aspects of Intellectual Property Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions and impediments to
international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that
measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives,
the members have agreed to adhere to minimum standards of protection set by several Conventions. 87 These Conventions are: the Berne
Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of
Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the
Paris Convention (1967), as revised in Stockholm on July 14, 1967. 88
A major proportion of international trade depends on the protection of intellectual property rights. 89 Since the late 1970's, the unauthorized
counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues.
90 The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to
encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring about economic, cultural and technological
independence. 91

The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business
and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. 92 Protectionism and
isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting
the widespread desire to operate in a fairer and more open multilateral trading system." 93 Conformably, the State must reaffirm its commitment to
the global community and take part in evolving a new international economic order at the dawn of the new millenium.

IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are affirmed.

SO ORDERED.

SECOND DIVISION

G.R. No. 195956 March 11, 2015

ABS-CBN CORPORATION, Petitioner,

vs.

FELIPE GOZON, GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A. SORO, GRACE DELA PENA-REYES, JOHN OLIVER T.
MANALASTAS, JOHN DOES AND JANE DOES, Respondents.

DECISION

LEONEN, J.:

The main issue in this case is whether there is probable cause to charge respondents with infringement under Republic Act No. 8293, otherwise
known as the Intellectual Property Code. The resolution of this issue requires clarification of the concept of "copyrightable material" in relation to
material that is rebroadcast live as a news story. We are also asked to rule on whether criminal prosecution for infringement of copyrightable
material, such as live rebroadcast, can be negated by good faith.

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari1 to assail the November 9, 2010 Decision2 and the March 3, 2011
Resolution3 of the Court of Appeals. The Court of Appeals reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the
withdrawal of the Information finding probable cause for respondents’ violation of Sections 1774 and 2115 of the Intellectual Property Code.6
Respondents are officers and employees of GMA Network, Inc. (GMA-7). They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr.
(Duavit, Jr.), Executive Vice-President; Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A. Soho (Soho), Director for
News; Grace Dela Peña-Reyes (Dela Peña-Reyes), Head of News and Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and
others.

The controversy arose from GMA-7’s news coverage on the homecoming of Filipino overseas worker and hostage victim Angelo dela Cruz on July
22, 2004. As summarized by the Court of Appeals:

Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition for his release, a demand was made for the
withdrawal of Filipino troops in Iraq. After negotiations, he was released by his captors and was scheduled to return to the country in the afternoon of
22 July 2004. Occasioned by said homecoming and the public interest it generated, both . . . GMA Network, Inc. . . . and [petitioner] made their
respective broadcasts and coverage of the live event.7

ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz at the Ninoy Aquino International Airport (NAIA)
and the subsequent press conference."8 ABS-CBN allowed Reuters Television Service (Reuters) to air the footages it had taken earlier under a
special embargo agreement.9

ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be for the "use of Reuter’s international subscribers
only, and shall be considered and treated by Reuters under ‘embargo’ against use by other subscribers in the Philippines. . . . [N]o other Philippine
subscriber of Reuters would be allowed to use ABS-CBN footage without the latter’s consent."10

GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are connected, "assigned and stationed news reporters and
technical men at the NAIA for its live broadcast and non-live news coverage of the arrival of dela Cruz."11 GMA-7 subscribes to both Reuters and
Cable News Network (CNN). It received a live video feed of the coverage of Angelo dela Cruz’s arrival from Reuters.12

GMA-7 immediately carried the live news feed in its program "Flash Report," together with its live broadcast.13 Allegedly, GMA-7 did not receive any
notice or was not aware that Reuters was airing footages of ABS-CBN.14 GMA-7’s news control room staff saw neither the "No Access Philippines"
notice nor a notice that the video feed was under embargo in favor of ABS-CBN.15

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections 17716 and 21117 of the Intellectual Property Code.18
On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution19 finding probable cause to indict Dela Peña-Reyes and
Manalastas.20 Consequently, the Information21 for violation of the Intellectual Property Code was filed on December 17, 2004. It reads:

That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused, conspiring together, confederating with and mutually
helping each other, being the Head of News Operations and the Program Manager, respectively, for the News and Public Affairs Department of GMA
Network, Inc., did then and there, willfully, unlawfully and feloniously use and broadcast the footage of the arrival of Angelo [d]ela Cruz at the Ninoy
Aquino International Airport of which ABS-CBN holds the exclusive ownership and copyright by then and there using, airing, and broadcasting the
said footage in its news program "FLASH REPORT" without first obtaining the consent or authority of said copyright owner, to their damage and
prejudice.

Contrary to law.22

On January 4, 2005, respondents filed the Petition for Review before the Department of Justice.23 In the Resolution (Gonzalez Resolution) dated
August 1, 2005, Department of Justice Secretary Raul M. Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith may
be raised as a defense in the case.24 The dispositive portion of the Resolution reads:

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is considered meritorious and is hereby GRANTED. This case
is hereby Dismissed, the resolution of the City Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the information if
any and report action taken to this office within ten (10) days.25 (Emphasis in the original)

Both parties moved for reconsideration of the Gonzalez Resolution.26

Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed earlier by Dela Peña-Reyes and Manalastas.27
The trial court Order reads:

Perusing the motion, the court finds that a petition for review was filed with the Department of Justice on January 5, 2005 as confirmed by the public
prosecutor. Under Section 11 (c), Rule 116 of the Rules of Criminal Procedure, once a petition for review is filed with the Department of Justice, a
suspension of the criminal proceedings may be allowed by the court.

Accordingly, to allow the Department of Justice the opportunity to act on said petition for review, let the proceedings on this case be suspended for a
period of sixty (60) days counted from January 5, 2005, the date the petition was filed with the Department of Justice. The arraignment of the
accused on February 1, 2005 is accordingly cancelled. Let the arraignment be rescheduled to March 8, 2005 at 8:30 a.m. The accused through
counsel are notified in open court.

SO ORDERED.28

On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra) issued the Resolution (Agra Resolution) that reversed
the Gonzalez Resolution and found probable cause to charge Dela Peña-Reyes and Manalastas for violation of the Intellectual Property Code.29
Secretary Agra also found probable cause to indict Gozon, Duavit, Jr., Flores, and Soho for the same violation.30 He ruled that:

[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption that must be proven in a full-blown trial.
Disputable presumptions may be contradicted and overcome by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and
laws are evaluated and considered. The very purpose of trial is to allow a party to present evidence to overcome the disputable presumptions
involved.31

The dispositive portion of the Agra Resolution provides:

WHEREFORE, premises considered:

(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation (ABS-CBN) of our Resolution promulgated on August 1,
2005 (Resolution No. 364, Series of 2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 04-10458 on April10,
2006, are GRANTED and the City Prosecutor of Quezon City is hereby ordered to file the necessary Information for violation of Section 177 and 211
of Republic Act No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L.Flores, Jessica A. Soho, Grace Dela Pena-Reyes, John
Oliver T. Manalastas[.]

....

SO ORDERED.32 (Emphasis in the original)

Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for issuance of a temporary restraining order and/or Writ of
Preliminary Injunction on September 2, 2010 before the Court of Appeals. In the Resolution dated September 13, 2010, the Court of Appeals granted
the temporary restraining order preventing the Department of Justice from enforcing the Agra Resolution.33

On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and reversing and setting aside the Agra Resolution.34 The
Court of Appeals held that Secretary Agra committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of copyright
infringement, the Court of Appeals said:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video feed, petitioner GMA is liable under the provisions
of the Intellectual Property Code, which was enacted purposely to protect copyright owners from infringement. However, it is an admitted fact that
petitioner GMA had only aired a five (5) second footage of the disputed live video feed that it had received from Reuters and CNN as a subscriber.
Indeed, petitioners had no notice of the right of ownership of private respondent over the same. Without notice of the "No Access Philippines"
restriction of the live video feed, petitioner cannot be faulted for airing a live video feed from Reuters and CNN.

Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in airing the five (5) second footage was undeniably
attended by good faith and it thus serves to exculpate them from criminal liability under the Code. While the Intellectual Property Code is a special
law, and thus generally categorized as malum prohibitum, it bears to stress that the provisions of the Code itself do not ipso facto penalize a person
or entity for copyright infringement by the mere fact that one had used a copyrighted work or material.

Certainly so, in the exercise of one’s moral and economic or copyrights, the very provisions of Part IV of the Intellectual Property Code provide for
the scope and limitations on copyright protection under Section 184 and in fact permit fair use of copyrighted work under Section 185. With the
aforesaid statutory limitations on one’s economic and copyrights and the allowable instances where the other persons can legally use a copyrighted
work, criminal culpability clearly attaches only when the infringement had been knowingly and intentionally committed.35 (Emphasis supplied)

The dispositive portion of the Decision reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed Resolution dated 29 June 2010 REVERSED and
SET ASIDE. Accordingly, the earlier Resolution dated 1 August 2005, which ordered the withdrawal of the Information filed, if any, against the
petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is hereby REINSTATED. No costs.

SO ORDERED.36 (Emphasis in the original)

ABS-CBN’s Motion for Reconsideration was denied.37 It then filed its Petition for Review before this court assailing the Decision and Resolution of
the Court of Appeals.38

The issues for this court’s consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010 and, therefore, whether a petition for certiorari
was the proper remedy in assailing that Resolution;

Second, whether news footage is copyrightable under the law;

Third, whether there was fair use of the broadcast material;

Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright infringement;

Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual Property Code; and

Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable cause.

The trial court granted respondents’ Motion to Suspend Proceedings and deferred respondents Dela Peña-Reyes and Manalastas’ arraignment for
60 days in view of the Petition for Review filed before the Department of Justice.

Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows

the suspension of the accused’s arraignment in certain circumstances only:

SEC. 11. Suspension of arraignment.–Upon motion by the proper party, the arraignment shall be suspended in the following cases:

(a) The accused appears to be suffering from an unsound mental condition which effectively renders him unable to fully understand the charge
against him and to plead intelligently thereto. In such case, the court shall order his mental examination and, if necessary, his confinement for such
purpose;

(b) There exists a prejudicial question; and

(c) A petition for review of the resolution of the prosecutor is pending at either the Department of Justice, or the Office of the President; provided, that
the period of suspension shall not exceed sixty (60) days counted from the filing of the petition with the reviewing office. (12a) (Emphasis supplied)

In Samson v. Daway,39 this court acknowledged the applicability of Rule 116, Section (c) in a criminal prosecution for infringement under the
Intellectual Property Code. However, this court emphasized the limits of the order of deferment under the Rule:

While the pendency of a petition for review is a ground for suspension of the arraignment, the . . . provision limits the deferment of the arraignment to
a period of 60 days reckoned from the filing of the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the
trial court is bound to arraign the accused or to deny the motion to defer arraignment.40

We clarify that the suspension of the arraignment should always be within the limits allowed by law. In Crespo v. Judge Mogul,41 this court outlined
the effects of filing an information before the trial court, which includes initiating a criminal action and giving this court "authority to hear and
determine the case":42

The preliminary investigation conducted by the fiscal for the purpose of determining whether a prima facie case exists warranting the prosecution of
the accused is terminated upon the filing of the information in the proper court. In turn, as above stated, the filing of said information sets in motion
the criminal action against the accused in Court. Should the fiscal find it proper to conduct a reinvestigation of the case, at such stage, the
permission of the Court must be secured. After such reinvestigation the finding and recommendations of the fiscal should be submitted to the Court
for appropriate action. While it is true that the fiscal has the quasi judicial discretion to determine whether or not a criminal case should be filed in
court or not, once the case had already been brought to Court whatever disposition the fiscal may feel should be proper in the case thereafter should
be addressed for the consideration of the Court, the only qualification is that the action of the Court must not impair the substantial rights of the
accused or the right of the People to due process of law.
Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the fiscal or a review by the Secretary of Justice
whereby a motion to dismiss was submitted to the Court, the Court in the exercise of its discretion may grant the motion or deny it and require that
the trial on the merits proceed for the proper determination of the case.

However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal upon the directive of the Secretary of Justice will
there not be a vacuum in the prosecution? A state prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who
does not believe that there is a basis for prosecution nor can the fiscal be expected to handle the prosecution of the case thereby defying the
superior order of the Secretary of Justice. The answer is simple. The role of the fiscal or prosecutor as We all know is to see that justice is done and
not necessarily to secure the conviction of the person accused before the Courts. Thus, in spite of his opinion to the contrary, it is the duty of the
fiscal to proceed with the presentation of evidence of the prosecution to the Court to enable the Court to arrive at its own independent judgment as to
whether the accused should be convicted or acquitted. The fiscal should not shirk from the responsibility of appearing for the People of the
Philippines even under such circumstances much less should he abandon the prosecution of the case leaving it to the hands of a private prosecutor
for then the entire proceedings will be null and void. The least that the fiscal should do is to continue to appear for the prosecution although he may
turn over the presentation of the evidence to the private prosecutor but still under his direction and control.

The rule therefore in this jurisdiction is that once a complaint or information is filed in Court any disposition of the case as to its dismissal or the
conviction or acquittal of the accused rests in the sound discretion of the Court. Although the fiscal retains the direction and control of the prosecution
of criminal cases even while the case is already in Court he cannot impose his opinion on the trial court. The Court is the best and sole judge on
what to do with the case before it. The determination of the case is within its exclusive jurisdiction and competence. A motion to dismiss the case
filed by the fiscal should be addressed to the Court who has the option to grant or deny the same. It does not matter if this is done before or after the
arraignment of the accused or that the motion was filed after a reinvestigation or upon instructions of the Secretary of Justice who reviewed the
records of the investigation.43 (Emphasis supplied, citations omitted)

The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals,44 where this court reminded the Department of Justice Secretary to
refrain from entertaining petitions for review when the case is already pending with this court:

[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the action of the fiscal may be disregarded by the trial court,
the Secretary of Justice should, as far as practicable, refrain from entertaining a petition for review or appeal from the action of the fiscal, when the
complaint or information has already been filed in the Court. The matter should be left entirely for the determination of the Court.45

The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas’ arraignment after the 60-day period from the filing of the
Petition for Review before the Department of Justice on March 8, 2005. It was only on September 13, 2010 that the temporary restraining order was
issued by the Court of Appeals. The trial court erred when it did not act on the criminal case during the interim period. It had full control and direction
of the case. As Judge Mogul reasoned in denying the motion to dismiss in Crespo, failure to proceed with the arraignment "disregards the
requirements of due process [and] erodes the Court’s independence and integrity."46

II

According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration was not necessary before a petition for certiorari
could be filed; the Department of Justice Secretary committed errors of jurisdiction since the Agra Resolution was issued within its authority and in
accordance with settled laws and jurisprudence; and respondents were not liable for copyright infringement.

In its assailed Decision, the Court of Appeals found that respondents committed a procedural error when they failed to file a motion for
reconsideration before filing the Petition for Certiorari. However, the Court of Appeals held that a motion for reconsideration was unnecessary since
the Agra Resolution was a patent nullity and it would have been useless under the circumstances: Given that a reading of the assailed Resolution
and the instant records readily reveals errors of jurisdiction on the part of respondent Secretary, direct judicial recourse is warranted under the
circumstances. Aside from the fact that said Resolution is a patent nullity having been issued in grave abuse of discretion amounting to lack or
excess of jurisdiction, the filing of a motion for reconsideration is evidently useless on account of the fact that the issues and arguments before this
Court have already been duly raised and accordingly delved into by respondent Secretary in his disposition of the petition a quo.47 (Emphasis in the
original)

In Elma v. Jacobi,48 this court ruled that a petition for certiorari under Rule 65 of the Rules of Court is proper when assailing adverse resolutions of
the Department of Justice stemming from the determination of probable cause.49 However, grave abuse of discretion must be alleged.50

In Sanrio Company Limited v. Lim,51 this court stressed the prosecutor’s role in determining probable cause. Judicial review will only lie when it is
shown that the prosecutor acted with grave abuse of discretion amounting to lack or excess of jurisdiction:

A prosecutor alone determines the sufficiency of evidence that will establish probable cause justifying the filing of a criminal information against the
respondent. By way of exception, however, judicial review is allowed where respondent has clearly established that the prosecutor committed grave
abuse of discretion. Otherwise stated, such review is appropriate only when the prosecutor has exercised his discretion in an arbitrary, capricious,
whimsical or despotic manner by reason of passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or
virtual refusal to perform a duty enjoined by law.52 (Citations omitted)

Grave abuse of discretion refers to:

such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the
power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.53

Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law[,]"54 such
as a motion for reconsideration. Generally, "a motion for reconsideration is a condition sine qua non before a petition for certiorari may lie, its
purpose being to grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a re-examination of the legal and factual
circumstances of the case."55 However, exceptions to the rule exist:
(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the questions raised in the certiorari proceeding have
been duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the
subject matter of the action is perishable; (d) where, under the circumstances, a motion for reconsideration would be useless; (e) where petitioner
was deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the
granting of such relief by the trial Court is improbable; (g) where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or where public
interest is involved.56 (Emphasis in the original, citations omitted)

As argued by respondents, "[a] second motion for reconsideration would have been useless and futile since the D[epartment] [of] J[ustice] had
already passed upon the same issues twice."57 Equally pressing under the circumstances was the need to resolve the matter, as the Information’s
filing would lead to respondents’ imminent arrest.58

Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000 NPS Rules on Appeal, provides that no second motion
for reconsideration of the Department of Justice Secretary’s resolution shall be entertained:

SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for reconsideration within a non-extendible period of ten (10) days
from receipt of the resolution on appeal, furnishing the adverse party and the Prosecution Office concerned with copies thereof and submitting proof
of such service. No second or further motion for reconsideration shall be entertained.

The Agra Resolution was the result of respondents’ Motion for Reconsideration assailing the Gonzalez Resolution. To file a motion for
reconsideration of the Agra Resolution would be superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.

III

The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then required the grant of the writ of certiorari:

So viewed, by ordering the filing of information without proof that probable cause exists to charge petitioners with a crime, respondent Secretary
clearly committed an error of jurisdiction thus warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when the very
provisions of the statute exculpates criminal liability in cases classified as fair use of copyrighted materials. The fact that they admittedly used the
Reuters live video feed is not, as a matter of course, tantamount to copyright infringement that would justify the filing of an information against the
petitioners.59

Error of jurisdiction must be distinguished from error of judgment:

A line must be drawn between errors of judgment and errors of jurisdiction. An error of judgment is one which the court may commit in the exercise
of its jurisdiction. An error of jurisdiction renders an order or judgment void or voidable. Errors of jurisdiction are reviewable on certiorari; errors of
judgment, only by appeal.60

In People v. Hon. Sandiganbayan61:

An error of judgment is one which the court may commit in the exercise of its jurisdiction. An error of jurisdictionis one where the act complained of
was issued by the court without or in excess of jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess of jurisdiction
and which error is correctible only by the extraordinary writ of certiorari. Certiorari will not be issued to cure errors of the trial court in its appreciation
of the evidence of the parties, or its conclusions anchored on the said findings and its conclusions of law.62 (Emphasis supplied)

This court has adopted a deferential attitude towards review of the executive’s finding of probable cause.63 This is based "not only upon the respect
for the investigatory and [prosecutorial] powers granted by the Constitution to the executive department but upon practicality as well."64 Review of
the Department of Justice Secretary’s decision or resolution will be allowed only when grave abuse of discretion is alleged:

The full discretionary authority to determine probable cause in a preliminary investigation to ascertain sufficient ground for the filing of information
rests with the executive branch. Hence, judicial review of the resolution of the Secretary of Justice is limited to a determination whether there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction. Courts cannot substitute the executive branch’s judgment.

....

It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion amounting to lack or excess of jurisdiction that the
Court of Appeals may take cognizance of the case in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court of
Appeals decision may then be appealed to this Court by way of a petition for review on certiorari.65 (Emphasis supplied, citations omitted)

In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the findings of Secretary Gonzalez. This court must
determine whether there is probable cause to file an information for copyright infringement under the Intellectual Property Code.

IV

Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a crime has been committed and that respondent is
probably guilty thereof."66 Preliminary investigation is the inquiry or proceeding to determine whether there is probable cause.67

In Webb v. De Leon,68 this court ruled that determination of probable cause during preliminary investigation does not require trial-like evaluation of
evidence since existence of probable cause does not equate to guilt:

It ought to be emphasized that in determining probable cause, the average man weighs facts and circumstances without resorting to the calibrations
of our technical rules of evidence of which his knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men have
an abundance.
....

. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a pronouncement of guilt.69

In Reyes v. Pearlbank Securities, Inc.,70 finding probable cause is not equivalent to finding with moral certainty that the accused committed the
crime:

A finding of probable cause needs only to rest on evidence showing that more likely than not a crime has been committed by the suspects. It need
not be based on clear and convincing evidence of guilt, not on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence
establishing absolute certainty of guilt. In determining probable cause, the average man weighs facts and circumstances without resorting to the
calibrations of the rules of evidence of which he has no technical knowledge. He relies on common sense.71

During preliminary investigation, a public prosecutor does not adjudicate on the parties’ rights, obligations, or liabilities.72

In the recent case of Estrada v. Office of the Ombudsman, et al.,73 we reiterated Webb on the determination of probable cause during preliminary
investigation and traced the history of probable cause as borrowed from American jurisprudence:

The purpose in determining probable cause is to make sure that the courts are not clogged with weak cases that will only be dismissed, as well as to
spare a person from the travails of a needless prosecution.

....

. . . In the United States, from where we borrowed the concept of probable cause, the prevailing definition of probable cause is this:

In dealing with probable cause, however, as the very name implies, we deal with probabilities. These are not technical; they are the factual and
practical considerations of everyday life on which reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly
correlative to what must be proved.

"The substance of all the definitions" of probable cause "is a reasonable ground for belief of guilt." McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted
with approval in the Carroll opinion. 267 U. S. at 161. And this "means less than evidence which would justify condemnation" or conviction, as
Marshall, C. J., said for the Court more than a century ago in Locke v. United States, 7 Cranch 339, 348. Since Marshall’s time, at any rate, it has
come to mean more than bare suspicion: Probable cause exists where "the facts and circumstances within their [the officers’] knowledge and of
which they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of reasonable caution in the belief that" an offense
has been or is being committed. Carroll v. United States, 267 U. S. 132, 162.

These long-prevailing standards seek to safeguard citizens from rash and unreasonable interferences with privacy and from unfounded charges of
crime. They also seek to give fair leeway for enforcing the law in the community’s protection. Because many situations which confront officers in the
course of executing their duties are more or less ambiguous, room must be allowed for some mistakes on their part. But the mistakes must be those
of reasonable men, acting on facts leading sensibly to their conclusions of probability. The rule of probable cause is a practical, non technical
conception affording the best compromise that has been found for accommodating these often opposing interests. Requiring more would unduly
hamper law enforcement. To allow less would be to leave law-abiding citizens at the mercy of the officers’ whim or caprice.

In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where probable cause is needed to be established:

(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether there is sufficient ground to engender a well-founded belief that
a crime has been committed and the respondent is probably guilty thereof, and should be held for trial. A preliminary investigation is required before
the filing of a complaint or information for an offense where the penalty prescribed by law is at least four years, two months and one day without
regard to the fine;

(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest or a commitment order, if the accused has already been
arrested, shall be issued and that there is a necessity of placing the respondent under immediate custody in order not to frustrate the ends of justice;

(3) In Section 5(b) of Rule 113:By a peace officer or a private person making a warrantless arrest when an offense has just been committed, and he
has probable cause to believe based on personal knowledge of facts or circumstances that the person to be arrested has committed it; and

(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be issued, and only upon probable cause in connection with
one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he
may produce, and particularly describing the place to be searched and the things to be seized which may be anywhere in the Philippines.

In all these instances, the evidence necessary to establish probable cause is based only on the likelihood, or probability, of guilt.74

Estrada also highlighted that a "[p]reliminary investigation is not part of the criminal action. It is merely preparatory and may even be disposed of in
certain situations."75

To determine whether there is probable cause that respondents committed copyright infringement, a review of the elements of the crime, including
the existing facts, is required.

ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted material is punishable under the Intellectual Property
Code. It argues that the new footage is not a "newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the Philippines — the
latter being the newsworthy event":76

To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable because that is the newsworthy event. However, any
footage created from the event itself, in this case the arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the footage
created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the statements of Dindo Amparo, are copyrightable and protected by the
laws on copyright.77

On the other hand, respondents argue that ABS-CBN’s news footage of Angelo dela Cruz’s arrival is not copyrightable or subject to protection:

Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the consciousness of the Filipino people with regard to their
countrymen, OFWs working in foreign countries and how the Philippine government responds to the issues concerning them, is "news". There is no
ingenuity or inventiveness added in the said news footage. The video footage of this "news" is not copyrightable by any legal standard as facts of
everyday life depicted in the news and items of press information is part of the public domain.78 (Emphasis in the original)

The news footage is copyrightable.

The Intellectual Property Code is clear about the rights afforded to authors of various kinds of work. Under the Code, "works are protected by the
sole fact of their creation, irrespective of their mode or form of expression, as well as of their content, quality and purpose."79 These include
"[a]udiovisual works and cinematographic works and works produced by a process analogous to cinematography or any process for making
audiovisual recordings."80

Contrary to the old copyright law,81 the Intellectual Property Code does not require registration of the work to fully recover in an infringement suit.
Nevertheless, both copyright laws provide that copyright for a work is acquired by an intellectual creator from the moment of creation.82

It is true that under Section 175 of the Intellectual Property Code, "news of the day and other miscellaneous facts having the character of mere items
of press information" are considered unprotected subject matter.83 However, the Code does not state that expression of the news of the day,
particularly when it underwent a creative process, is not entitled to protection.

An idea or event must be distinguished from the expression of that idea or event. An idea has been likened to a ghost in that it "must be spoken to a
little before it will explain itself."84 It is a concept that has eluded exact legal definition.85 To get a better grasp of the idea/expression dichotomy, the
etymology of the term "idea" is traced:

The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a thing as opposed to its reality, from idein, to see." In the
Timaeus, Plato saw ideas as eternal paradigms, independent objects to which the divine demiurge looks as patterns in forming the world. This was
later modified to the religious conception of ideas as the thoughts of God. "It is not a very long step to extend the term ‘idea’ to cover patterns,
blueprints, or plans in anyone's mind, not only in God’s." The word entered the French and English vernacular in the 1600s and possessed two
meanings. The first was the Platonic meaning of a perfect exemplar or paradigm. The second, which probably has its origin with Descartes, is of a
mental concept or image or, more broadly, any object of the mind when it is active. Objects of thought may exist independently. The sun exists
(probably) before and after you think of it. But it is also possible to think of things that have never existed, such as a unicorn or Pegasus. John Locke
defined ideas very comprehensively, to include: all objects of the mind. Language was a way of translating the invisible, hidden ideas that make up a
person’s thoughts into the external, perceptible world of articulate sounds and visible written symbols that others can understand.86 (Citations
omitted) There is no one legal definition of "idea" in this jurisdiction. The term "idea" is mentioned only once in the Intellectual Property Code.87 In
Joaquin, Jr. v. Drilon,88 a television format (i.e., a dating show format) is not copyrightable under Section 2 of Presidential Decree No. 49;89 it is a
mere concept:

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea,
procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides:

SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any
idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated
or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of
a legislative, administrative or legal nature, as well as any official translation thereof.

What then is the subject matter of petitioners’ copyright? This Court is of the opinion that petitioner BJPI’s copyright covers audio-visual recordings of
each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, §2(M),to wit:

Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings;

The copyright does not extend to the general concept or format of its dating game show. Accordingly, by the very nature of the subject of petitioner
BJPI’s copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence
was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole spectrum of visuals and effects, video and audio, such
that no similarity or dissimilarity may be found by merely describing the general copyright/format of both dating game shows.90 (Emphasis supplied,
citations omitted)

Ideas can be either abstract or concrete.91 It is the concrete ideas that are generally referred to as expression:

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression distinction. The Nichols court, for example, found that the
defendant’s film did not infringe the plaintiff’s play because it was "too generalized an abstraction from what plaintiff wrote . . . only a part of her
ideas." In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of thought, and general ideas found in another’s work,
"provided they do not substantially copy a concrete form, in which the circumstances and ideas have been developed, arranged, and put into shape."
Judge Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no one infringes, unless he descends so far into what is
concrete as to invade. . . ‘expression.’"

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of these abstractions that may be termed expression.
However, if the concrete form of a work means more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several meanings for the word concrete. These include:
"having a material, perceptible existence; of, belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract."92

In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,93 this court, citing the American case of Baker v. Selden, distinguished copyright
from patents and illustrated how an idea or concept is different from the expression of that idea:

In the oft-cited case of Baker vs. Selden, the United States Supreme Court held that only the expression of an idea is protected by copyright, not the
idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The publication
illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiff’s copyrighted
book. The US Supreme Court ruled that:

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright;
but, then, it is claimed only as a book. x x x But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of
every other art as well as that of bookkeeping.

A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the
mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of
copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The
copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter. The novelty
of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in
the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is
the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to the examination
of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it.

The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case
of medicines. Certain mixtures are found to be of great value in the healing art. If the discoverer writes and publishes a book on the subject (as
regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to
acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book,
if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of
drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.

....

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any
person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a
publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books
prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was
not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must
necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art
described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the art. x x x The description of the art in a book,
though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of
the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent."94 (Emphasis
supplied)

News or the event itself is not copyrightable. However, an event can be captured and presented in a specific medium. As recognized by this court in
Joaquin, television "involves a whole spectrum of visuals and effects, video and audio."95 News coverage in television involves framing shots, using
images, graphics, and sound effects.96 It involves creative process and originality. Television news footage is an expression of the news.

In the United States, a line of cases dwelt on the possibility of television newscasts to be copyrighted.97 Most of these cases focused on private
individuals’ sale or resale of tapes of news broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the District Court’s
pronouncement in Pacific & Southern Co. v. Duncan,98 which involves a News Monitoring Service’s videotaping and sale of WXIA-TV’s news
broadcasts:

It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas which are the subject of news reports. Miller v.
Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir. 1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91, 95 (2d Cir.
1977), cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that copyright protection does extend to the
reports themselves, as distinguished from the substance of the information contained in the reports. Wainwright, 558 F.2d at 95; International News
Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see Chicago Record-Herald Co. v. Tribune Assn., 275 F. 797 (7th
Cir.1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright protects the manner of expression of news reports, "the particular form or collocation
of words in which the writer has communicated it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70. Such protection extends to electronic
news reports as well as written reports. See17 U.S.C. § 102(a) (5), (6), and (7); see also Iowa State University Research Foundations, Inc. v.
American Broadcasting Cos., 621 F.2d 57, 61 (2d Cir. 1980).99 (Emphasis supplied)

The idea/expression dichotomy has long been subject to debate in the field of copyright law. Abolishing the dichotomy has been proposed, in that
non-protectibility of ideas should be re-examined, if not stricken, from decisions and the law:
If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only excuse for the continuance of the idea-
expression test as a judicial standard for determining protectibility would be that it was or could be a truly useful method of determining the proper
balance between the creator’s right to profit from his work and the public's right that the "progress of the arts not be retarded."

. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the policy which it should effectuate. Indeed, all too often the
sweeping language of the courts regarding the non-protectibility of ideas gives the impression that this is of itself a policy of the law, instead of
merely a clumsy and outdated tool to achieve a much more basic end.100

The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain material is a copy of another.101 This dichotomy
would be more relevant in determining, for instance, whether a stage play was an infringement of an author’s book involving the same characters
and setting. In this case, however, respondents admitted that the material under review — which is the subject of the controversy — is an exact copy
of the original. Respondents did not subject ABS-CBN’s footage to any editing of their own. The news footage did not undergo any transformation
where there is a need to track elements of the original.

Having established the protectible nature of news footage, we now discuss the concomitant rights accorded to authors. The authors of a work are
granted several rights in relation to it, including copyright or economic rights:

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright or economic rights shall consist of the exclusive
right to carry out, authorize or prevent the following acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;

177.3. The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;

177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a
compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the
subject of the rental; (n)

177.5. Public display of the original or a copy of the work;

177.6. Public performance of the work; and

177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis supplied)

Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a more specific set of rights called related or
neighboring rights:

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out,
authorize or prevent any of the following acts:

211.1. The rebroadcasting of their broadcasts;

211.2. The recording in any manner, including the making of films or the use of video tape, of their broadcasts for the purpose of communication to
the public of television broadcasts of the same; and

211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D. No. 49) (Emphasis supplied)

Section 212 of the Code provides:

CHAPTER XV

LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts referred to in those Sections are related to:

212.1. The use by a natural person exclusively for his own personal purposes;

212.2. Using short excerpts for reporting current events;

212.3. Use solely for the purpose of teaching or for scientific research; and

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D. No. 49a)

The Code defines what broadcasting is and who broadcasting organizations include:

202.7. "Broadcasting" means the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such
transmission by satellite is also "broadcasting" where the means for decrypting are provided to the public by the broadcasting organization or with its
consent;

202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly authorized to engage in broadcasting[.]

Developments in technology, including the process of preserving once ephemeral works and disseminating them, resulted in the need to provide a
new kind of protection as distinguished from copyright.102 The designation "neighboring rights" was abbreviated from the phrase "rights neighboring
to copyright."103 Neighboring or related rights are of equal importance with copyright as established in the different conventions covering both kinds
of rights.104
Several treaties deal with neighboring or related rights of copyright.105 The most prominent of these is the "International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations" (Rome Convention).106

The Rome Convention protects the rights of broadcasting organizations in relation to their broadcasts. Article XIII of the Rome Convention
enumerates the minimum rights accorded to broadcasting organizations:

Article 13

Minimum Rights for Broadcasting Organizations

Broadcasting organisations shall enjoy the right to authorize or prohibit:

(a) the rebroadcasting of their broadcasts;

(b) the fixation of their broadcasts;

(c) the reproduction:

(i) of fixations, made without their consent, of their broadcasts;

(ii) of fixations, made in accordance with the provisions of Article 15, of their broadcasts, if the reproduction is made for purposes different from those
referred to in those provisions;

(d) the communication to the public of their television broadcasts if such communication is made in places accessible to the public against payment
of an entrance fee; it shall be a matter for the domestic law of the State where protection of this right is claimed to determine the conditions under
which it may be exercised.

With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this court has discussed the difference between broadcasting
and rebroadcasting:

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the public reception of sounds or of images or of
representations thereof; such transmission by satellite is also ‘broadcasting’ where the means for decrypting are provided to the public by the
broadcasting organization or with its consent."

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection of Performers, Producers of
Phonograms and Broadcasting Organizations, otherwise known as the 1961 Rome Convention, of which the Republic of the Philippines is a
signatory, is "the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization."

....

Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization." The Working Paper prepared by the Secretariat of the Standing Committee on Copyright and Related Rights defines
broadcasting organizations as "entities that take the financial and editorial responsibility for the selection and arrangement of, and investment in, the
transmitted content."107 (Emphasis in the original, citations omitted)

Broadcasting organizations are entitled to several rights and to the protection of these rights under the Intellectual Property Code. Respondents’
argument that the subject news footage is not copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized the
existence of ABS-CBN’s copyright over the news footage:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video feed, petitioner GMA is liable under the provisions
of the Intellectual Property Code, which was enacted purposely to protect copyright owners from infringement.108

News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations have not only copyright on but also neighboring
rights over their broadcasts. Copyrightability of a work is different from fair use of a work for purposes of news reporting.

VI

ABS-CBN assails the Court of Appeals’ ruling that the footage shown by GMA-7 falls under the scope of Section 212.2 and 212.4 of the Intellectual
Property Code:

The evidence on record, as well as the discussions above, show that the footage used by[respondents] could hardlybe characterized as a short
excerpt, as it was aired over one and a half minutes.

Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the Intellectual Property Code. A plain reading of the
provision would reveal that copyrighted material referred to in Section 212 are short portions of an artist’s performance under Section 203, or a
producer’s sound recordings under Sections 208 and 209. Section 212 does not refer to actual use of video footage of another as its own.

The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual Property Code on fair use of the broadcast.

....

In determining fair use, several factors are considered, including the nature of the copyrighted work, and the amount and substantiality of the person
used in relation to the copyrighted work as a whole.

In the business of television news reporting, the nature of the copyrighted work or the video footages, are such that, footage created, must be a
novelty to be a good report. Thus, when the . . . Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly affected.
Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for its own, its use can hardly be classified as fair
use.

Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage] following the provisions on fair use.

It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it relied on the provisions of fair use in its assailed rulings
considering that it found that the Angelo dela Cruz footage is not copyrightable, given that the fair use presupposes an existing copyright. Thus, it is
apparent that the findings of the Honorable Court of Appeals are erroneous and based on wrong assumptions.109 (Underscoring in the original)

On the other hand, respondents counter that GMA-7’s use of ABS-CBN’s news footage falls under fair use as defined in the Intellectual Property
Code. Respondents, citing the Court of Appeals Decision, argue that a strong statutory defense negates any finding of probable cause under the
same statute.110 The Intellectual Property Code provides that fair use negates infringement.

Respondents point out that upon seeing ABS-CBN’s reporter Dindo Amparo on the footage, GMA-7 immediately shut off the broadcast. Only five (5)
seconds passed before the footage was cut. They argue that this shows that GMA-7 had no prior knowledge of ABS-CBN’s ownership of the footage
or was notified of it. They claim that the Angelo dela Cruz footage is considered a short excerpt of an event’s "news" footage and is covered by fair
use.111

Copyright protection is not absolute.112 The Intellectual Property Code provides the limitations on copyright:

CHAPTER VIII

LIMITATIONS ON COPYRIGHT

Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of
copyright:

....

184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be used in a manner which does not conflict with the
normal exploitation of the work and does not unreasonably prejudice the right holder's legitimate interests.

....

CHAPTER XV

LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts referred to in those Sections are related to:

....

212.2. Using short excerpts for reporting current events;

....

212.4. Fair use of the broadcast subject to the conditions under Section 185.(Sec. 44, P.D. No. 49a) (Emphasis supplied)

The determination of what constitutes fair use depends on several factors. Section 185 of the Intellectual Property Code states:

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship,
research, and similar purposes is not an infringement of copyright. . . . In determining whether the use made of a work in any particular case is fair
use, the factors to be considered shall include:

a. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work. Respondents allege that the news footage was only five (5)
seconds long, thus falling under fair use. ABS-CBN belies this contention and argues that the footage aired for two (2) minutes and 40 seconds.113
According to the Court of Appeals, the parties admitted that only five (5) seconds of the news footage was broadcasted by GMA-7.114

This court defined fair use as "aprivilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as
copying the theme or ideas rather than their expression."115 Fair use is an exception to the copyright owner’s monopoly of the use of the work to
avoid stifling "the very creativity which that law is designed to foster."116

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual Property Code lists four (4) factors to determine if there
was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.

First, the purpose and character of the use of the copyrighted material must fall under those listed in Section 185, thus: "criticism, comment, news
reporting, teaching including multiple copies for classroom use, scholarship, research, and similar purposes."117 The purpose and character
requirement is important in view of copyright’s goal to promote creativity and encourage creation of works. Hence, commercial use of the copyrighted
work can be weighed against fair use.

The "transformative test" is generally used in reviewing the purpose and character of the usage of the copyrighted work.118 This court must look into
whether the copy of the work adds "new expression, meaning or message" to transform it into something else.119 "Meta-use" can also occur without
necessarily transforming the copyrighted work used.120

Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If the nature of the work is more factual than creative,
then fair use will be weighed in favor of the user.

Third, the amount and substantiality of the portion used is important to determine whether usage falls under fair use. An exact reproduction of a
copyrighted work, compared to a small portion of it, can result in the conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose determines that the usage is still fair.121 For example, a parody using a
substantial amount of copyrighted work may be permissible as fair use as opposed to a copy of a work produced purely for economic gain. Lastly,
the effect of the use on the copyrighted work’s market is also weighed for or against the user. If this court finds that the use had or will have a
negative impact on the copyrighted work’s market, then the use is deemed unfair.

The structure and nature of broadcasting as a business requires assigned values for each second of broadcast or airtime. In most cases,
broadcasting organizations generate revenue through sale of time or timeslots to advertisers, which, in turn, is based on market share:122 Once a
news broadcast has been transmitted, the broadcast becomes relatively worthless to the station. In the case of the aerial broadcasters, advertising
sales generate most of the profits derived from news reports. Advertising rates are, in turn, governed by market share. Market share is determined
by the number of people watching a show at any particular time, relative to total viewers at that time. News is by nature time-limited, and so re-
broadcasts are generally of little worth because they draw few viewers. Newscasts compete for market share by presenting their news in an
appealing format that will capture a loyal audience. Hence, the primary reason for copyrighting newscasts by broadcasters would seem to be to
prevent competing stations from rebroadcasting current news from the station with the best coverage of a particular news item, thus misappropriating
a portion of the market share.

Of course, in the real world there are exceptions to this perfect economic view. However, there are also many caveats with these exceptions. A
common exception is that some stations rebroadcast the news of others. The caveat is that generally, the two stations are not competing for market
share. CNN, for example, often makes news stories available to local broadcasters. First, the local broadcaster is often not affiliated with a network
(hence its need for more comprehensive programming), confining any possible competition to a small geographical area. Second, the local
broadcaster is not in competition with CNN. Individuals who do not have cable TV (or a satellite dish with decoder) cannot receive CNN; therefore
there is no competition. . . . Third, CNN sells the right of rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First
Amendment freedom of access argument foremost on his mind. (Else he would give everyone free cable TV so everyone could get CNN.) He is in
the business for a profit. Giving away resources does not a profit make.123 (Emphasis supplied)

The high value afforded to limited time periods is also seen in other media. In social media site Instagram, users are allowed to post up to only 15
seconds of video.124 In short-video sharing website Vine,125 users are allowed a shorter period of six (6) seconds per post. The mobile application
1 Second Everyday takes it further by capturing and stitching one (1) second of video footage taken daily over a span of a certain period.126

Whether the alleged five-second footage may be considered fair use is a matter of defense. We emphasize that the case involves determination of
probable cause at the preliminary investigation stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and evidence during preliminary investigation. Defenses
raised during preliminary investigation are subject to further proof and evaluation before the trial court. Given the insufficiency of available evidence,
determination of whether the Angelo dela Cruz footage is subject to fair use is better left to the trial court where the proceedings are currently
pending. GMA-7’s rebroadcast of ABS-CBN’s news footage without the latter’s consent is not an issue. The mere act of rebroadcasting without
authority from the owner of the broadcast gives rise to the probability that a crime was committed under the Intellectual Property Code.

VII

Respondents cannot invoke the defense of good faith to argue that no probable cause exists.

Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not what is being prohibited, but its injurious effect which
consists in the lifting from the copyright owners’ film or materials, that were the result of the latter’s creativity, work and productions and without
authority, reproduced, sold and circulated for commercial use to the detriment of the latter."127

Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual Property Code is a special law. Copyright is a statutory
creation:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-
existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only
with respect to the subjects and by the persons, and on terms and conditions specified in the statute.128

The general rule is that acts punished under a special law are malum prohibitum.129 "An act which is declared malum prohibitum, malice or criminal
intent is completely immaterial."130

In contrast, crimes mala in seconcern inherently immoral acts:

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime involves moral turpitude, is for the Supreme
Court to determine". In resolving the foregoing question, the Court is guided by one of the general rules that crimes mala in se involve moral
turpitude, while crimes mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:
It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by law or not. It must not be merely mala prohibita,
but the act itself must be inherently immoral. The doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude
does not, however, include such acts as are not of themselves immoral but whose illegality lies in their being positively prohibited. (Emphasis
supplied)

[These] guidelines nonetheless proved short of providing a clear cut solution, for in International Rice Research Institute v. NLRC, the Court admitted
that it cannot always be ascertained whether moral turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and there are crimes which involve moral turpitude and
are mala prohibita only. In the final analysis, whether or not a crime involves moral turpitude is ultimately a question of fact and frequently depends
on all the circumstances surrounding the violation of the statue.131 (Emphasis in the original)

"Implicit in the concept of mala in se is that of mens rea."132 Mens reais defined as "the nonphysical element which, combined with the act of the
accused, makes up the crime charged. Most frequently it is the criminal intent, or the guilty mind[.]"133

Crimes mala in sepre suppose that the person who did the felonious act had criminal intent to do so, while crimes mala prohibita do not require
knowledge or criminal intent:

In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing the act to have knowledge of the nature of his act
and to have a criminal intent; in the case of mala prohibita, unless such words as "knowingly" and "willfully" are contained in the statute, neither
knowledge nor criminal intent is necessary. In other words, a person morally quite innocent and with every intention of being a law abiding citizen
becomes a criminal, and liable to criminal penaltes, if he does an act prohibited by these statutes.134 (Emphasis supplied) Hence, "[i]ntent to commit
the crime and intent to perpetrate the act must be distinguished. A person may not have consciously intended to commit a crime; but he did intend to
commit an act, and that act is, by the very nature of things, the crime itself[.]"135 When an act is prohibited by a special law, it is considered injurious
to public welfare, and the performance of the prohibited act is the crime itself.136

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to knowledge of the act being done. On the other
hand, criminal intent — which is different from motive, or the moving power for the commission of the crime137 — refers to the state of mind beyond
voluntariness. It is this intent that is being punished by crimes mala in se.

Unlike other jurisdictions that require intent for a criminal prosecution of copyright infringement, the Philippines does not statutorily support good faith
as a defense. Other jurisdictions provide in their intellectual property codes or relevant laws that mens rea, whether express or implied, is an element
of criminal copyright infringement.138

In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence, meaning the accused’s actual or subjective state of
mind has to be proved; strict liability offences where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament has made it clear that guilt follows proof of the
prescribed act only."139 Because of the use of the word "knowingly" in Canada’s Copyright Act, it has been held that copyright infringement is a full
mens rea offense.140

In the United States, willful intent is required for criminal copyright infringement.141 Before the passage of the No Electronic Theft Act, "civil copyright
infringements were violations of criminal copyright laws only if a defendant willfully infringed a copyright ‘for purposes of commercial advantage or
private financial gain.’"142 However, the No Electronic Theft Act now allows criminal copyright infringement without the requirement of commercial
gain. The infringing act may or may not be for profit.143

There is a difference, however, between the required liability in civil copyright infringement and that in criminal copyright infringement in the United
States. Civil copyright infringement does not require culpability and employs a strict liability regime144 where "lack of intention to infringe is not a
defense to an action for infringement."145

In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of criminal actions for the following violations of
intellectual property rights: Repetition of Infringement of Patent (Section 84); Utility Model (Section 108); Industrial Design (Section 119); Trademark
Infringement (Section 155 in relation to Section 170); Unfair Competition (Section 168 in relation to Section 170); False Designations of Origin, False
Description or Representation (Section 169.1 in relation to Section 170); infringement of copyright, moral rights, performers’ rights, producers’ rights,
and broadcasting rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and other violations of intellectual property rights as may be
defined by law.

The Intellectual Property Code requires strict liability for copyright infringement whether for a civil action or a criminal prosecution; it does not require
mens rea or culpa:146

SECTION 216. Remedies for Infringement. —

216.1. Any person infringing a right protected under this law shall be liable:

a. To an injunction restraining such infringement. The court may also order the defendant to desist from an infringement, among others, to prevent
the entry into the channels of commerce of imported goods that involve an infringement, immediately after customs clearance of such goods.

b. Pay to the copyright proprietor or his assigns or heirs such actual damages, including legal costs and other expenses, as he may have incurred
due to the infringement as well as the profits the infringer may have made due to such infringement, and in proving profits the plaintiff shall be
required to prove sales only and the defendant shall be required to prove every element of cost which he claims, or, in lieu of actual damages and
profits, such damages which to the court shall appear to be just and shall not be regarded as penalty.

c. Deliver under oath, for impounding during the pendency of the action, upon such terms and conditions as the court may prescribe, sales invoices
and other documents evidencing sales, all articles and their packaging alleged to infringe a copyright and implements for making them.

d. Deliver under oath for destruction without any compensation all infringing copies or devices, as well as all plates, molds, or other means for
making such infringing copies as the court may order.
e. Such other terms and conditions, including the payment of moral and exemplary damages, which the court may deem proper, wise and equitable
and the destruction of infringing copies of the work even in the event of acquittal in a criminal case.

216.2. In an infringement action, the court shall also have the power to order the seizure and impounding of any article which may serve as evidence
in the court proceedings. (Sec. 28, P.D. No. 49a)

SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of Part IV of this Actor aiding or abetting such
infringement shall be guilty of a crime punishable by:

a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (₱50,000) to One hundred fifty thousand pesos
(₱150,000) for the first offense.

b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (₱150,000) to Five
hundred thousand pesos (₱500,000) for the second offense.

c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from Five hundred thousand pesos (₱500,000) to One million
five hundred thousand pesos (₱1,500,000) for the third and subsequent offenses.

d. In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court shall consider the value of the infringing materials that
the defendant has produced or manufactured and the damage that the copyright owner has suffered by reason of the infringement.

217.3. Any person who at the time when copyright subsists in a work has in his possession an article which he knows, or ought to know, to be an
infringing copy of the work for the purpose of: a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire, the article;

b. Distributing the article for purpose of trade, or for any other purpose to an extent that will prejudice the rights of the copyright owner in the work; or

c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable on conviction to imprisonment and fine as above mentioned.
(Sec. 29, P.D. No. 49a) (Emphasis supplied)

The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as opposed to rewarding the creator, it is the plain
reading of the law in conjunction with the actions of the legislature to which we defer. We have continuously "recognized the power of the legislature .
. . to forbid certain acts in a limited class of cases and to make their commission criminal without regard to the intent of the doer. Such legislative
enactments are based on the experience that repressive measures which depend for their efficiency upon proof of the dealer’s knowledge or of his
intent are of little use and rarely accomplish their purposes."147

Respondents argue that live broadcast of news requires a different treatment in terms of good faith, intent, and knowledge to commit infringement.
To argue this point, they rely on the differences of the media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals, and this case:

Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is not a defense in copyright infringement and cites the
case of Columbia Pictures vs. Court of Appeals and Habana et al. vs. Robles(310 SCRA 511). However, these cases refer to film and literary work
where obviously there is "copying" from an existing material so that the copier knew that he is copying from an existing material not owned by him.
But, how could respondents know that what they are "copying was not [theirs]" when they were not copying but merely receiving live video feed from
Reuters and CNN which they aired? What they knew and what they aired was the Reuters live video feed and the CNN feed which GMA-7 is
authorized to carry in its news broadcast, it being a subscriber of these companies[.]

It is apt to stress that the subject of the alleged copyright infringement is not a film or literary work but live broadcast of news footage. In a film or
literary work, the infringer is confronted face to face with the material he is allegedly copying and therefore knows, or is presumed to know, that what
he is copying is owned by another. Upon the other hand, in live broadcast, the alleged infringer is not confronted with the fact that the material he
airs or re-broadcasts is owned by another, and therefore, he cannot be charged of knowledge of ownership of the material by another. This specially
obtains in the Angelo dela Cruz news footage which GMA-7 received from Reuters and CNN. Reuters and CNN were beaming live videos from the
coverage which GMA-7 received as a subscriber and, in the exercise of its rights as a subscriber, GMA-7 picked up the live video and
simultaneously re-broadcast it. In simultaneously broadcasting the live video footage of Reuters, GMA-7 did not copy the video footage of petitioner
ABS-CBN[.]148 (Emphasis in the original)

Respondents’ arguments must fail.

Respondents are involved and experienced in the broadcasting business. They knew that there would be consequences in carrying ABS-CBN’s
footage in their broadcast. That is why GMA-7 allegedly cut the feed from Reuters upon seeing ABS-CBN’s ogo and reporter. To admit a different
treatment for broadcasts would mean abandonment of a broadcasting organization’s minimum rights, including copyright on the broadcast material
and the right against unauthorized rebroadcast of copyrighted material. The nature of broadcast technology is precisely why related or neighboring
rights were created and developed. Carving out an exception for live broadcasts would go against our commitments under relevant international
treaties and agreements, which provide for the same minimum rights.149

Contrary to respondents’ assertion, this court in Habana,150 reiterating the ruling in Columbia Pictures,151 ruled that lack of knowledge of
infringement is not a valid defense. Habana and Columbia Pictures may have different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and copyright owners of English textbooks and workbooks. The case was
anchored on the protection of literary and artistic creations such as books. In Columbia Pictures, video tapes of copyrighted films were the subject of
the copyright infringement suit.

In Habana, knowledge of the infringement is presumed when the infringer commits the prohibited act:

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof.
Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of
the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright.

....

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing
any copyright; he at least knew that what he was copying was not his, and he copied at his peril.

....

In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that
respondent Robles lifted from petitioners’ book materials that were the result of the latter’s research work and compilation and misrepresented them
as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as her source.152 (Emphasis supplied)

Habana and Columbia Pictures did not require knowledge of the infringement to constitute a violation of the copyright. One does not need to know
that he or she is copying a work without consent to violate copyright law. Notice of fact of the embargo from Reuters or CNN is not material to find
probable cause that respondents committed infringement. Knowledge of infringement is only material when the person is charged of aiding and
abetting a copyright infringement under Section 217 of the Intellectual Property Code.153

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most importantly, in defining the contours of what it
means to willfully infringe copyright for purposes of criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not
primarily about providing the strongest possible protection for copyright owners so that they have the highest possible incentive to create more
works. The control given to copyright owners is only a means to an end: the promotion of knowledge and learning. Achieving that underlying goal of
copyright law also requires access to copyrighted works and it requires permitting certain kinds of uses of copyrighted works without the permission
of the copyright owner. While a particular defendant may appear to be deserving of criminal sanctions, the standard for determining willfulness
should be set with reference to the larger goals of copyright embodied in the Constitution and the history of copyright in this country.154

In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate
understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and,
therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any
person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the
copyright."155

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting, establish an artificial and limited monopoly to reward
creativity. Without these legally enforceable rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit of
their works as reflected in their markets. This, in turn, is based on the theory that the possibility of gain due to creative work creates an incentive
which may improve efficiency or simply enhance consumer welfare or utility. More creativity redounds to the public good.

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable to the free rider problem. It is easily replicated
despite the costs to and efforts of the original creator. The more useful the creation is in the market, the greater the propensity that it will be copied.
The most creative and inventive individuals are usually those who are unable to recover on their creations.

Arguments against strict liability presuppose that the Philippines has a social, historical, and economic climate similar to those of Western
jurisdictions. As it stands, there is a current need to strengthen intellectual property protection.

Thus, unless clearly provided in the law, offenses involving infringement of copyright protections should be considered malum prohibitum. It is the act
of infringement, not the intent, which causes the damage. To require or assume the need to prove intent defeats the purpose of intellectual property
protection.

Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under the Intellectual Property Code.

VIII

Respondents argue that GMA-7’s officers and employees cannot be held liable for infringement under the Intellectual Property Code since it does
not expressly provide direct liability of the corporate officers. They explain that "(i) a corporation may be charged and prosecuted for a crime where
the penalty is fine or both imprisonment and fine, and if found guilty, may be fined; or (ii) a corporation may commit a crime but if the statute
prescribes the penalty therefore to be suffered by the corporate officers, directors or employees or other persons, the latter shall be responsible for
the offense."156

Section 217 of the Intellectual Property Code states that "any person" may be found guilty of infringement. It also imposes the penalty of both
imprisonment and fine:

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or abetting such
infringement shall be guilty of a crime punishable by:

(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (₱50,000) to One hundred fifty thousand pesos
(₱150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (₱150,000) to Five
hundred thousand pesos (₱500,000) for the second offense.

(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from five hundred thousand pesos (₱500,000) to One million
five hundred thousand pesos (₱1,500,000) for the third and subsequent offenses.
(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied) Corporations have separate and distinct personalities from their
officers or directors.157 This court has ruled that corporate officers and/or agents may be held individually liable for a crime committed under the
Intellectual Property Code:158

Petitioners, being corporate officers and/or directors, through whose act, default or omission the corporation commits a crime, may themselves be
individually held answerable for the crime. . . . The existence of the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide behind the cloak of the separate corporate
personality of the corporation to escape criminal liability. A corporate officer cannot protect himself behind a corporation where he is the actual,
present and efficient actor.159

However, the criminal liability of a corporation’s officers or employees stems from their active participation in the commission of the wrongful act:

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies to those corporate agents who themselves
commit the crime and to those, who, by virtue of their managerial positions or other similar relation to the corporation, could be deemed responsible
for its commission, if by virtue of their relationship to the corporation, they had the power to prevent the act. Moreover, all parties active in promoting
a crime, whether agents or not, are principals. Whether such officers or employees are benefited by their delictual acts is not a touchstone of their
criminal liability. Benefit is not an operative fact.160 (Emphasis supplied) An accused’s participation in criminal acts involving violations of intellectual
property rights is the subject of allegation and proof. The showing that the accused did the acts or contributed in a meaningful way in the commission
of the infringements is certainly different from the argument of lack of intent or good faith. Active participation requires a showing of overt physical
acts or intention to commit such acts. Intent or good faith, on the other hand, are inferences from acts proven to have been or not been committed.

We find that the Department of Justice committed grave abuse of discretion when it resolved to file the Information against respondents despite lack
of proof of their actual participation in the alleged crime.

Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive Vice-President; Flores, Vice-President for News and Public
Affairs; and Soho, Director for News, as respondents, Secretary Agra overturned the City Prosecutor’s finding that only respondents Dela Peña-
Reyes and Manalastas are responsible for the crime charged due to their duties.161 The Agra Resolution reads:

Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7’s directors, officers, employees or other officers
thereof responsible for the offense shall be charged and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In their
complaint for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.Soho, Grace Dela Pena-Reyes, John Oliver T.
Manalastas felt they were aggrieved because they were "in charge of the management, operations and production of news and public affairs
programs of the network" (GMA-7). This is clearly an admission on respondents’ part. Of course, respondents may argue they have no intention to
infringe the copyright of ABS-CBN; that they acted in good faith; and that they did not directly cause the airing of the subject footage, but again this is
preliminary investigation and what is required is simply probable cause. Besides, these contentions can best be addressed in the course of trial.162
(Citation omitted)

In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found that respondents Gozon, Duavit, Jr., Flores, and
Soho did not have active participation in the commission of the crime charged:

This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon, Gilberto Duavit, Marissa Flores and Jessica Soho should
be held liable for the said offense. Complainant failed to present clear and convincing evidence that the said respondents conspired with Reyes and
Manalastas. No evidence was adduced to prove that these respondents had an active participation in the actual commission of the copyright
infringement or they exercised their moral ascendancy over Reyes and Manalastas in airing the said footage. It must be stressed that, conspiracy
must be established by positive and conclusive evidence. It must be shown to exist as clearly and convincingly as the commission of the offense
itself.163 (Emphasis supplied, citations omitted)

The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature of their work and responsibilities. He found that:

[t]his Office however finds respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas liable for copyright infringement penalized under
Republic Act No. 8293. It is undisputed that complainant ABSCBN holds the exclusive ownership and copyright over the "Angelo [d]ela Cruz news
footage". Hence, any airing and re-broadcast of the said footage without any consent and authority from ABS-CBN will be held as an infringement
and violation of the intellectual property rights of the latter. Respondents Grace Dela Peña-Reyes as the Head of the News Operation and John
Oliver T. Manalastas as the Program Manager cannot escape liability since the news control room was under their direct control and supervision.
Clearly, they must have been aware that the said footage coming from Reuters or CNN has a "No Access Philippines" advisory or embargo thus
cannot be re-broadcast. We find no merit to the defense of ignorance interposed by the respondents. It is simply contrary to human experience and
logic that experienced employees of an established broadcasting network would be remiss in their duty in ascertaining if the said footage has an
embargo.164 (Emphasis supplied)

We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents committed acts that promoted infringement of
ABS-CBN’s footage. We note that embargoes are common occurrences in and between news agencies and/or broadcast organizations.165 Under
its Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and publication embargo.166 Under ABS-CBN’s service
contract with Reuters, Reuters will embargo any content contributed by ABS-CBN from other broadcast subscribers within the same geographical
location:

4a. Contributed Content

You agree to supply us at our request with news and sports news stories broadcast on the Client Service of up to three (3) minutes each for use in
our Services on a non-exclusive basis and at a cost of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we
agree to embargo them against use by other broadcast subscribers in the Territory and confirm we will observe all other conditions of usage
regarding Contributed Content, as specified in Section 2.5 of the Reuters Business Principles for Television Services. For the purposes of
clarification, any geographical restriction imposed by you on your use of Contributed Content will not prevent us or our clients from including such
Contributed Content in online transmission services including the internet. We acknowledge Contributed Content is your copyright and we will not
acquire any intellectual property rights in the Contributed Content.167 (Emphasis supplied)
Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by Reuters to its clients, including GMA-7. As in the
records, the advisory reads:

ADVISORY - - +++LIVE COVER PLANS+++

PHILIPPINES: HOSTAGE RETURN

**ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER

PLANNED FOR THURSDAY, JULY 22:

....

SOURCE: ABS-CBN

TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES.168

There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed copyright infringement of ABS-CBN’s news footage
to warrant piercing of the corporate veil. They are responsible in airing the embargoed Angelo dela Cruz footage. They could have prevented the act
of infringement had they been diligent in their functions as Head of News Operations and Program Manager.

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the Information against all respondents despite the
erroneous piercing of the corporate veil. Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of the
corporation.

Mere membership in the Board or being President per se does not mean knowledge, approval, and participation in the act alleged as criminal. There
must be a showing of active participation, not simply a constructive one.

Under principles of criminal law, the principals of a crime are those "who take a direct part in the execution of the act; [t]hose who directly force or
induce others to commit it; [or] [t]hose who cooperate in the commission of the offense by another act without which it would not have been
accomplished."169 There is conspiracy "when two or more persons come to an agreement concerning the commission of a felony and decide to
commit it":170

Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of conspiracy must be proven beyond reasonable
doubt.1âwphi1 While conspiracy need not be established by direct evidence, for it may be inferred from the conduct of the accused before, during
and after the commission of the crime, all taken together, however, the evidence must be strong enough to show the community of criminal design.
For conspiracy to exist, it is essential that there must be a conscious design to commit an offense. Conspiracy is the product of intentionality on the
part of the cohorts.

It is necessary that a conspirator should have performed some overt act as a direct or indirect contribution to the execution of the crime committed.
The overt act may consist of active participation in the actual commission of the crime itself, or it may consist of moral assistance to his co-
conspirators by being present at the commission of the crime or by exerting moral ascendancy over the other co-conspirators[.]171 (Emphasis
supplied, citations omitted)

In sum, the trial court erred in failing to resume the proceedings after the designated period. The Court of Appeals erred when it held that Secretary
Agra committed errors of jurisdiction despite its own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News should
be differentiated from expression of the news, particularly when the issue involves rebroadcast of news footage. The Court of Appeals also
erroneously held that good faith, as. well as lack of knowledge of infringement, is a defense against criminal prosecution for copyright and
neighboring rights infringement. In its current form, the Intellectual Property Code is malum prohibitum and prescribes a strict liability for copyright
infringement. Good faith, lack of knowledge of the copyright, or lack of intent to infringe is not a defense against copyright infringement. Copyright,
however, is subject to the rules of fair. use and will be judged on a case-to-case basis. Finding probable cause includes a determination of the
defendant's active participation, particularly when the corporate veil is pierced in cases involving a corporation's criminal liability.

WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution dated June 29, 2010 ordering the filing of the Information is
hereby REINSTATED as to respondents Grace Dela Pena-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon
City is directed to continue with the proceedings in Criminal Case No. Q-04-131533.

SO ORDERED.

EN BANC

July 19, 2016

G.R. No. 204605

INTELLECTUAL PROPERTY ASSOCIATION OF THE PHILIPPINES, Petitioner,

vs.

HON. PAQUITO OCHOA, IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. ALBERT DEL ROSARIO, IN HIS CAPACITY AS SECRETARY
OF THE DEPARTMENT OF FOREIGN AFFAIRS, AND HON. RICARDO BLANCAFLOR, IN HIS CAPACITY AS THE DIRECTOR GENERAL OF
THE INTELLECTUAL PROPERTY OFFICE OF THE PHILIPPINES, Respondents.
DECISION

BERSAMIN, J.:

In this special civil action for certiorari and prohibition, the Intellectual Property Association of the Philippines (IPAP) seeks to declare the accession
of the Philippines to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol)
unconstitutional on the ground of the lack of concurrence by the Senate, and in the alternative, to declare the implementation thereof as
unconstitutional because it conflicts with Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code).1

We find and declare that the President's ratification is valid and constitutional because the Madrid Protocol, being an executive agreement as
determined by the Department of Foreign Affairs, does not require the concurrence of the Senate.

Antecedents

The Madrid System for the International Registration of Marks (Madrid System), which is the centralized system providing a one-stop solution for
registering and managing marks worldwide, allows the trademark owner to file one application in one language, and to pay one set of fees to protect
his mark in the territories of up to 97 member-states.2 The Madrid System is governed by the Madrid Agreement, concluded in 1891, and the Madrid
Protocol, concluded in 1989.3

The Madrid Protocol, which was adopted in order to remove the challenges deterring some countries from acceding to the Madrid Agreement, has
two objectives, namely: (1) to facilitate securing protection for marks; and (2) to make the management of the registered marks easier in different
countries.4

In 2004; the Intellectual Property Office of the Philippines (IPOPHL), the government agency mandated to administer the intellectual property system
of the country and to implement the state policies on intellectual property; began considering the country's accession to the Madrid Protocol.
However, based on its assessment in 2005, the IPOPHL needed to first improve its own operations before making the recommendation in favor of
accession. The IPOPHL thus implemented reforms to eliminate trademark backlogs and to reduce the turnaround time for the registration of marks.5

In the meanwhile, the IPOPHL mounted a campaign for information dissemination to raise awareness of the Madrid Protocol. It launched a series of
consultations with stakeholders and various business groups regarding the Philippines' accession to the Madrid Protocol. It ultimately arrived at the
conclusion that accession would benefit the country and help raise the level of competitiveness for Filipino brands. Hence, it recommended in
September 2011 to the Department of Foreign Affairs (DFA) that the Philippines should accede to the Madrid Protocol.6

After its own review, the DFA endorsed to the President the country's accession to the Madrid Protocol. Conformably with its express authority under
Section 9 of Executive Order No. 459 (Providing for the Guidelines in the Negotiation of International Agreements and its Ratification) dated
November 25, 1997, the DFA determined that the Madrid Protocol was an executive agreement.1âwphi1 The IPOPHL, the Department of Science
and Technology, and the Department of Trade and Industry concurred in the recommendation of the DFA.7

On March 27, 2012, President Benigno C. Aquino III ratified the Madrid Protocol through an instrument of accession, The instrument of accession
was deposited with the Director General of the World Intellectual Property Organization (WIPO) on April 25, 2012.8 The Madrid Protocol entered into
force in the Philippines on July 25, 2012.9

Petitioner IP AP, an association of more than 100 law firms and individual practitioners in Intellectual Property Law whose main objective is to
promote and protect intellectual property rights in the Philippines through constant assistance and involvement in the legislation of intellectual
property law,10 has commenced this special civil action for certiorari and prohibition11 to challenge the validity of the President's accession to the
Madrid Protocol without the concurrence of the Senate. Citing Pimentel, Jr. v. Office of the Executive Secretary, the IPAP has averred:

Nonetheless, while the President has the sole authority to negotiate and enter into treaties, the Constitution provides a limitation to his power by
requiring the concurrence of 2/3 of all the members of the Senate for the validity of the treaty entered into by him. Section 21, Article VII of the 1987
Constitution provides that "no treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the
Members of the Senate." The 1935 and the 1973 Constitution also required the concurrence by the legislature to the treaties entered into by the
executive.12

According to the IPAP, the Madrid Protocol is a treaty, not an executive agreement; hence, respondent DFA Secretary Albert Del Rosario acted with
grave abuse of discretion in determining the Madrid Protocol as an executive agreement.13

The IPAP has argued that the implementation of the Madrid Protocol in the Philippines; specifically the processing of foreign trademark applications,
conflicts with the IP Code,14 whose Section 125 states:

Sec. 125. Representation; Address for Service. - If the applicant is not domiciled or has no real and effective commercial establishment in the
Philippines; he shall designate by a written document filed in the office, the name and address of a Philippine resident who may be served notices or
process in proceedings affecting the mark. Such notices or services may be served upon the person so designated by leaving a copy thereof at the
address specified in the last designation filed. If the person so designated cannot be found at the address given in the last designation, such notice
or process may be served upon the Director. (Sec. 3; R.A. No. 166 a)

It has posited that Article 2 of the Madrid Protocol provides in contrast:

Article 2

Securing Protection through International Registration

(1) Where an application for the registration of a mark has been filed with the Office of a Contracting Party, or where a mark has been registered in
the register of the Office of a Contracting Party, the person in whose name that application (hereinafter referred to as "the basic application;') or that
registration (hereinafter referred to as "the basic registration") stands may, subject to the provisions of this Protocol secure protection for his mark in
the territory of the Contracting Parties, by obtaining the registration of that mark in the register of the International Bureau of the World Intellectual
Property Organization (hereinafter referred to as "the international registration," "the International Register," "the International Bureau" and "the
Organization'', respectively), provided that,

(i) where the basic application has been filed with the Office of a Contracting State or where the basic registration has been made by such an Office,
the person in whose name that application or registration stands is a national of that Contracting State, or is domiciled, or has a real and effective
industrial or commercial establishment, in the said Contracting State,

(ii) where the basic application has been filed with the Office of a Contracting Organization or where the basic registration has been made by such an
Office, the person in whose name that application or registration stands is a national of a State member of that Contracting Organization, or is
domiciled, or has a real and effective industrial or commercial establishment, in the territory of the said Contracting Organization.

(2) The application for international registration (hereinafter referred to as "the international application") shall be filed with the International Bureau
through the intermediary of the Office with which the basic application was filed or by which the basic registration was made (hereinafter referred to
as "the Office of origin"), as the case may be.

(3) Any reference in this Protocol to an "Office" or an "Office of a Contracting Party" shall be construed as a reference to the office that is in charge,
on behalf of a Contracting Party, of the registration of marks, and any reference in this Protocol to "marks" shall be construed as a reference to
trademarks and service marks.

(4) For the purposes of this Protocol, "territory of a Contracting Party" means, where the Contracting Party is a State, the territory of that State and,
where the Contracting Party is an intergovernmental organization, the territory in which the constituting treaty of that intergovernmental organization
applied.

The IPAP has insisted that Article 2 of the Madrid Protocol means that foreign trademark applicants may file their applications through the
International Bureau or the WIPO, and their applications will be automatically granted trademark protection without the need for designating their
resident agents in the country.15

Moreover, the IPAP has submitted that the procedure outlined in the Guide to the International Registration of Marks relating to representation before
the International Bureau is the following, to wit:

Rule 3(1)(a) 09.02 References in the Regulations, Administrative Instructions or in this Guide to representation relate only to representation before
the International Bureau. The questions of the need for a representative before the Office of origin or the Office of a designated Contracting Party (for
example, in the event of a refusal of protection issued by such an Office), who may act as a representative in such cases and the method of
appointment, are outside the scope of the Agreement, Protocol and Regulations and are governed by the law and practice of the Contracting Party
concerned.

which procedure is in conflict with that under Section 125 of the IP Code, and constitutes in effect an amendment of the local law by the Executive
Department.16

The IPAP has prayed that the implementation of the Madrid Protocol in the Philippines be restrained in order to prevent future wrongs considering
that the IP AP and its constituency have a clear and unmistakable right not to be deprived of the rights granted them by the IP Code and existing
local laws.17

In its comment in behalf of the respondents, the Office of the Solicitor General (OSG) has stated that the IPAP does not have the locus standi to
challenge the accession to the Madrid Protocol; that the IPAP cannot invoke the Court's original jurisdiction absent a showing of any grave abuse of
discretion on the part of the respondents; that the President's ratification of the Madrid Protocol as an executive agreement is valid because the
Madrid Protocol is only procedural, does not create substantive rights, and does not require the amendment of the IP Code; that the IPAP is not
entitled to the restraining order or injunction because it suffers no damage from the ratification by the President, and there is also no urgency for
such relief; and the IPAP has no clear unmistakable right to the relief sought.18

Issues

The following issues are to be resolved, namely:

I. Whether or not the IP AP has locus standi to challenge the President's ratification of the Madrid Protocol;

II. Whether or not the President's ratification of the Madrid Protocol is valid and constitutional; and

III. Whether or not the Madrid Protocol is in conflict with the IP Code.

Ruling of the Court

The petition for certiorari and prohibition is without merit.

A.

The issue of legal standing to sue, or locus standi

The IPAP argues in its reply19 that it has the locus standi to file the present case by virtue of its being an association whose members stand to be
injured as a result of the enforcement of the Madrid Protocol in the Philippines; that the injury pertains to the acceptance and approval of applications
submitted through the Madrid Protocol without local representation as required by Section 125 of the IP Code;20 and that such will diminish the
rights granted by the IP Code to Intellectual Property Law practitioners like the members of the IPAP.21

The argument of the IPAP is untenable.

Legal standing refers to "a right of appearance in a court of justice on a given question."22 According to Agan, Jr. v. Philippine International Air
Terminals Co., Inc.,23standing is "a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been
personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public
interest."

The Court has frequently felt the need to dwell on the issue of standing in public or constitutional litigations to sift the worthy from the unworthy public
law litigants seeking redress or relief. The following elucidation in De Castro v. Judicial and Bar Council24offers the general understanding of the
context of legal standing, or locus standi for that purpose, viz. :

In public or constitutional litigations, the Court is often burdened with the determination of the locus standi of the petitioners due to the ever-present
need to regulate the invocation of the intervention of the Court to correct any official action or policy in order to avoid obstructing the efficient
functioning of public officials and offices involved in public service. It is required, therefore, that the petitioner must have a personal stake in the
outcome of the controversy, for, as indicated in Agan, Jr. v. Philippine International Air Terminals Co., Inc.:

The question on legal standing is whether such parties have "'alleged such a personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional
questions," Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must
be able to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has
been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties
by reason of the statute or act complained of.

It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for determining whether a petitioner in a public action had
locus standi. There, the Court held that the person who would assail the validity of a statute must have "a personal and substantial interest in the
case such that he has sustained, or will sustain direct injury as a result." Vera was followed in Custodio v. President of the Senate, Manila Race
Horse Trainers' Association v. De la Fuente, Anti-Chinese League of the Philippines v. Felix, and Pascual v. Secretary of Public Works.

Yet, the Court has also held that the requirement of locus standi, being a mere procedural technicality, can be waived by the Court in the exercise of
its discretion. For instance, in 1949, in Araneta v. Dinglasan, the Court liberalized the approach when the cases had "transcendental importance."
Some notable controversies whose petitioners did not pass the direct injury test were allowed to be treated in the same way as in Araneta v.
Dinglasan.

In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues raised by the petition due to their "farreaching
implications,'; even if the petitioner had no personality to file the suit. The liberal approach of Aquino v. Commission on Elections has been adopted
in several notable cases, permitting ordinary citizens, legislators, and civic organizations to bring their suits involving the constitutionality or validity of
laws, regulations, and rulings.

However, the assertion of a public right as a predicate for challenging a supposedly illegal or unconstitutional executive or legislative action rests on
the theory that the petitioner represents the public in general. Although such petitioner may not be as adversely affected by the action complained
against as are others, it is enough that he sufficiently demonstrates in his petition that he is entitled to protection or relief from the Court in the
vindication ofa public right.25

The injury that the IPAP will allegedly suffer from the implementation of the Madrid Protocol is imaginary, incidental and speculative as opposed to a
direct and material injury required by the foregoing tenets on locus standi. Additionally, as the OSG points out in the comment,26 the IPAP has
misinterpreted Section 125 of the IP Code on the issue of representation. The provision only states that a foreign trademark applicant "shall
designate by a written document filed in the office, the name and address of a Philippine resident who may be served notices or process in
proceedings affecting the mark;" it does not grant anyone in particular the right to represent the foreign trademark applicant. Hence, the IPAP cannot
justly claim that it will suffer irreparable injury or diminution of rights granted to it by Section 125 of the IP Code from the implementation of the
Madrid Protocol.

Nonetheless, the IPAP also emphasizes that the paramount public interest involved has transcendental importance because its petition asserts that
the Executive Department has overstepped the bounds of its authority by thereby cutting into another branch's functions and responsibilities.27 The
assertion of the IPAP may be valid on this score. There is little question that the issues raised herein against the implementation of the Madrid
Protocol are of transcendental importance. Accordingly, we recognize IPAP's locus standi to bring the present challenge. Indeed, the Court has
adopted a liberal attitude towards locus standi whenever the issue presented for consideration has transcendental significance to the people, or
whenever the issues raised are of paramount importance to the public.28

B.

Accession to the

Madrid Protocol was constitutional

The IP AP submits that respondents Executive Secretary and DFA Secretary Del Rosario gravely abused their discretion in determining that there
was no need for the Philippine Senate's concurrence with the Madrid Protocol; that the Madrid Protocol involves changes of national policy, and its
being of a permanent character requires the Senate's concurrence,29 pursuant to Section 21, Article VII of the Constitution, which states that "no
treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate."

Before going further, we have to distinguish between treaties and international agreements, which require the Senate's concurrence, on one hand,
and executive agreements, which may be validly entered into without the Senate's concurrence. Executive Order No. 459, Series of 1997,30 notes
the following definitions, to wit:

Sec. 2. Definition of Terms.

a. International agreement - shall refer to a contract or understanding, regardless of nomenclature, entered into between the Philippines and another
government in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments.

b. Treaties - international agreements entered into by the Philippines which require legislative concurrence after executive ratification. This term may
include compacts like conventions, declarations, covenants and acts.

c. Executive Agreements - similar to treaties except that they do not require legislative concurrence.

The Court has highlighted the difference between treaties and executive agreements in Commissioner of Customs v. Eastern Sea Trading,31 thusly:

International agreements involving political issues or changes of national policy and those involving international arrangements of a permanent
character usually take the form of treaties. But international agreements embodying adjustments of detail carrying out well-established national
policies and traditions and those involving arrangements of a more or less temporary nature usually take the form of executive agreements.

In the Philippines, the DFA, by virtue of Section 9, Executive Order No. 459,32 is initially given the power to determine whether an agreement is to
be treated as a treaty or as an executive agreement. To determine the issue of whether DFA Secretary Del Rosario gravely abused his discretion in
making his determination relative to the Madrid Protocol, we review the jurisprudence on the nature of executive agreements, as well as the subject
matters to be covered by executive agreements.

The pronouncement in Commissioner of Customs v. Eastern Sea Trading33is instructive, to wit:

x x x The concurrence of said House of Congress is required by our fundamental law in the making of "treaties" (Constitution of the Philippines;
Article VII, Section 10[7]), which are, however, distinct and different from "executive agreements," which may be validly entered into without such
concurrence.

"Treaties are formal documents which require ratification with the approval of two thirds of the Senate. Executive agreements become binding
through executive action without the need of a vote by the Senate or by Congress.

xxxx

"x x x the right of the Executive to enter into binding agreements without the necessity of subsequent Congressional approval has been confirmed by
long usage. From the earliest days of our history we have entered into executive agreements covering such subjects as commercial and consular
relations, most-favored-nation rights, patent rights, trademark and copyright protection, postal and navigation arrangements and the settlement of
claims. The validity of these has never been seriously questioned by our courts.

xxxx

Agreements with respect to the registration of trademarks have been concluded by the Executive with various countries under the Act of Congress of
March 3, 1881 (21 Stat. 502), x x x

xxxx

In this connection, Francis B. Sayre, former U.S. High Commissioner to the Philippines, said in his work on "The Constitutionality of Trade
Agreement Acts":

Agreements concluded by the President which fall short of treaties are commonly referred to as executive agreements and are no less common in
our scheme of government than are the more formal instruments - treaties and conventions. They sometimes take the form of exchanges of notes
and at other times that or more formal documents denominated 'agreements' or 'protocols'. The point where ordinary correspondence between this
and other governments ends and agreements - whether denominated executive agreements or exchanges of notes or otherwise - begin, may
sometimes be difficult of ready ascertainment. It would be useless to undertake to discuss here the large variety of executive agreements as such,
concluded from time to time. Hundreds of executive agreements, other than those entered into under the trade-agreements act, have been
negotiated with foreign governments. x x x It would seem to be sufficient, in order to show that the trade agreements under the act of 1934 are not
anomalous in character, that they are not treaties, and that they have abundant precedent in our history, to refer to certain classes of agreements
heretofore entered into by the Executive without the approval of the Senate. They cover such subjects as the inspection of vessels, navigation dues,
income tax on shipping profits, the admission of civil aircraft, customs matters, and commercial relations generally, international claims, postal
matters, the registration of trademarks and copyrights, etcetera. Some of them were concluded not by specific congressional authorization but in
conformity with policies declared in acts of Congress with respect to the general subject matter, such as tariff acts; while still others, particularly
those with respect of the settlement of claims against foreign governments, were concluded independently of any legislation. (Emphasis ours)

As the foregoing pronouncement indicates, the registration of trademarks and copyrights have been the subject of executive agreements entered
into without the concurrence of the Senate. Some executive agreements have been concluded in conformity with the policies declared in the acts of
Congress with respect to the general subject matter.

It then becomes relevant to examine our state policy on intellectual property in general, as reflected in Section 2 of our IP Code, to wit:

Section 2. Declaration of State Policy. - The State recognizes that an effective intellectual and industrial property system is vital to the development
of domestic and creative activity, facilitates transfer of technology, attracts foreign investments, and ensures market access for our products. It shall
protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations, particularly
when beneficial to the people, for such periods as provided in this Act.

The use of intellectual property bears a social function. To this end, the State shall promote the diffusion of knowledge and information for the
promotion of national development and progress and the common good.

It is also the policy of the State to streamline administrative procedures of registering patents, trademarks and copyright, to liberalize the registration
on the transfer of technology; and to enhance the enforcement of intellectual property rights in the Philippines.
In view of the expression of state policy having been made by the Congress itself, the IPAP is plainly mistaken in asserting that "there was no
Congressional act that authorized the accession of the Philippines to the Madrid Protocol."34

Accordingly, DFA Secretary Del Rosario’s determination and treatment of the Madrid Protocol as an executive agreement; being in apparent
contemplation of the express state policies on intellectual property as well as within his power under Executive Order No. 459, are upheld. We
observe at this point that there are no hard and fast rules on the propriety of entering into a treaty or an executive agreement on a given subject as
an instrument of international relations. The primary consideration in the choice of the form of agreement is the parties' intent and desire to craft their
international agreement in the form they so wish to further their respective interests. The matter of form takes a back seat when it comes to
effectiveness and binding effect of the enforcement of a treaty or an executive agreement; inasmuch as all the parties; regardless of the form,
become obliged to comply conformably with the time-honored principle of pacta sunt servanda.35The principle binds the parties to perform in good
faith their parts in the agreements.36

c.

There is no conflict between the

Madrid Protocol and the IP Code.

The IPAP also rests its challenge on the supposed conflict between the Madrid Protocol and the IP Code, contending that the Madrid Protocol does
away with the requirement of a resident agent under Section 125 of the IP Code; and that the Madrid Protocol is unconstitutional for being in conflict
with the local law, which it cannot modify.

The IPAP's contentions stand on a faulty premise. The method of registration through the IPOPHL, as laid down by the IP Code, is distinct and
separate from the method of registration through the WIPO, as set in the Madrid Protocol. Comparing the two methods of registration despite their
being governed by two separate systems of registration is thus misplaced.

In arguing that the Madrid Protocol conflicts with Section 125 of the IP Code, the IP AP highlights the importance of the requirement for the
designation of a resident agent. It underscores that the requirement is intended to ensure that non-resident entities seeking protection or privileges
under Philippine Intellectual Property Laws will be subjected to the country's jurisdiction. It submits that without such resident agent, there will be a
need to resort to costly, time consuming and cumbersome extraterritorial service of writs and processes.37

The IPAP misapprehends the procedure for examination under the Madrid Protocol, The difficulty, which the IPAP illustrates, is minimal, if not
altogether inexistent. The IPOPHL actually requires the designation of the resident agent when it refuses the registration of a mark. Local
representation is further required in the submission of the Declaration of Actual Use, as well as in the submission of the license contract.38 The
Madrid Protocol accords with the intent and spirit of the IP Code, particularly on the subject of the registration of trademarks. The Madrid Protocol
does not amend or modify the IP Code on the acquisition of trademark rights considering that the applications under the Madrid Protocol are still
examined according to the relevant national law, In that regard, the IPOPHL will only grant protection to a mark that meets the local registration
requirements.

WHEREFORE, this Court DISMISSES the petition for certiorari and prohibition for lack of merit; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

INTELLECTUAL CREATIONS UNDER THE NEW CIVIL CODE OF THE PHILIPPINES

HISTORY

THIRD DIVISION
[ G.R. No. 197335. September 07, 2020 ]
REPUBLIC OF THE PHILIPPINES, THROUGH THE PHILIPPINE NATIONAL POLICE (PNP), PETITIONER, VS. HEIRS OF JOSE C. TUPAZ, IV,
NAMELY: MA. CORAZON J. TUPAZ, MA. JEANETTE T. CALING, MA. JUNELLA T. AVJEAN, MARIE JOSELYN T. DEXHEIMER, JOSE NIÑO T.
TUPAZ, V, AND JON FERDINAND T. TUPAZ, AND/OR EL ORO INDUSTRIES, INC., AND THE NATIONAL LIBRARY, REPRESENTED BY
ADORACION MENDOZA-BOLOS, DIRECTOR, AND THE CHIEF OF THE PUBLICATION AND SPECIAL SERVICES DIVISION OF THE
NATIONAL LIBRARY, RESPONDENTS.

DECISION

LEONEN, J.:

The copyright of a derivative work solely belongs to the person who fixes an idea into a tangible medium of expression. The law on copyright only
protects the expression of an idea, not the idea itself. Thus, one who merely contributes concepts or ideas is not deemed an author.

For this Court's resolution is a Petition for Review on Certiorari [1] assailing the Court of Appeals' Decision[2] and Resolution.[3] The challenged
judgments reversed the Regional Trial Court's Decision,[4] which ordered the cancellation of respondents' certificates of copyright registration over
the designs of the Philippine National Police (PNP) cap device and badge. [5]
In 1996, the PNP Directorate for Logistics Support Service authorized the procurement of new uniforms and equipment for the PNP, including brand
new cap devices and badges. The PNP Directorate on Research and Development, Clothing, and Criminalistics Equipment Division assumed the
responsibility of updating the designs of the PNP cap device and badge. [6]

The present PNP cap device and badge have the following distinctive features: (1) a native shield, depicted as a vertically elongated hexagon; (2) a
sword-and-shield wielding warrior purporting to be Lapu-Lapu; (3) eight (8) rays of the sun representing the first eight (8) provinces to revolt against
Spain; (4) three (3) pentagram stars representing Luzon, Visayas, and Mindanao; (5) laurel leaves; and (6) the words "service, honor, and justice."[7]

The designs of the present PNP cap device and badge were previously used by the Philippine Constabulary in its coat of arms. [8]

The PNP Directorate on Research and Development, Clothing, and Criminalistics Equipment Division collaborated with Jose C. Tupaz, IV (Tupaz) to
create the new designs of the PNP cap device and badge. Tupaz volunteered and rendered his services for free. [9] Under their agreement, Tupaz will
sketch the new designs and produce samples or prototypes. The samples will then be presented before the PNP's Uniform and Equipment
Standardization Board for approval.[10]

Tupaz drew the new designs based on the PNP's specifications and instructions. He then submitted the finished sketches to the PNP for evaluation.
Thereafter, the designs were transmitted to and approved by the National Police Commission. [11]

Upon approval of the new designs, the PNP conducted a public bidding for the procurement of the new PNP cap devices and badges. Among those
who participated was El Oro Industries, Inc. (El Oro).[12] Tupaz was El Oro's then-president and chair of the board of directors.[13]

El Oro submitted the second highest bid price. After the tabulation of the bids, El Oro presented before the PNP's Bids and Awards Committee
certificates of copyright registration over the PNP cap device and badge issued in favor of Tupaz. Hence, the contract was not awarded to the
winning bidder, but to El Oro.[14]

No other manufacturer attempted to produce the PNP cap device and badge bearing the new designs for fear of copyright infringement.[15]

Police Director Jose S. Andaya, head of the PNP Directorate on Research and Development, Clothing, and Criminalistics Equipment Division, wrote
the National Library requesting the cancellation of the certificates of copyright registration of the PNP cap device and badge. However, the National
Library did not act on the request.[16]

Subsequently, the Republic of the Philippines, through the PNP, filed a Complaint before the Quezon City Regional Trial Court for the cancellation of
Tupaz's certificates of copyright registration, with a prayer for the issuance of a writ of preliminary injunction. [17]

In their Answer, El Oro and Tupaz alleged that El Oro is the exclusive and official engraver of Philippine heraldry items since 1953. They claimed that
Tupaz's ancestor, Jose T. Tupaz, Jr., developed the original designs on which the present designs of the PNP cap device and badge were based.
Hence, El Oro owned the copyright over the new designs and was allegedly the only qualified bidder.[18]

In its Decision,[19] the Regional Trial Court ruled in favor of the Republic of the Philippines. The dispositive portion states:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants as follows:

(a) [O]rdering the defendant National Library to cancel Certificate of Copyright Registration No. 96-589 over the PNP Cap Device and Certificate
of Copyright Registration No. 96-721 over the PNP badge issued in favor of defendant/s Jose C. Tupaz IV and/or El Oro Industries Inc., and
to issue two new certificates of copyright registration in the name of the Philippine National Police in lieu of these two aforecited certificates of
copyright registration; and

(b) [O]rdering the issuance of a writ of prohibitory injunction, permanently prohibiting defendant/s Jose C. Tupaz IV and/or El Oro Industries Inc.,
and other persons/parties deriving interest from said defendant/s from manufacturing, using[,] and selling the PNP cap devices and badges
bearing the designs created and developed by the Philippine National Police which are the subject matters of Certificates of Copyright
Registration Nos. 96-589 and 96-721, which had now been ordered cancelled as provided herein.

All other claim/s including the counterclaim are dismissed for lack of legal and/or factual basis.

SO ORDERED.[20]

The Regional Trial Court declared that the new designs of the PNP cap device and badge were created by the PNP Directorate for Research and
Development, Clothing, and Criminalistics Equipment Division. Under Section 176.1 of Republic Act No. 8293, [21] the new designs are works of the
Philippine government, the copyright of which may not be registered in favor of private entities. [22]

El Oro and Tupaz moved for reconsideration, but their motion was denied. [23]

Pending appeal before the Court of Appeals, Tupaz passed away.[24] He was substituted in the case by his heirs.[25]

In its Decision,[26] the Court of Appeals reversed the Regional Trial Court's ruling and lifted the writ of prohibitory injunction issued against El Oro,
Tupaz, and their successors-in-interest.
The Court of Appeals classified the new designs of the PNP cap device and badge as derivative works under Section 2(P) of Presidential Decree
No. 49.[27] According to the Court of Appeals, a derivative work is entitled to copyright protection, if produced with the consent of the original work's
author, and if it has a "distinguishable non-trivial variation" from the original.[28] The Court of Appeals ruled that both requirements were present. [29]

Although both parties claim authorship over the pre-existing designs, the Court of Appeals nevertheless held that the consent requirement was met
because both parties agreed to use the pre-existing designs as basis for the new designs. Moreover, the new designs are substantially distinct from
the pre existing designs.[30] In its Decision, the Court of Appeals stated:

Comparing Exhibits A-1 (the cap device designed earlier used by the PNP) and A-2 (the design for which Tupaz obtained a copyright registration
certificate), substantial changes in the appearance are present. Some of these distinctions are: the native shield in Exhibit A-1 is checkered cream
and red in color while the one in Exhibit A-2 is silver; eight short sun rays appear on top of Exhibit A-2 while there is none in the other earlier design;
and the flowers in Exhibit A-2 are mere buds while the ones in Exhibit A-1 have open petals. Notable changes are also present if Exhibits B-1 (the
badge design earlier used by the PNP) and B-2 (another design for which Tupaz obtained a certificate [of copyright registration]) are compared. For
instance, among other differences, colors (black, red, white and blue) and eight short sun rays on top of the design are incorporated in Exhibit B-2
while Exhibit B-1 does not contain these details.[31]

The Court of Appeals declared Tupaz as the author of the new designs. The PNP only contributed ideas, but it was Tupaz who actually made the
new designs. The Court of Appeals emphasized that the law on copyright protects the expression of an idea, but not the idea itself.[32]

The Republic of the Philippines then filed a Petition for Review on Certiorari [33] before this Court. In a September 14, 2011 Resolution,[34] this Court
required respondents to comment on the petition. However, they failed to file their comment on the petition. Subsequently, this Court issued a show
cause order requiring respondent Tupaz to explain why he should not be held in contempt, and to submit the required comment on the petition.[35]

The Resolution, and other subsequent Resolutions of this Court, were returned unserved to respondents.[36] In another Resolution,[37] this Court
required the Office of the Solicitor General to submit the current addresses of respondents so that they may be served with court processes.

The Office of the Solicitor General manifested that respondent Tupaz received a copy of the petition based on the postmaster's certification.
Meanwhile, respondent Ma. Corazon Tupaz passed away on August 30, 2010. On the other hand, the whereabouts of respondents Ma. Jeanette T.
Caling, Ma. Junella T. Avjean, Marie Jocelyn T. Dexheimer, and Jon Ferdinand T. Tupaz could not be ascertained. [38]

Extraordinary efforts to serve copies of the resolutions ordering respondents to file their comment failed. This Court later resolved to dispense with
the filing of respondents' comment on the petition.[39]

Petitioner concedes that only questions of law may be raised in a Petition for Review on Certiorari brought under Rule 45 of the Rules of Court.
However, it claims that the present case is exempted from the application of the general rule for two (2) reasons. First, the factual findings of the
Court of Appeals are contrary to the findings of the trial court. Second, the conclusion of the Court of Appeals [40] is "grounded entirely on speculation,
surmise[s,] and conjectures[.]" [41]

Petitioner argues that derivative works are entitled to protection under Section 8 of Presidential Decree No. 49 only if they were "produced with the
consent of the creator or proprietor of the original works[.]" [42] However, the Court of Appeals failed to establish the true author of the pre-existing
designs. This is relevant to determine who can give consent. [43]

Moreover, petitioner maintains that there is no substantial distinction between the new designs and the pre-existing designs. The distinctive features
of the pre-existing designs were exactly adopted in the new designs. The differences pointed out by the Court of Appeals are only trivial distinctions.
Due to the absence of distinguishable non-trivial variations, the new designs cannot be copyrighted as derivative or new works under Section 8 of
Presidential Decree No. 49.[44]

This case presents the following issues for this Court's resolution:

First, whether or not this Court may undertake a factual review.

Second, whether or not the new designs of the PNP cap device and badge are entitled to protection as derivative works under Section 8 of
Presidential Decree No. 49.

Lastly, whether or not the PNP, as contributor of ideas, should be deemed as the author of the new designs.

The petition is unmeritorious.

The scope of this Court's jurisdiction over petitions brought under Rule 45 of the Revised Rules of Court is limited to reviewing questions of
law.[45] This Court will not entertain questions of fact because it is not duty-bound to weigh and analyze evidence anew.[46] The factual findings of the
appellate courts are generally final and conclusive on this Court when supported by substantial evidence. [47]

The question pertaining to the authorship of a copyrightable work is a factual matter that generally goes beyond the scope of review in a Rule 45
Petition. However, this Court may undertake a factual review when the findings of the Court of Appeals are "contrary to those of the trial court[.]"[48]

In this case, the Regional Trial Court and Court of Appeals differed as to who created the new designs of the PNP cap device and badge. Also, both
tribunals applied different laws. The Regional Trial Court rendered its Decision based on the present intellectual property code or Republic Act No.
8293.[49] The Court of Appeals, on the other hand, relied on the provisions of Presidential Decree No. 49. [50]
This case shall be resolved using the provisions of Presidential Decree No. 49, not Republic Act No. 8293. Presidential Decree No. 49 was the law in
force at the time the new designs of the PNP cap device and badge were made. It was also the law in force when the certificates of copyright
registration were issued to respondents in 1996.[51] Republic Act No. 8293, which amended Presidential Decree No. 49, only took effect on January
1, 1998.[52]

II(A)

Copyright is "the right granted by statute to the proprietor of an intellectual production to its exclusive use and enjoyment[.]"[53] It "may be obtained
and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute." [54] Copyright is a purely
statutory right. Only classes of works falling under the statutory enumeration are entitled to protection. [55]

Copyright has two rationales: the economic benefit and social benefit. The economic benefit is reaped by the author from his work while the social
benefit manifests when it creates impetus for individuals to be creative. [56] Copyright, like other intellectual property rights, grants legal protection by
prohibiting the unauthorized reproduction of the author's work. [57] It "create[s] a temporary monopoly on varying types of knowledge, allowing their
owners to restrict and even prevent, other from using that knowledge."[58] By eliminating fear of other's appropriation and exploitation of an author's
work, intellectual creation is incentivized.[59]

When the concept of copyright emerged, it was primarily concerned with the advancement of a common social good and not so much about the
author's rights. Copyright statutes were initially crafted for the reading public and to encourage education through the production of books.[60]

Copyright traces its beginnings in 1476 when printing was first introduced in England. The English Crown then had two (2) main reasons in
regulating printing through licensing: (1) to suppress dissent, which was rapidly growing due to easier reproduction of materials; and (2) to profit from
those who are willing to pay for the exclusive right to print particular books. Subsequently, the control of publishing was ceded to a group of printers,
bookbinders, and booksellers called Stationer's Company through a printing patent which grants monopoly over the English publishing trade.
Through the Stationer's Company, the English Crown maintained its political and economic interest in the publishing trade. [61]

The Stationer's Company eventually lost its power when the Licensing Act expired in 1694. Failing to convince the Parliament to extend its powers,
the Stationer's Company lobbied for the interests of authors over publishers. In 1710, the Statute of Anne, the first copyright act, was enacted. The
Statute of Anne granted the Stationer's Company the remedies they needed to maintain their existing publication rights. However, it removed the
Stationer's Company's monopoly by allowing anyone, whether an author or a publisher, to obtain copyright by mere registration. The law further
provided a limited term of copyright instead of the former perpetual monopoly. It granted 14 years for the work's publication which is renewable for
another 14 years, if the author was still alive.[62]

While the Statute of Anne was seen as an anti-monopoly trade regulation, it mainly focused on the author's social contribution and the advancement
of education through the production of books.[63] It is not mainly after the "recognition of any pre-existing authorial right, nor...the regulation of the
booksellers' market[,]" but the promotion of "the free market of ideas[.]" [64]

The Statute of Anne only covered books, but succeeding laws added other subjects as new technology emerged, such as engravings, sculptures,
paintings, drawings, photographs, sound recordings, and motion pictures. [65] The first copyright law of the United States, the Act of 1790, was
modeled after the Statute of Anne. It initially covered books, maps, and charts and similarly required a formal registration and granted a 14-year
copyright renewable for another 14-year term.[66] In its subsequent amendments, the period was extended to 28 years[67] and it expanded copyright
to other works such as historical and other prints, dramatic works and its public performance, photographs, visual art, and musical compositions.[68] It
later included the right to create derivative works and the prohibition on copyright protection in government publications. [69]

Intellectual property law in our jurisdiction dates back during the Spanish occupation. [70] When the United States took over the Philippines through
the Treaty of Paris in 1898, "patents, trademarks, and copyrights that were granted by the Spanish government continued to have legal effect in the
[Philippines.]"[71]

While under the United States occupation, Act No. 3134, otherwise known as the Copyright Law of the Philippine Island, was passed.[72] Act No.
3134 was based on the United States Copyright Law of 1909. [73] After the Philippines gained its independence in 1946, Act No. 3134 provided the
legal framework for intellectual property law in our jurisdiction. [74] Years later, laws on patent[75] and trademark[76] were enacted, creating a patent
office for the registration of trademarks, trade names, and service marks. [77]

In 1972, Presidential Decree No. 49, otherwise known as the Decree on the Protection of Intellectual Property, was passed, superseding Act No.
3134. Nevertheless, Presidential Decree No. 49 was heavily modeled after Act No. 3134. [78]

Section 2 of Presidential Decree No. 49 enumerates different classes of copyrightable works, which are protected from the moment of creation:

SECTION 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works:

(A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers;

(B) Periodicals, including pamphlets and newspapers;

(C) Lectures, sermons, addresses, dissertations prepared for oral delivery;

(D) Letters;

(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in
writing or otherwise;
(F) Musical compositions, with or without words;

(G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of art;

(H) Reproductions of a work of art;

(I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art;

(J) Maps, plans, sketches, and charts;

(K) Drawings or plastic works of a scientific or technical character;

(L) Photographic works and works produced by a process analogous to photography; lantern slides;

(M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings;

(N) Computer programs;

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

(P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or of works
of the Philippine Government as herein defined, which shall be protected as provided in Section 8 of this Decree;

(Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection and
arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this Decree;

(R) Other literary, scholarly, scientific[,] and artistic works.

The enumeration under Section 2 of Presidential Decree No. 49 is substantially similar to that which can be found in Section 172.1 of the subsequent
law, Republic Act No. 8293.[79]

Under both laws, the copyright vests upon the sole fact of creation. [80] Presidential Decree No. 49 requires the registration and deposit of some works
with the National Library.[81] Noncompliance with this rule "does not deprive the copyright owner of the right to sue for infringement." [82] However, it
limits the remedies of copyright owners, denies them of the right to recover damages, and subjects them to certain sanctions. [83] Republic Act No.
8293 retains the registration and deposit requirement but only for the purpose of "completing the records of the National Library and the Supreme
Court Library[.]"[84] The present law "does not require registration of the work to fully recover in an infringement suit." [85]

II(B)

Broadly defined, a derivative work refers to a work that is "based on...one or more already existing works." [86] The author of a derivative work borrows
expressive content from an existing work and transforms it into another work. [87] Through this process, the author of a derivative work does not
simply copy the existing work but creates an original work entitled to a separate copyright.[88] Although the expression in the derivative work is
"intermingled with the expression from the underlying work," the derivative author contributes original expression to the new work making it distinct
from the underlying work.[89]

Derivative works right is inseparable from the adaptation right of the original work's author. [90] Adaptation right is included in the bundle of rights
granted to a recognized author or owner of an intellectual property. Under Section 5(B) of Presidential Decree No. 49:

SECTION 5. Copyright shall consist in the exclusive right;

….

(B) To make any translation or other version or extracts or arrangements or adaptations thereof; to dramatize it if it be a non-dramatic work; to
convert it into a non-dramatic work if it be a drama; to complete or execute it if it be a model or design[.]

Under earlier laws, authors are not granted adaptation rights. The original author's right was narrow as it only covered the literal copying of the
material. For instance, an author cannot claim an injunction against the unauthorized translation of his or her work to another language, because the
rights granted under the copyright only extends to "printing, reprinting, publishing or vending." [91]

Adaptation right was later introduced as copyright expanded beyond literal copying. Similar to existing laws in United Kingdom, [92] Canada,[93] and
Australia,[94] the United States' 1909 Copyright Act then allowed "abridgements, adaptations, arrangements, dramatizations, translations, or other
version of works...of copyrighted works" only when produced with the author's consent. [95] This statutory text was adopted in Act No. 3134, and later
in Presidential Decree No. 49.[96]

Borne out of copyright's expansion, the notion of derivative works was introduced in the legal scheme. When the adaptation of an original work was
authorized by the owner, and when distinct from the underlying work, the resulting derivative work is copyrightable.

No exact definition of derivative works is found in Presidential Decree No. 49 and Republic Act No. 8293. However, both laws provide examples
consistent with the Berne Convention.
Under Article 2(3) of the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) to which the Philippines is a
contracting party,[97] derivative works pertain to "[t]ranslations, adaptations, arrangements of music and other alterations of a literary or artistic
work[.]"

Section 2(P) of Presidential Decree No. 49 grants copyright protection to "[d]ramatizations, translations, adaptations, abridgements, arrangements
and other alterations of literary, musical or artistic works or of works of the Philippine Government[.]" Republic Act No. 8293 devotes a separate
chapter to derivative works. The enumeration is substantially similar to that found in Presidential Decree No. 49. However, it excludes from copyright
protection derivative works based on existing works of the government. [98]

Presidential Decree No. 49 gives special attention to derivative works and how it may be granted copyright as a new work. Under Section 8 of the
law:

SECTION 8. The works referred to in subsections (P) and (O) of Section 2 of this Decree shall, when produced with the consent of the creator or
proprietor of the original works on which they are based, be protected as new works; however, such new works shall not affect the force of any
subsisting copyright upon the original works employed or any part thereof, or be construed to imply an exclusive right to such use of the original
works, or to secure or extend copyright in such original works. (Emphasis supplied) [99]

Presidential Decree No. 49 is consistent with prevailing conventions when it was enacted. Under the Berne Convention and the Universal Copyright
Convention, authors of original works retain the exclusive right of control over their works. Pertinent articles of the conventions provide:

Berne Convention

Article 8.
Right of Translation.

Authors of literary and artistic works protected by this Convention shall enjoy the exclusive right of making and of authorizing the translation of their
works throughout the term of protection of their rights in the original works.
....

Article 12.
Right of Adaptation, Arrangement and Other Alteration.

Authors of literary or artistic works shall enjoy the exclusive right of authorizing adaptations, arrangements and other alterations of their works. [100]

Universal Copyright Convention

Article V

1. Copyright shall include the exclusive right of the author to make, publish, and authorize the making and publication of translations of works
protected under this Convention.

The Court of Appeals correctly classified the new designs of the PNP cap device and badge as derivative works. Respondents, in collaboration with
the PNP and upon its instruction, borrowed expressive content from the pre existing designs of the PNP cap device and badge to create the new.
The new designs are considered alterations of artistic works under Section 2(P) of Presidential Decree No. 49. However, they can only be
copyrighted if they were produced with the consent of the creator of the pre-existing designs and if there is distinction between the new designs and
the pre-existing designs.

Both requisites are present in this case.

The Regional Trial Court and the Court of Appeals failed to determine who authored the pre-existing designs. Respondents assert that they owned
both designs because their ancestor, Jose T. Tupaz, Jr., is the author of the original designs of the PNP cap device and badge. On the other hand,
petitioner claims that it owned the designs. However, this would be of little or of no consequence considering that the parties asserting ownership
over the pre-existing designs are the very same ones who collaborated to create the new designs. It would have been a different matter if a third
party also claimed ownership over the pre-existing designs. What is clear is that both parties agreed to create the new designs from the pre-existing
designs.

Since the creator of the new designs must borrow expressive content from the pre-existing designs, the new designs would obviously incorporate
elements of the original material. In this case, the borrowed elements of the original material are the native shield, the eight (8) rays of the sun, three
(3) stars' laurel leaves' and the words "service," "honor," and "Justice." [101]

The test of whether the new designs are copyrightable independently from the pre-existing works is the presence of originality in the derivative work.
The new work, although similar to the pre-existing work in some of its expressive elements, must be substantially distinct from the pre-existing
work.[102]

A careful comparison of the pre-existing designs and the new designs shows that there are substantial distinctions between the two: [103]

(see image, p. 17)

Figure 1.1 Pre-existing PNP Cap Device & Figure 1.2 Redesigned PNP Cap Device
The most prominent feature of the pre-existing PNP cap device is the native shield. In the new design of the PNP cap device, the native shield has
been reduced in size and the laurel leaves are made more noticeable. The Court of Appeals observed that the native shield in the pre-existing
design is "checkered cream and red in color." On the other hand, the native shield in the new design is silver. [104]

The pre-existing PNP cap device contains the words "PHILIPPINE NATIONAL POLICE" located inside the native shield, which was eliminated in the
new design. Instead, the words "PHILIPPINES" and "POLICE" were placed at the top and bottom of the cap device, respectively. Furthermore, the
word "POLICE" is more prominent in the new design. There are also 8 short sun rays on top of the cap device:

(see image, p. 17)

Figure 2.1 Pre-existing: PNP Badge & Figure 2.2 Redesigned PNP Badge

With regard to the PNP badge, the most prominent feature of the pre existing design is the native shield, which has been reduced in size in the new
design. Another prominent feature of the pre-existing design is the badge number. The badge number in the new design was reduced and placed at
the bottom portion.

The words "PHILIPPINE NATIONAL POLICE" were transposed from the native shield in the pre-existing design and were placed on top in the new
design. The shapes of the two designs are also different. The new design takes the general shape of an oval compared to the pre-existing design.
Aside from these, the Court of Appeals observed that the new design contains the colors black, red, white, and blue. [105]

III

Under Section 2 of Presidential Decree No. 49, the copyright belongs to the creator of the work or the creator's heirs or assigns. If the work is
created by two (2) or more persons, they shall own the copyright jointly. [106] The same principles are embodied in Sections 178.1 and 178.2 of
Republic Act No. 8293.[107]

Unlike Republic Act No. 8293, which defines an author as the "natural person who has created the work[,]" [108] Presidential Decree No. 49 does not
provide a definition of an author or a creator. Despite the law's silence, an author, for purposes of copyright ownership, should be deemed as one
who fixes an abstract idea into something tangible.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), which took effect in the Philippines on January 1,
1995,[109] states that "copyright protection shall extend to expressions and not to ideas, procedures, methods of operation[,] or mathematical
concepts as such."[110]

More commonly referred to as the "idea/expression dichotomy," the principle in copyright protection is that "ideas are not protectable" and only
expressions of those ideas may be subject to copyright protection. [111]

In ABS-CBN Corp. v. Gozon,[112] this Court distinguished ideas and expression of ideas in relation to what may be the subject of copyright:

An idea or event must be distinguished from the expression of that idea or event. An idea has been likened to a ghost in that it "must be spoken to a
little before it will explain itself."
...

Ideas can be either abstract or concrete. It is the concrete ideas that are generally referred to as expression:

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression distinction. The Nichols court, for example, found that the
defendant's film did not infringe the plaintiffs play because it was "too generalized an abstraction from what plaintiff wrote ... only a part of her ideas."
In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of thought, and general ideas found in another's work, "provided
they do not substantially copy a concrete form, in which the circumstances and ideas have been developed, arranged, and put into shape." Judge
Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no one infringes, unless he descends so far into what is concrete
as to invade... 'expression."'

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of these abstractions that may be termed expression.
However, if the concrete form of a work means more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several meanings for the word concrete. These include:
"having a material, perceptible existence; of, belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract." [113] (Citations omitted)

Joaquin v. Drilon [114] also illustrates the distinction between ideas and expression of ideas regarding copyrightable subject matter. The petitioner in
Joaquin claimed that the format of its dating game show called 'Rhoda and Me' is entitled to copyright protection. [115] In ruling against the petitioner,
this Court underscored the principle that the law on copyright is purely statutory.[116] Only classes of work enumerated in Pres. Decree No. 49 are
subject to copyright.[117] Thus, the format of a television show, not falling within the enumeration, is not copyrightable.[118] Furthermore, this Court
stated:

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea,
procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work.[119] (Citation omitted, emphasis supplied)

Although a creator or author is not expressly defined under Pres. Decree No. 49, it may be logically inferred—based on the scope of copyrightable
works—that a creator or an author pertains to someone who transforms an abstract idea into a tangible form of expression through the application of
skill or labor.
To create a thing that may be entitled to a copyright requires something more than the giving of ideas and concepts. Ideas should translate to or
transition into something that is tangible or physical. In other words, something capable of being perceived must be produced. To illustrate, an image
that remains in a person's mind would not be entitled to copyright protection unless he or she draws it on a piece of paper or paints the image on
canvass.

In this case, it is undisputed that petitioner and respondent Tupaz collaborated to develop the new designs of the PNP cap device and badge.
However, the extent of petitioner's participation in developing the new designs of the PNP cap device and badge was limited to instructing
respondent Tupaz on how the designs should appear in general and what specific elements should be incorporated.[120] Petitioner merely supplied
ideas and concepts.[121] It was respondent Tupaz who used his skill and labor to concretize what petitioner had envisioned. Therefore, petitioner
cannot be considered as an author of the new designs either in whole or in part.

Petitioner is also not entitled to own the copyright under any of the exceptions in Section 6 of Presidential Decree No. 49. [122] The first exception
refers to works created in the course of the employment of the creator. Section 6 of Presidential Decree No. 49 states:

If the work in which copyright subsists was made during and in the course of the employment of the creator, the copyright shall belong to:

(a) The employee, if the creation of the object of copyright is not a part of his regular duties even if the employee uses the time, facilities and
materials of the employer.

(b) The employer, if the work is the result of the performance of his regularly assigned duties, unless there is an agreement, express or implied
to the contrary. [123]

Section 178.3 of Republic Act No. 8293, retains the rule regarding works created in the course of the employment. [124]

The second exception refers to commissioned works. The creator of the work should be paid valuable consideration for the work made. Section 6 of
Presidential Decree No. 49 states that the copyright of a commissioned work belongs in joint ownership to the creator and the person who
commissioned the work. The parties, however, can agree that the ownership of the copyright shall pertain to either of them. [125]

The rule regarding commissioned works is modified under Republic Act No. 8293. Parties no longer have joint ownership over the copyright. Under
Section 178.4 of Republic Act No. 8293, the copyright of a commissioned work generally belongs to the creator. However, the parties may agree in
writing to transfer the copyright to the person who commissioned the work. [126]

In the present case, petitioner is not entitled to own the copyright because the designs were neither commissioned works nor works created in the
course of respondent Tupaz's employment. First, although the parties verbally agreed to work together, petitioner did not hire respondent Tupaz's
services for a fee or a commission. Respondent Tupaz rendered his services voluntarily.[127] In other words, the new designs do not qualify as
commissioned works. Second, there was no employer-employee relationship between the parties at the time the designs were made.

Petitioner could have avoided this dispute had it entered into a contract that clearly and expressly spelled out the extent of each party's rights over
the new designs, as Presidential Decree No. 49 allows the transfer or assignment of the work and its copyright to other persons by gift, inheritance,
or otherwise.[128]

WHEREFORE, the Petition for Review is DENIED. The Court of Appeals Decision dated August 12, 2010 and Resolution dated June 27, 2011 in
CA-G.R. CV No. 82018 are AFFIRMED.

SO ORDERED.

THIRD DIVISION

[ G.R. No. 154342. July 14, 2004 ]

MIGHTY CORPORATION AND LA CAMPANA FABRICA DE TABACO, INC. PETITIONERS, 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 decision[1] 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[4] and (c) the aforesaid Makati RTC decision itself.

I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of
California, United States of America (U.S.), where all its wineries are located. 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 circa 1974 within the then U.S. military facilities only. By 1979, they had
expanded their Philippine market through authorized distributors and independent outlets.[16]

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 infringement and unfair competition, with a prayer
for damages and preliminary injunction.Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of
Industrial Property (Paris Convention)[18] and RA 166 (Trademark Law),[19] specifically, Sections 22 and 23 (for trademark infringement),[20] 29
and 30[21] (for unfair competition and false designation of origin) and 37 (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 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, plus
P2 million as actual and compensatory damages, at least P500,000 as exemplary and moral damages, and at least P500,000 as attorney’s fees and
litigation expenses.[23]

In their answer, petitioners alleged, among other affirmative defenses, that: petitioner’s GALLO cigarettes and Gallo Winery’s wines were totally
unrelated products; Gallo Winery’s GALLO trademark registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines
were sold through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items
compared to Gallo 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, laborers and other low-income
workers; the dominant feature of the GALLO cigarette mark was the 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 GALLO or just their
surname GALLO; by their inaction and conduct, respondents were guilty of laches and estoppel; and petitioners acted with honesty, justice and good
faith in the exercise of their right to manufacture and sell GALLO cigarettes.

In an order dated April 21, 1993,[24] 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 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]

After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, and permanently enjoined them from,
committing trademark infringement and unfair competition with respect to the GALLO trademark:

WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit:

permanently restraining and enjoining defendants, their distributors, trade 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 words, designs or emblems and other acts of similar nature, and (ii) committing other acts of unfair competition against
plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under the GALLO trademark.

ordering defendants to pay plaintiffs –

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

exemplary damages in the amount of PHP100,000.00;

attorney’s fees and expenses of litigation in the amount of PHP1,130,068.91;

the cost of suit.

SO ORDERED.”[29]

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.

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]

Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure questions of law, and hence, must be
dismissed outright.

IV.

Discussion

THE EXCEPTIONAL CIRCUMSTANCES

IN THIS CASE OBLIGE THE COURT TO REVIEW

THE 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]

the conclusion is grounded entirely on speculation, surmises, and conjectures;

the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible;

there is grave abuse of discretion;

the judgment is based on a misapprehension of facts;

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;

the findings are without citation of specific evidence on which they are based;
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

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:

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.

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

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 create confusion 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:

registration or use by another person of a trademark which is a reproduction, imitation or translation liable to create confusion,

of a mark considered by the competent authority of the country of registration or use[48] to be well-known in that country and is already the mark of a
person entitled to the benefits of the Paris Convention, and

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 Law[50] considers the trademark registration certificate as prima facie evidence 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 Patents[51] and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-A[52] 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 trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office

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,

the trademark is used for identical or similar goods, and

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 use of a trademark in the Philippines prior to its registration, notwithstanding the provisions of the Paris
Convention:

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial
use of its “LEE” trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over
said mark.

Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of
the Philippine Trademark Law (R.A. No. 166) x x x

xxx xxx xxx

The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the
Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224
SCRA 576 [1993]):

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must
subordinate an international agreement 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 in Kabushi 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 facie evidence. It is not conclusive but can and may be rebutted by controverting evidence.

xxx xxx xxx

In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records,
we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of
the trademark “LEE” which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its “LEE”
mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177)
based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the
H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly, we give little weight to the numerous vouchers
representing various advertising expenses in the Philippines for “LEE” products. It is well to note that these expenses were incurred only in 1981 and
1982 by LEE (Phils.), Inc. after it entered into a licensing agreement 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:

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;

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;

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;

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;

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

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]

the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals[76] and other cases,[77] and

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 confuse[82] 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,”[88] which appears in different
fonts, sizes, styles and labels, unlike petitioners’ uniform casque-font bold-lettered GALLO mark.

Moreover, on the labels of Gallo 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 6bis of the Paris Convention which proscribe trademark
infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and
applied the modern concept of “related goods.”[91] Simply stated, when goods are so related that the public may be, or is actually, deceived and
misled that they come from the same maker or manufacturer, trademark infringement occurs.[92]

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:

the business (and its location) to which the goods belong

the class of product to which the goods belong

the product's quality, quantity, or size, including the nature of the package, wrapper or container [97]

the nature and cost of the articles[98]

the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality

the purpose of the goods[99]

whether the article is bought for immediate consumption,[100] that is, day-to-day household items[101]

the fields of manufacture[102]

the conditions under which the article is usually purchased[103] and

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-sari stores 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 defendant’s use of the mark “BLACK LABEL” for cigarettes because it was likely to cause confusion with the plaintiff’s well-known mark
“BLACK LABEL” for beer.

xxx xxx xxx

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

The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products
and that IDV has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related
products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation
between the tobacco and liqueur products bearing the marks here at issue.

xxx xxx xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name ‘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, and as found in
Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public
mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at
308.

Taken as a whole, the evidence here demonstrates the absence of the ‘special circumstances’ in which courts have found a relationship between
tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark.
It is true that BAILEYS liqueur, the world’s best selling liqueur and the second best selling in the United States, is a well-known product. That fact
alone, however, is insufficient to invoke the special circumstances connection here where so much other evidence and so many other factors
disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion.
(Emphasis supplied).

In short, tobacco and alcohol products may be considered related only in cases involving special circumstances which exist only if a famous mark is
involved and there is a demonstrated intent to capitalize on it. Both of these are absent in the present case.

THE GALLO WINE TRADEMARK IS NOT A

WELL-KNOWN MARK IN THE CONTEXT

OF THE PARIS CONVENTION IN THIS CASE

SINCE WINES AND CIGARETTES ARE NOT

IDENTICAL OR SIMILAR GOODS

First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, after Tobacco Industries’ use
of the GALLO cigarette trademark in 1973 and petitioners’ use of the same mark in 1984.

GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite element under both the Trademark Law
and the Paris Convention.

Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary
evidence that aside from Gallo Winery’s GALLO trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on
September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.A’s April 19, 1990
application for GALLO trademark registration and use for its “noodles, prepared food or canned noodles, ready or canned sauces for noodles,
semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar,
species and ice.”[122]

Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,[123] “GALLO”
cannot be considered a “well-known” mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes
are not identical or similar goods:

We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established
in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT:
“Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose
tradename is alleged to have been infringed through the use of that name as a trademark by a local entity.

In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held
that:

‘The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from
using a tradename which happens to be used in one country. To illustrate — if a taxicab or bus company in a town in the United Kingdom or India
happens to use the tradename ‘Rapid Transportation,’ it does not necessarily follow that ‘Rapid’ can no longer be registered in Uganda, Fiji, or the
Philippines.

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:

the mark must be internationally known;

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

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

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:

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;

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;

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

The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man’s goods or business
as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendant’s
practices must always appear.[125] On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents.
There is no evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark.

All told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are not
liable for trademark infringement, unfair competition or damages.

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

Costs against respondents.

SO ORDERED.

THIRD DIVISION

G.R. No. 148222 August 15, 2003

PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,

vs.

SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED, Respondents.

DECISION

CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22,
2001 decision1 of the Court of Appeals reversing the October 31, 1996 decision2 of the Regional Trial Court of Makati, Branch 133, in Civil Case No.
92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and
copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals3 contained a summary of this dispute:

"Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light
boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to
secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The advertising light boxes were marketed
under the trademark "Poster Ads". The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and
Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl
and Dean employed the services of Metro Industrial Services to manufacture its advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM
City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which
Pearl and Dean agreed. On September 11, 1985, Pearl and Dean’s General Manager, Rodolfo Vergara, submitted for signature the contracts
covering SM Cubao and SM Makati to SMI’s Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM
Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their
agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMI’s house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to
non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without
basis. In the same letter, he pushed for the signing of the contract for SM Cubao.

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display units, offered to construct light
boxes for Shoemart’s chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI.
After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes.
Some 300 units were fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM
Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures
were also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing
arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI’s different branches. Pearl
and Dean noted that NEMI is a sister company of SMI.
In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the
subject light boxes and to remove the same from SMI’s establishments. It also demanded the discontinued use of the trademark "Poster Ads," and
the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements
for "Poster Ads" from the lighted display units in SMI’s stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed
this instant case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and
available technology, without notice of or reference to Pearl and Dean’s copyright. SMI noted that the registration of the mark "Poster Ads" was only
for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word "Poster Ads" is a generic term which cannot be
appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs
prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that
Pearl and Dean had no cause of action against it and that the suit was purely intended to malign SMI’s good name. On this basis, SMI, aside from
praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Dean’s
Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September
12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising. It
repleaded SMI’s averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI."

The RTC of Makati City decided in favor of P & D:

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and
infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and
Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:

(1) to pay plaintiff the following damages:

(a) actual damages - ₱16,600,000.00,

representing profits derived by defendants as a result of infringement of plaintiff’s copyright from 1991 to 1992

(b) moral damages - ₱1,000.000.00

(c) exemplary damages - ₱1,000,000.00

(d) attorney’s fees - ₱1,000,000.00

plus

(e) costs of suit;

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

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

(4) to permanently refrain from infringing the copyright on plaintiff’s light boxes and its trademark "Poster Ads".

Defendants’ counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.4

On appeal, however, the Court of Appeals reversed the trial court:

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or
box wraps, to be properly classified as a copyrightable class "O" work, we have to agree with SMI when it posited that what was copyrighted were
the technical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant’s will not extend to the actual
object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had
obtained a copyright protection for a book entitled "Selden’s Condensed Ledger or Bookkeeping Simplified" which purported to explain a new system
of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in
connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on
two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Selden’s copyrighted books.
The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that "to grant a monopoly in the underlying art
when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of
copyright." And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent
application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely
employs a recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case,
Muller had obtained a copyright over an unpublished drawing entitled "Bridge Approach – the drawing showed a novel bridge approach to unsnarl
traffic congestion". The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiff’s
drawings. In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because
copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to
construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no
copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the
copyright does not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the technical drawings of the latter’s advertising display units.

xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law
extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of
Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or trade-name shall be prima facie
evidence of the validity of the registration, the registrant’s ownership of the mark or trade-name, and of the registrant’s exclusive right to use the
same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein."
(underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark "Poster Ads" with the Bureau of Patents,
Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165
covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words
"Poster Ads", in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as "an implicit permission to a
manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other
than those stated in the certificate of registration." The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated,
through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant
may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for
the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law.

While we do not discount the striking similarity between Pearl and Dean’s registered trademark and defendants-appellants’ "Poster Ads" design, as
well as the parallel use by which said words were used in the parties’ respective advertising copies, we cannot find defendants-appellants liable for
infringement of trademark. "Poster Ads" was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants
who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us.
But, having already done so, it must stand by the consequence of the registration which it had caused.

xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words "Poster Ads" are a simple contraction of the generic term poster
advertising. In the absence of any convincing proof that "Poster Ads" has acquired a secondary meaning in this jurisdiction, we find that Pearl and
Dean’s exclusive right to the use of "Poster Ads" is limited to what is written in its certificate of registration, namely, stationeries.

Defendants-appellants cannot thus be held liable for infringement of the trademark "Poster Ads".

There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary award granted by the lower court to
Pearl and Dean has no leg to stand on.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered DISMISSING the complaint
and counterclaims in the above-entitled case for lack of merit.5

Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Court’s consideration:

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY
RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEAN’S TRADEMARK "POSTER
ADS" WAS COMMITTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTER’S FINDING,
NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING
CONTRACTS WITH PEARL & DEAN.

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR
ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.6

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law —
patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three. We shall focus then on the following issues:
(1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of
registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright?

(2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer
(now Intellectual Property Office) — in addition to the copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his
goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Petitioner P & D’s complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD
Rainbow Advertising for its own account. Obviously, petitioner’s position was premised on its belief that its copyright over the engineering drawings
extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was no copyright infringement, the Court of Appeals
held that the copyright was limited to the drawings alone and not to the light box itself. We agree with the appellate court.

First, petitioner’s application for a copyright certificate — as well as Copyright Certificate No. PD-R2588 issued by the National Library on January
20, 1981 — clearly stated that it was for a class "O" work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then
prevailing. Said Section 2 expressly enumerated the works subject to copyright:

SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following works:

xxx xxx xxx

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

xxx xxx xxx

Although petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the box-type electrical devices), its claim of
copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited to what the statute confers. It
may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute.7
Accordingly, it can cover only the works falling within the statutory enumeration or description.8

P & D secured its copyright under the classification class "O" work. This being so, petitioner’s copyright protection extended only to the technical
drawings and not to the light box itself because the latter was not at all in the category of "prints, pictorial illustrations, advertising copies, labels, tags
and box wraps." Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical
drawings within the category of "pictorial illustrations." It could not have possibly stretched out to include the underlying light box. The strict
application9 of the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was
entitled "Advertising Display Units." What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic
piece which could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to make the light box
copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library as "Advertising Display Units."

In fine, if SMI and NEMI reprinted P & D’s technical drawings for sale to the public without license from P & D, then no doubt they would have been
guilty of copyright infringement. But this was not the case. SMI’s and NEMI’s acts complained of by P & D were to have units similar or identical to
the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers. Was
this an infringement of petitioner’s copyright over the technical drawings? We do not think so.

During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an "engineering or marketing
invention."10 Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and
trademarks. In the leading case of Kho vs. Court of Appeals,11 we ruled that these three legal rights are completely distinct and separate from one
another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible
sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of
goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a
copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the
moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is
new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents
cannot be held legally liable for infringement of P & D’s copyright over its technical drawings of the said light boxes, should they be liable instead for
infringement of patent? We do not think so either.

For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired no patent rights which could have protected
its invention, if in fact it really was. And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially
using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,12 we held that "there can be no infringement of a patent until a patent
has been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no
common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by
offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a
patentee, he has the exclusive right of making, selling or using the invention.13 On the assumption that petitioner’s advertising units were patentable
inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library.
To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement. No patent, no
protection. The ultimate goal of a patent system is to bring new designs and technologies into the public domain through disclosure.14 Ideas, once
disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.15

On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected. As held in Bauer & Cie
vs. O’Donnel,16 "The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others
from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new
and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the
exclusive privileges granted the benefit of such inventions and improvements."

The law attempts to strike an ideal balance between the two interests:

"(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances
in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret
and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive
enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use."17

The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to
stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent
protection seek to ensure that ideas in the public domain remain there for the free use of the public."18

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because "in rewarding
a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded. To that end, the prerequisites to
obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced. To begin with, a
genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each
slight technological advance in art."19

There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person is claiming the creation of a
work. The law confers the copyright from the moment of creation20 and the copyright certificate is issued upon registration with the National Library
of a sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or
commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings.

Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light box’s eligibility as a
patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through
the simplified procedure of copyright-registration with the National Library — without undergoing the rigor of defending the patentability of its
invention before the IPO and the public — the petitioner would be protected for 50 years. This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court held that only the expression of an idea is protected by copyright, not
the idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiff’s
copyrighted book. The US Supreme Court ruled that:

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

The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case
of medicines. Certain mixtures are found to be of great value in the healing art. If the discoverer writes and publishes a book on the subject (as
regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to
acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book,
if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of
drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.

xxx

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any
person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a
publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books
prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was
not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must
necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art
described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the art. x x x The description of the art in a book,
though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of
the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent." (underscoring
supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark "Poster Ads" which petitioner’s president said was a contraction of "poster advertising." P &
D was able to secure a trademark certificate for it, but one where the goods specified were "stationeries such as letterheads, envelopes, calling
cards and newsletters."22 Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically
operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate.

Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,23 where we, invoking Section 20 of the
old Trademark Law, ruled that "the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use
its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has
adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a
different description."24 Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals.25

Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on
the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof.1âwphi1

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had no registration.26 However,
while the petitioner’s complaint in the RTC also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner did
not appeal this particular point; hence, it cannot now revive its claim of unfair competition.

But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition.

By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of
trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such
that the name or phrase becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against
unfair competition.27 In this case, there was no evidence that P & D’s use of "Poster Ads" was distinctive or well-known. As noted by the Court of
Appeals, petitioner’s expert witnesses himself had testified that " ‘Poster Ads’ was too generic a name. So it was difficult to identify it with any
company, honestly speaking."28 This crucial admission by its own expert witness that "Poster Ads" could not be associated with P & D showed that,
in the mind of the public, the goods and services carrying the trademark "Poster Ads" could not be distinguished from the goods and services of
other entities.

This fact also prevented the application of the doctrine of secondary meaning. "Poster Ads" was generic and incapable of being used as a trademark
because it was used in the field of poster advertising, the very business engaged in by petitioner. "Secondary meaning" means that a word or phrase
originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might
nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was his property.29 The admission by petitioner’s own expert witness that
he himself could not associate "Poster Ads" with petitioner P & D because it was "too generic" definitely precluded the application of this exception.

Having discussed the most important and critical issues, we see no need to belabor the rest.

All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the Regional Trial Court of Makati City.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22, 2001 is AFFIRMED in toto.

SO ORDERED.