ABELLA V CIR Civil Law; Donations; Elements of a Donation.

Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus donandi. Same; Same; Same; Petitioners contribution of money without any material consideration evinces animus donandi; The fact that their purpose for donating was to aid in the election of the donee does not negate the presence of donative intent.Since animus donandi or the intention to do an act of liberality is an essential element of a donation, petitioners argue that it is important to look into the intention of the giver to determine if a political contribution is a gift. Petitioners argument is not tenable. First of all, donative intent is a creature of the mind. It cannot be perceived except by the material and tangible acts which manifest its presence. This being the case, donative intent is presumed present when one gives a part of ones patrimony to another without consideration. Second, donative intent is not negated when the person donating has other intentions, motives or purposes which do not contradict donative intent. This Court is not convinced that since the purpose of the contribution was to help elect a candidate, there was no donative intent. Petitioners contribution of money without any material consideration evinces

animus donandi. The fact that their purpose for donating was to aid in the election of the donee does not negate the presence of donative intent. Same; Same; Same; Donative intent is not negated by the presence of other intentions, motives or purposes which do not contradict donative intent.Since the purpose of an electoral contribution is to influence the results of the election, petitioners again claim that donative intent is not present. Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the purpose of political contributions. This Court reiterates that donative intent is not negated by the presence of other intentions, motives or purposes which do not contradict donative intent. VICTORIA MOREO-LENTFER,** GUNTER LENTFER and JOHN CRAIGIE YOUNG CROSS, petitioners, vs. HANS JURGEN WOLFF, respondent. Donations; Words and Phrases; A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it, but when a large amount of money is involved, the Court is constrained to take the donees purported claim of liberality of the donor with more than a grain of salt; A donation of money equivalent to P3,297,800 as well as its

acceptance should be in writing.Petitioner Moreo-Lentfers claim of either cash or property donation rings hollow. A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it. But when a large amount of money is involved, equivalent to P3,297,800, based on the exchange rate in the year 1992, we are constrained to take the petitioners claim of liberality of the donor with more than a grain of salt. Petitioners could not brush aside the fact that a donation must comply with the mandatory formal requirements set forth by law for its validity. Since the subject of donation is the purchase money, Art. 748 of the New Civil Code is applicable. Accordingly, the donation of money equivalent to P3,297,800 as well as its acceptance should have been in writing. It was not. Hence, the donation is invalid for noncompliance with the formal requisites prescribed by law. OCAMPO V. OCAMPO Civil Law; Property; Co-ownership; Partition; The settlement of the issue of ownership is the first stage in an action for partition.Since the original Complaint was an action for partition, this Court cannot order a division of the property, unless it first makes a determination as to the existence of a coownership. The settlement of the issue of ownership is the first

stage in an action for partition. This action will not lie if the claimant has no rightful interest in the subject property. Parties filing the action are in fact required by the Rules of Court to set forth in their complaint the nature and the extent of their title to the property. It would be premature to effect a partition thereof until and unless the question of ownership is first definitely resolved. Same; Same; Same; Mortgage; The effect of a mortgage by a co-owner shall be limited to the portion that may be allotted to that person upon the termination of the co-ownership.The Civil Code provides that an essential requisite of a contract of mortgage is that the mortgagor be the abso_______________ * FIRST DIVISION. 546 SUPREME COURT REPORTS ANNOTATED 546 Ocampo vs. Ocampo lute owner of the thing mortgaged. Co-ownership cannot be presumed even if only a portion of the property was mortgaged to Apolonia, because a co-owner may dispose only of ones interest in the ideal or abstract part of the undivided thing co-

owned with others. The effect of a mortgage by a co-owner shall be limited to the portion that may be allotted to that person upon the termination of the co-ownership. In this case, Fidela mortgaged a definite portion of the property and thus negated any acknowledgement of co-ownership. Same; Same; Same; Mere issuance of a certificate of title does not foreclose the possibility that the real property may be under co-ownership with persons not named therein.We are not unmindful of our ruling that the mere issuance of a certificate of title does not foreclose the possibility that the real property may be under co-ownership with persons not named therein. But given the circumstances of this case, the claim of co-ownership by petitioners has no leg to stand on. Again, we stress, Belen clearly traced the source of her sole ownership of the property in question and thereby foreclosed the unproven and unsubstantiated allegation of co-ownership thereof. Same; Same; Same; Donation; Once perfected, a donation is final, its revocation or rescission cannot be effected, absent any legal ground therefor.Donation is an act of liberality whereby a person gratuitously disposes of a thing or a right in favor of another who accepts it. Once perfected, a donation is final; its revocation or rescission cannot be effected, absent any legal ground therefor. A donation may in fact comprehend the entire property of the donor. At any rate, the law provides that donors

should reserve, in full ownership or in usufruct, sufficient means for their own support and that of all their relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by them. In questioning the motives of Fidela for donating the subject property, petitioners are contradicting even themselves. On the one hand, they assert that she would not have disposed of her property, since she would need it in her old age; on the other, they argue that it was not hers alone anyway. It should be clear that the law protects donors by providing that, without any reservation of sufficient means for themselves, the donation shall be reduced upon the petition of any person affected.44 To be sure, petitioners arguments all pertain to circumstances extraneous to the Deed of Donation itself. The law is clear that when its terms have been reduced to writing, an agreement must be presumed to contain all the terms agreed upon; and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.45 Petitioners did not question the consent of Fidela to the donation. Never was there any intimation that she had either been coerced or defrauded into entering into it. As all the essential elements of a donationconsent, subject matter and cause46have been

satisfied, we see no reason to entertain any doubt about the Deed pertaining thereto. _______________ 40 Article 725 of the Civil Code. 41 Vitug, Compendium of Civil Law and Jurisprudence (1993 revised ed.), p. 353. 42 Article 750 of the Civil Code. 43 Ibid. 44 Ibid. 45 9 of Rule 130 of the Revised Rules on Evidence. 46 Tolentino, Civil Code of the Philippines, supra, p. 531. 563 VOL. 427, APRIL 14, 2004 563 Ocampo vs. Ocampo The question of why the land was registered several years after the donation is purely speculative. What is important is that there was a duly proven Deed of Donation, which formed the basis of Belens claim and led to the registration of the property in her name. PERSHING TAN QUETO, petitioner, vs. COURT OF APPEALS,

JUAN POMBUENA and RESTITUTA TACALINAR GUANGCO DE POMBUENA, respondents. The two principal issues are clearly the following: (1) Is the questioned lot paraphernal or conjugal? (2) In having constructed the building on the lot, should TAN QUETO be regarded as a builder in good faith (and hence entitled to reimbursement) or a builder in bad faith (with no right to reimbursement)? (1) The land is conjugal, not paraphernal. How was ownership transferred, if at all, from her mother to RESTITUTA? The oral donation of the lot cannot be a valid donation inter58 58 SUPREME COURT REPORTS ANNOTATED Pershing Tan Queto vs. Court of Appeals vivos because it was not executed in a public instrument (Art. 749, Civil Code), nor as a valid donation mortis causa for the formalities of a will were not complied with. The allegation that the transfer was a conveyance to RESTITUTA of her hereditary share in the estate of her mother (or parents) cannot be sustained for the contractual transmission of future inheritance is

generally prohibited. The fact is ownership was acquired by both JUAN and RESTITUTA by tradition (delivery) as a consequence of the contract of sale (See Art. 712, Civil Code) with P50.00 (then a considerable amount) as the cause or consideration of the transaction. The lot is therefore conjugal, having been acquired by the spouses thru onerous title (the money used being presumably conjugal, there being no proof that RESTITUTA had paraphernal funds of her own). The contention that the sale was fictitious or simulated (and therefore void) is bankrupt. Firstly, there was a valid consideration therefor. Secondly, assuming that there had indeed been a simulation, the parties thereto cannot use said simulation to prejudice a stranger to said strategem (like petitioner herein). One nagging question has been posed. But did not TAN QUETO admit in his Answer that RESTITUTA was the owner of the lot. This is not so. He admitted RESTITUTA was "an owner" (not the owner) of the lot, and this is true, for she was a co-owner (with JUAN, and therefore "an owner." Surely, there is no admission of RESTITUTA's exclusive ownership. And yet this is the basis of the trial court's conclusion that the lot was indeed paraphernal

LAGAZO V. CA

The Courts Ruling The petition lacks merit. Main Issue: Simple or Onerous Donation? At the outset, let us differentiate between a simple donation and an onerous one. A simple or pure donation is one whose cause is pure liberality (no strings attached), while an onerous donation is one which is subject to burdens, charges or future services equal to or more in value than the thing donated.10 Under Article 733 of the Civil Code, donations with an onerous cause shall be governed by the rules on contracts; hence, the formalities required for a valid simple donation are not applicable. Petitioner contends that the burdens, charges or conditions imposed upon a donation need not be stated on the deed of donation itself. Thus, although the deed did not categorically impose any charge, burden or condition to be satisfied by him, the donation was onerous since he in fact and in reality paid for the installments in arrears and for the remaining balance of the lot in question. Being an onerous donation, his acceptance thereof may be express or implied, as provided under Art. 1320 of the Civil Code, and need not comply with the formalities required by Art. 749 of the same code. His payment of the arrearages and balance and his assertion of his

right of possession against private respondent clearly indicate his acceptance of the donation. We rule that the donation was simple, not onerous. Even conceding that petitioners full payment of the purchase price of the lot might have been a burden to him, such payment was not however imposed by the donor as a condition for the donation. Rather, the deed explicitly stated: That for and in consideration of the love and affection which the DONEE inspires in the DONOR, and as an act of liberality and generosity and considering further that the DONEE is a grandson of the DONOR, the DONOR hereby voluntarily and freely gives, transfer[s] and conveys, by way of donation unto said DONEE, his heirs, executors, administrators and assigns, all the right, title and interest which the said DONOR has in the above described real property, together with all the buildings and improvements found therein, free from all lines [sic] and encumbrances and charges whatsoever11; [italics supplied] It is clear that the donor did not have any intention to burden or charge petitioner as the donee. The words in the deed are in fact typical of a pure donation. We agree with Respondent Court that the payments made by petitioner were merely his voluntary acts. This much can be gathered from his testimony in court, in which he never even claimed that a burden or charge had been imposed by his grandmother.

The payments even seem to have been made pursuant to the power of attorney13 executed by Catalina Reyes in favor of petitioner, her grandson, authorizing him to execute acts necessary for the fulfillment of her obligations. Nothing in the records shows that such acts were meant to be a burden in the donation. _______________ 12 TSN, August 2, 1988, pp. 17-19. 13 Records, p. 10; rollo, p. 102. 27 VOL. 287, MARCH 5, 1998 27 Lagazo vs. Court of Appeals As a pure or simple donation, the following provisions of the Civil Code are applicable: Art. 734. The donation is perfected from the moment the donor knows of the acceptance by the donee. Art. 746. Acceptance must be made during the lifetime of the donor and the donee. Art. 749. In order that the donation of an immovable may be valid, it must be made in a public instrument, specifying therein

the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation and in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in authentic form, and this step shall be noted in both instruments. In the words of the esteemed Mr. Justice Jose C. Vitug,14 Like any other contract, an agreement of the parties is essential. The donation, following the theory of cognition (Article 1319, Civil Code), is perfected only upon the moment the donor knows of the acceptance by the donee. Furthermore, [i]f the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.15 Acceptance of the donation by the donee is, therefore, indispensable; its absence makes the donation null and void.16 The perfection and the validity of a donation are well explained by former Sen. Arturo M. Tolentino in this wise: x x x Title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has _______________

14 In his Compendium of Civil Law and Jurisprudence, 1993 revised ed., p. 349. 15 Ibid., p. 353, citing Legasto vs. Verzosa, 54 Phil. 766, March 31, 1930. 16 Pea vs. Court of Appeals, 193 SCRA 717, 731, February 7, 1991. 28 28 SUPREME COURT REPORTS ANNOTATED Lagazo vs. Court of Appeals been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Solemn words are not necessary; it is sufficient if it shows the intention to accept. But in this case it is necessary that formal notice thereof be given to the donor, and the fact that due notice has been given must be noted in both instruments (that containing the offer to donate and that showing the acceptance). Then and only then is the donation perfected. If the instrument of donation has been recorded in the registry of property, the instrument that shows the acceptance should also be recorded. Where the deed of

donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the deed of donation and in the separate acceptance, the donation is null and void.17 Exhibit E (the deed of donation) does not show any indication that petitioner-donee accepted the gift. During the trial, he did not present any instrument evidencing such acceptance despite the fact that private respondent already raised this allegation in his supplemental pleading18 to which petitioner raised no objection. It was only after the Court of Appeals had rendered its decision, when petitioner came before this Court, that he submitted an affidavit19 dated August 28, 1990, manifesting that he wholeheartedly accepted the lot given to him by his grandmother, Catalina Reyes. This is too late, because arguments, evidence, causes of action and matters not raised in the trial court may no longer be raised on appeal.20 True, the acceptance of a donation may be made at any time during the lifetime of the donor. And granting arguendo that such acceptance may still be admitted in evidence on _______________ 17 Tolentino, Civil Code of the Philippines, 1992 ed., Vol. II, pp. 557-558 (citations omitted). 18 Records, pp. 62-64.

19 Annex D to Petition; rollo, p. 50. 20 First Philippine International Bank vs. Court of Appeals, 252 SCRA 259, January 24, 1996; Servicewide Specialists, Inc. vs. Court of Appeals, 257 SCRA 643, June 26, 1996. 29 VOL. 287, MARCH 5, 1998 29 Lagazo vs. Court of Appeals appeal, there is still need for proof that a formal notice of such acceptance was received by the donor and noted in both the deed of donation and the separate instrument embodying the acceptance. At the very least, this last legal requisite of annotation in both instruments of donation and acceptance was not fulfilled by petitioner. For this reason, the subject lot cannot be adjudicated to him. Secondary Issue: Supervening Events Petitioner also contends that certain supervening events have transpired which render the assailed Decision manifestly unjust, unfair and inequitable to him. The City of Manila has granted his request for the transfer to his name of the lot originally awarded in favor of Catalina Reyes. A deed of sale21 covering the subject lot has in fact been executed between the City of Manila, as the

vendor; and petitioner, as the vendee. The corresponding certificate of title22 has also been issued in petitioners name. A close perusal of the city governments resolution23 granting petitioners request reveals that the request for and the grant of the transfer of the award were premised on the validity and perfection of the deed of donation executed by the original awardee, petitioners grandmother. This is the same document upon which petitioner, as against private respondent, asserts his right over the lot. But, as earlier discussed and ruled, this document has no force and effect and, therefore, passes no title, right or interest. Furthermore, the same resolution states: Cabanlits Claim of Ownership Petitioner also assails Respondent Courts conclusion that it is unnecessary to pass upon private respondents claim over the property. Petitioner insists that the principal issue in the case, as agreed upon by the parties during pretrial, is who between the parties is the owner of the house and lot in question. In disposing of the principal issue of the right of petitioner over the subject property under the deed of donation, we arrive at one definite conclusion: on the basis of the alleged donation, petitioner cannot be considered the lawful owner of the subject property. This does not necessarily mean, however, that private respondent is automatically the rightful owner. In resolving

private respondents claim of ownership, the examination of the genuineness of the documents (deeds of assignment over the lot between Catalina Reyes and Eduardo Espaol and between Espaol and private respondent) upon which he asserts his right is necessary, especially in light of petitioners allegations of forgery. However, the respective assignors in both documents are not parties to the instant case. Not having been impleaded in the trial court, they had no participation whatsoever in the proceedings at bar. Elementary norms of fair play and due process bar us from making any disposition which may affect their rights. Verily, there can be no valid judgment for or against them.26 Anyhow, since petitioner, who was the plaintiff below, failed to prove with clear and convincing evidence his ownership claim over the subject property, the parties thus resume their status quo ante. The trial court should have dismissed his complaint for his failure to prove a right superior to that of private respondent, but without prejudice to any action _______________ 26 Matuguina Integrated Wood Products, Inc. vs. Court of Appeals, 263 SCRA 490, October 24, 1996; Ang Yu Asuncion vs. Court of Appeals, 238 SCRA 602, December 2, 1994. See also Periquet, Jr. vs. Intermediate Appellate Court, 238 SCRA

697, December 5, 1994. 32 32 SUPREME COURT REPORTS ANNOTATED Lagazo vs. Court of Appeals that Catalina Reyes or Eduardo Espaol or both may have against said private respondent. Stating this point otherwise, we are not ruling in this case on the rights and obligations between, on the one hand, Catalina Reyes, her assigns and/or representatives; and, on the other, Private Respondent Cabanlit. Not having proven any right to a valid, just and demandable claim that compelled him to litigate or to incur expenses in order to protect his interests by reason of an unjustified act or omission of private respondent, petitioner cannot be awarded attorneys fees. LIGUEZ V. CA Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and null and void (1) because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant; and (2) because the donation was tainted with illegal causa or consideration, of which donor and donee were

participants. Appellant vigorously contends that the Court of First Instance as well as the Court of Appeals erred in holding the donation void for having an illicit causa, or consideration. It is argued that under Article 1274 of the Civil Code of 1889 (which was the governing law in 1943, when the donation was executed), "in contracts of pure beneficence the consideration is the liberality of the donor", and that liberality per se can never be illegal, since it is neither against law or morals or public policy. The flaw in this argument lies in ignoring that under Article 1274, liberality of the donor is deemed causa only in those contracts that are of "pure" beneficence; that is to say, contracts designed solely and exclusively to procure the welfare of the beneficiary, without any intent of producing any satisfaction for the donor; contracts, in other words, in which the idea of self-interest is totally absent on the part of the transferor eror. For this very reason, the same Article 1274 provides that in remuneratory contracts, the consideration is the service or benefit for which the remuneration is given; causa is not liberality in these cases because the contract or conveyance is not made out of pure beneficence, but "solvendi animo." In 581 VOL. 102, DECEMBER 18, 1957

581 Liguez vs. Hon. Court of Appeals, et al consonance with this view, this Supreme Court in Philippine Long Distance Co. vs. Jeturian* G. R. L-7756, July 30, 1955, like the Supreme Court of Spain in its decision of 16 Feb. 1899, has ruled that bonuses granted to employees to excite their zeal and efficiency, with consequent benefit for the employer, do not constitute donation having liberality for a consideration. Here the facts as found by the Court of Appeals (and which we can not vary) demonstrate that in making the donation in question, the late Salvador P. Lopez was not moved exclusively by the desire to benefit appellant Conchita Liguez, but also to secure her cohabiting with him; so that he could gratify his sexual impulses. This is clear from the confession of Lopez to the witnesses Rodriguez and Ragay, that he was in love with appellant, but her parents would not agree unless he donated the land in question to her. Actually, therefore, the donation was but one part of an onerous transaction (at least with appellant's parents) that must be viewed in its totality. Thus considered, the conveyance was clearly predicated upon an illicit causa,. Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for the donation in her favor, and his desire for cohabiting with appellant, as motives that impelled him to make the donation, and quotes from Manresa and the jurisprudence of

this Court on the distinction that must be maintained between causa and motives (De Jess vs. Urrutia and Co., 33 Phil. 171). It is well to note, however, that Manresa himself (Vol. 8, pp. 641642), while maintaining the distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the contract, expressly excepts from the rule those contracts that are conditioned upon the attainment of the motives of either party. "* * * distincin importantsima, que impide anular el contrato por la sola influencia de los motivos a no ser que se hubiera subordinado al cumplimiento de estos como condiciones la eficacia de aquel." _______________ * 97 Phil., 981. 582 582 PHILIPPINE REPORTS ANNOTATED Liguez vs. Hon. Court of Appeals, et al. The same view is held by the Supreme Court of Spain, in its decisions of February 4, 1941, and December 4, 1946, holding that the motive may be regarded as causa when it predetermines the purpose of the contract.

In the present case, it is scarsely disputable that Lopez would not have conveyed the property in question had he known that appellant would refuse to cohabit with him; so that the cohabitation was an implied condition to the donation, and being unlawful, necessarily tainted the donation itself. The Court of Appeals rejected the appellant's claim on the basis of the well-known rule "in pari delicto non oritur actio" as embodied in Article 1306 of the Code of 1889 (reproduced in Article 1412 of the new Civil Code) : "ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking; (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, 01 ask for fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise." In our opinion, the Court of Appeals erred in applying to the present case the pari delicto rule. First, because it can not be said that both parties here had equal guilt when we consider that as against the deceased Salvador P. Lopez, who was a man

advanced in years and mature experience, the appellant was a mere minor, 16 years of age, when the donation was made; that there is no finding made by the Court of Appeals that she was fully aware of the terms of the bargain entered into by and between Lopez and her parents; that her acceptance in the deed of donation (which was authorized by Article 626 of the old Civil Code) did not necessarily imply knowledge of conditions and terms not set forth therein; and that the 583 VOL. 102, DECEMBER 18, 1957 583 Liguez vs. Hon. Court of Appeals, et al. substance of the testimony of the instrumental witnesses is that it was the appellant's parents who insisted on the donation before allowing her to live with Lopez. These facts are more suggestive of seduction than of immoral bargaining on the part of appellant. It must not be forgotten that illegality is not presumed, but must be duly and adequately proved. The situation confronting us is exactly analogous. The appellant seeks recovery of the disputed land on the strength of a donation regular on its face. To defeat its effect, the appellees must plead and prove that the same is illegal. But such plea on the part of

the Lopez heirs is not receivable, since Lopez himself, if living, would be barred from setting up that plea; and his heirs, as his privies and successors in interest, can have no better rights than Lopez himself. Appellees, as successors of the late donor, being thus precluded from pleading the defense of immorality or illegal causa of the donation, the total or partial ineffectiveness of the same must be decided by different legal principles. In this regard, the Court of Appeals correctly held that Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria Ngo, because said property was conjugal in character, and the right of the husband to donate community property is strictly limited by law (Civil Code of 1889, Arts. 1409, 1415, 1413; Baello vs. Villanueva, 54 Phil. 213). The text of the articles makes it plain that the donation made by the husband in contravention of law is not void in its entirety, but only in so far as it prejudices the interest of the wife. In this regard, as Manresa points out (Commentaries, 5th Ed., pp. 650651, 652-653), the law makes no distinction between gratuitous transfers and conveyances for a consideration. The case of Galin vs. Gayares, supra, is not in point. First, because that case involved a simulated transfer that can have no effect, while a donation with illegal causa may produce effects

under certain circumstances where the parties are not of equal guilt; and again, because the transferee in the Galin case took the property subject to lis pendens notice, that in this case does not exist. 588 588 PHILIPPINE REPORTS ANNOTATED Luna, et al. vs. Mons. P. P. Santos, et al. In view of the foregoing, the decisions appealed from are reversed and set aside, and the appellant Conchita Liguez declared entitled to so much of the donated property as may be found, upon proper liquidation, not to prejudice the share of the widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs of the latter. The records are ordered remanded to the court of origin for further proceedings in accordance with this opinion. Costs against appellees. So ordered. G.R. No. 172804. January 24, 2011.*

GONZALO VILLANUEVA, represented by his heirs, petitioner, vs. SPOUSES FROILAN and LEONILA BRANOCO, respondents. Civil Law; Property; Donation; Rodrigos acceptance of the

transfer underscores its essence as a gift in presenti, not in futuro, as only donations inter vivos need acceptance by the recipient.It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected donation inter vivos. First. Rodrigo stipulated that if the herein Donee predeceases me, the [Property] will not be reverted to the Donor, but will be inherited by the heirs of x x x Rodriguez, signaling the irrevocability of the passage of title to Rodriguezs estate, waiving Rodrigos right to reclaim title. This transfer of title was perfected the moment Rodrigo learned of Rodriguezs acceptance of the disposition which, being reflected in the Deed, took place on the day of its execution on 3 May 1965. Rodrigos acceptance of the transfer underscores its essence as a gift in presenti, not in futuro, as only donations inter vivos need acceptance by the recipient. Indeed, had Rodrigo wished to retain full title over the Property, she could have easily stipulated, as the testator did in another case, that the donor, may transfer, sell, or encumber to any person or entity the properties here donated x x x or used words to that effect. Instead, Rodrigo expressly waived title over the Property in case Rodriguez predeceases her. _______________ * SECOND DIVISION. 309

VOL. 640, JANUARY 24, 2011 309 Villanueva vs. Branoco Same; Same; Same; The designation of the donation as mortis causa, or a provision in the deed to the effect that the donation is to take effect at the death of the donor are not controlling criteria [but] x x x are to be construed together with the rest of the instrument, in order to give effect to the real intent of the transferor; Doubts on the nature of dispositions are resolved to favor inter vivos transfers to avoid uncertainty as to the ownership of the property subject of the deed.It will not do, therefore, for petitioner to cherry-pick stipulations from the Deed tending to serve his cause (e.g. the ownership shall be vested on [Rodriguez] upon my demise and devise). Dispositions bearing contradictory stipulations are interpreted wholistically, to give effect to the donors intent. In no less than seven cases featuring deeds of donations styled as mortis causa dispositions, the Court, after going over the deeds, eventually considered the transfers inter vivos, consistent with the principle that the designation of the donation as mortis causa, or a provision in the deed to the effect that the donation is to take effect at the death of the donor are not controlling criteria [but] x x x are to be construed together with the rest of the instrument,

in order to give effect to the real intent of the transferor. Indeed, doubts on the nature of dispositions are resolved to favor inter vivos transfers to avoid uncertainty as to the ownership of the property subject of the deed. Same; Same; Ownership; Prescription; The ten year ordinary prescriptive period to acquire title through possession of real property in the concept of an owner requires uninterrupted possession coupled with just title and good faith.Petitioner anchors his contention on an unfounded legal assumption. The ten year ordinary prescriptive period to acquire title through possession of real property in the concept of an owner requires uninterrupted possession coupled with just title and good faith. There is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. Good faith, on the other hand, consists in the reasonable belief that the person from whom the possessor received the thing was the owner thereof, and could transmit his ownership. The Ruling of the Court We find respondents title superior, and thus, affirm the CA.

Naked Title Passed from Rodrigo to Rodriguez Under a Perfected Donation We examine the juridical nature of the Deedwhether it passed title to Rodriguez upon its execution or is effective only upon Rodrigos deathusing principles distilled from relevant jurisprudence. Post-mortem dispositions typically (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (2) That before the [donors] death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; (3) That the transfer should be void if the transferor should survive the transferee.10 _______________ 10 Bonsanto v. Court of Appeals, 95 Phil. 481, 487 (1954) (internal citations omitted). 315 VOL. 640, JANUARY 24, 2011

315 Villanueva vs. Branoco Further [4] [T]he specification in a deed of the causes whereby the act may be revoked by the donor indicates that the donation is inter vivos, rather than a disposition mortis causa[;] [5] That the designation of the donation as mortis causa, or a provision in the deed to the effect that the donation is to take effect at the death of the donor are not controlling criteria; such statements are to be construed together with the rest of the instrument, in order to give effect to the real intent of the transferor[;] [and] (6) That in case of doubt, the conveyance should be deemed donation inter vivos rather than mortis causa, in order to avoid uncertainty as to the ownership of the property subject of the deed.11 It is immediately apparent that Rodrigo passed naked title to Rodriguez under a perfected donation inter vivos. First. Rodrigo stipulated that if the herein Donee predeceases me, the [Property] will not be reverted to the Donor, but will be inherited by the heirs of x x x Rodriguez, signaling the irrevocability of the passage of title to Rodriguezs estate, waiving Rodrigos right to reclaim title. This transfer of title was perfected the moment Rodrigo learned of Rodriguezs acceptance of the disposition12

which, being reflected in the Deed, took place on the day of its execution on 3 May 1965. Rodrigos acceptance of the transfer underscores its essence as a gift in presenti, not in futuro, as only donations inter vivos need acceptance by the recipient.13 Indeed, had Rodrigo wished to retain full title over the Property, she could have easily stipulated, as the testator did in another case, that the donor, may transfer, sell, or encumber to any person or entity _______________ 11 Puig v. Peaflorida, 122 Phil. 665, 671-672; 15 SCRA 276, 283 (1965) (internal citations omitted). 12 Article 734, Civil Code (The donation is perfected from the moment the donor knows of the acceptance by the donee.) 13 Alejandro v. Geraldez, 168 Phil. 404; 78 SCRA 245 (1977); Concepcion v. Concepcion, 91 Phil. 823 (1952); Laureta v. Mata, 44 Phil. 668 (1923). 316 316 SUPREME COURT REPORTS ANNOTATED Villanueva vs. Branoco the properties here donated x x x14 or used words to that effect. Instead, Rodrigo expressly waived title over the Property in case

Rodriguez predeceases her. In a bid to diffuse the non-reversion stipulations damning effect on his case, petitioner tries to profit from it, contending it is a fideicommissary substitution clause.15 Petitioner assumes the fact he is laboring to prove. The question of the Deeds juridical nature, whether it is a will or a donation, is the crux of the present controversy. By treating the clause in question as mandating fideicommissary substitution, a mode of testamentary disposition by which the first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole or part of the inheritance,16 petitioner assumes that the Deed is a will. Neither the Deeds text nor the import of the contested clause supports petitioners theory. Second. What Rodrigo reserved for herself was only the beneficial title to the Property, evident from Rodriguezs undertaking to give one [half] x x x of the produce of the land to Apoy Alve during her lifetime.17 Thus, the Deeds stipulation that the ownership shall be vested on [Rodriguez] upon my demise, taking into account the non-reversion clause, could only refer to Rodrigos beneficial title. We arrived at the same conclusion in Balaqui v. Dongso18 where, as here, the donor, while b[inding] herself to answer to the [donor] and her heirs x x x that none shall question or disturb [the donees] right, also stipulated that the donation does not pass title to [the donee]

during my lifetime; but when I die, [the donee] shall be _______________ 14 Puig v. Peaflorida, supra note 11 at p. 674; p. 285 ([l]a DONANTE, podra enajenar, vender, traspasar o hipotecar a cuallesquier personas o entidades los bienes aqui donados x x x x). 15 Rollo, p. 43. 16 Civil Code, Article 863. 17 The records do not disclose the identity of Apoy Alve but this likely refers to the donor Alvegia Rodrigo, Rodriguezs aunt. 18 53 Phil. 673 (1929). 317 VOL. 640, JANUARY 24, 2011 317 Villanueva vs. Branoco the true owner of the donated parcels of land. In finding the disposition as a gift inter vivos, the Court reasoned: Taking the deed x x x as a whole, x x x x it is noted that in the same deed [the donor] guaranteed to [the donee] and her heirs and successors, the right to said property thus conferred. From the moment [the donor] guaranteed the right granted by her to [the donee] to the two parcels of land by virtue of the deed of gift,

she surrendered such right; otherwise there would be no need to guarantee said right. Therefore, when [the donor] used the words upon which the appellants base their contention that the gift in question is a donation mortis causa [that the gift does not pass title during my lifetime; but when I die, she shall be the true owner of the two aforementioned parcels] the donor meant nothing else than that she reserved of herself the possession and usufruct of said two parcels of land until her death, at which time the donee would be able to dispose of them freely.19 (Emphasis supplied) Indeed, if Rodrigo still retained full ownership over the Property, it was unnecessary for her to reserve partial usufructuary right over it.20 Third. The existence of consideration other than the donors death, such as the donors love and affection to the donee and the services the latter rendered, while also true of devises, nevertheless corroborates the express irrevocability of x x x [inter vivos] transfers.21 Thus, the CA committed no error in giving weight to Rodrigos statement of love and affection for Rodriguez, her niece, as consideration for the gift, to underscore its finding. _______________ 19 Id., at p. 676.

20 See Bonsanto v. Court of Appeals, 95 Phil. 481, 487 (1954), where, in interpreting an identical reservation, the Court observed the donors reserv[ation] for himself, during his lifetime, the owners share of the fruits or produce is unnecessary if the ownership of the donated property remained with the donor. 21 Id., at p. 489. 318 318 SUPREME COURT REPORTS ANNOTATED Villanueva vs. Branoco It will not do, therefore, for petitioner to cherry-pick stipulations from the Deed tending to serve his cause (e.g. the ownership shall be vested on [Rodriguez] upon my demise and devise). Dispositions bearing contradictory stipulations are interpreted wholistically, to give effect to the donors intent. In no less than seven cases featuring deeds of donations styled as mortis causa dispositions, the Court, after going over the deeds, eventually considered the transfers inter vivos,22 consistent with the principle that the designation of the donation as mortis causa, or a provision in the deed to the effect that the donation is to take effect at the death of the donor are not controlling criteria [but] x x x are to be construed together with the rest of

the instrument, in order to give effect to the real intent of the transferor.23 Indeed, doubts on the nature of dispositions are resolved to favor inter vivos transfers to avoid uncertainty as to the ownership of the property subject of the deed.24 Nor can petitioner capitalize on Rodrigos post-donation transfer of the Property to Vere as proof of her retention of ownership. If such were the barometer in interpreting deeds of donation, not only will great legal uncertainty be visited on gratuitous dispositions, this will give license to rogue property owners to set at naught perfected transfers of titles, which, while founded on liberality, is a valid mode of passing owner_______________ 22 Del Rosario v. Ferrer, G.R. No. 187056, 20 September 2010, 630 SCRA 683; Puig v. Peaflorida, 122 Phil. 665; 15 SCRA 276 (1965); Bonsanto v. Court of Appeals, 95 Phil. 481 (1954); Concepcion v. Concepcion, 91 Phil. 823, 829 (1952); Sambaan v. Villanueva, 71 Phil. 303 (1941); Balaqui v. Dongso, 53 Phil. 673 (1929); Laureta v. Mata, 44 Phil. 668 (1923). 23 Puig v. Peaflorida, supra note 11 at pp. 671-672; p. 283. 24 Id., at p. 672; p. 283. 319 VOL. 640, JANUARY 24, 2011

319 Villanueva vs. Branoco ship. The interest of settled property dispositions counsels against licensing such practice.25 Accordingly, having irrevocably transferred naked title over the Property to Rodriguez in 1965, Rodrigo cannot afterwards revoke the donation nor dispose of the said property in favor of another.26 Thus, Rodrigos post-donation sale of the Property vested no title to Vere. As Veres successor-in-interest, petitioner acquired no better right than him. On the other hand, respondents bought the Property from Rodriguez, thus acquiring the latters title which they may invoke against all adverse claimants, including petitioner.

MAGLASANG V. HEIRS OF CABATINGAN Petitioners insist that the donations are inter vivos donations as these were, made by the late Conchita Cabatingan in consideration of the love and affection of the donor for the donee, and there is nothing in the deeds which indicate that the donations were made in consideration of Cabatingans death.11 In addition, petitioners contend that the stipulation on rescission in case petitioners die ahead of Cabatingan is a resolutory

condition that confirms the nature of the donation as inter vivos. Petitioners arguments are bereft of merit. In a donation mortis causa, the right of disposition is not transferred to the donee while the donor is still alive.12 In determining whether a donation is one of mortis causa, the following characteristics must be taken into account: (1) It conveys no title or ownership to the transferee before the death of the transferor; or what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and (3) That the transfer should be void if the transferor should survive the transferee.13 In the present case, the nature of the donations as mortis causa is confirmed by the fact that the donations do not contain any clear provision that intends to pass proprietary rights to petitioners prior to Cabatingans death.14 The phrase to become effective upon the death of the DONOR admits of no other interpretation but that Cabatingan did not intend to transfer the ownership of the properties to petitioners during her lifetime.

Petitioners themselves expressly confirmed the donations as mortis causa in the following Acceptance and Attestation clauses, uniformly found in the subject deeds of donation, to wit: That the DONEE does hereby accept the foregoing donation mortis causa under the terms and conditions set forth therein, and avail herself of this occasion to express her profound gratitude for the kindness and generosity of the DONOR. xxx SIGNED by the above-named DONOR and DONEE at the foot of this Deed of Donation mortis causa, which consists of two (2) pages x x x.15 That the donations were made in consideration of the love and affection of the donor does not qualify the donations as inter vivos because transfers mortis causa may also be made for the same reason.16 Well in point is National Treasurer of the Phils. v. Vda. de Meimban.17 In said case, the questioned donation contained the provision: That for and in consideration of the love and affection which the DONOR has for the DONEE, the said Donor by these presents does hereby give, transfer, and convey unto the DONEE, her heirs and assigns a portion of ONE HUNDRED THOUSAND (100,000) SQUARE METERS, on the southeastern part Proindiviso of the above described property. (The portion herein

donated is within Lot 2-B of the proposed amendment Plan Subdivision of Lots Nos. 1 and 2, Psu-109393), with all the buildings and improvements thereon, to become effective upon the death of the DONOR. (italics supplied.)18 Notably, the foregoing provision is similar to that contained in the donation executed by Cabatingan. We held in Meimban case that the donation is a mortis causa donation, and that the above quoted provision establishes the donors intention to transfer the ownership and possession of the donated property to the donee only after the formers death. Further: As the donation is in the nature of a mortis causa disposition, the formalities of a will should have been complied with under Article 728 of the Civil Code, otherwise, the donation is void and would produce no effect. As we have held in Alejandro v. Geraldez (78 SCRA 245, 253), If the donation is made in contemplation of the donors death, meaning that the full or naked ownership of the donated properties will pass to the donee because of the donors death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament. (Citing Bonsato v. Court of Appeals, 95 Phil. 481).19 We apply the above rulings to the present case. The herein subject deeds expressly provide that the donation shall be

rescinded in case petitioners predecease Conchita Cabatingan. As stated in Reyes v. Mosqueda,20 one of the decisive characteristics of a donation mortis causa is that the transfer should be considered void if the donor should survive the donee. This is exactly what Cabatingan provided for in her donations. If she really intended that the donation should take effect during her lifetime and that the ownership of the properties donated be transferred to the donee or independently of, and not by reason of her death, she would have not expressed such proviso in the subject deeds. Considering that the disputed donations are donations mortis causa, the same partake of the nature of testamentary provisions21 and as such, said deeds must be executed in accordance with the requisites on solemnities of wills and testaments under Articles 805 and 806 of the Civil Code, to wit: The deeds in question although acknowledged before a notary public of the donor and the donee, the documents were not executed in the manner provided for under the above-quoted provisions of law. Thus, the trial court did not commit any reversible error in declaring the subject deeds of donation null and void. GANUELAS V. CAWED

Hence, the instant petition for review, petitioners contending that the trial court erred: I. . . . WHEN IT DECLARED NULL AND VOID THE DONATION EXECUTED BY CELESTINA GANUELAS; II. . . . WHEN IT UPHELD THE REVOCATION OF DONATION; III. . . . IN RENDERING ITS DECISION ADVERSE TO PETITIONER URSULINA GANUELAS.14 Petitioners argue that the donation contained in the deed is inter vivos as the main consideration for its execution was the donors affection for the donee rather than the donors death;15 that the provision on the effectivity of the donationafter the donors deathsimply meant that absolute ownership would pertain to the donee on the donors death;16 and that since the donation is inter vivos, it may be revoked only for the reasons provided in Articles 760,17 76418 and 76519 of the Civil Code. The issue is thus whether the donation is inter vivos or mortis causa. Crucial in the resolution of the issue is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed.22 Donation inter vivos differs from donation mortis causa in that in the former, the act is immediately operative even if the actual

execution may be deferred until the death of the donor, while in the latter, nothing is conveyed to or acquired by the donee until the death of the donor-testator.23 The following ruling of this Court in Alejandro v. Geraldez is illuminating:24 If the donation is made in contemplation of the donors death, meaning that the full or naked ownership of the donated properties will pass to the donee only because of the donors death, then it is at that time that the donation takes effect, and it is a donation mortis causa which should be embodied in a last will and testament. But if the donation takes effect during the donors lifetime or independently of the donors death, meaning that the full or naked ownership (nuda proprietas) of the donated properties passes to the donee during the donors lifetime, not by reason of his death but because of the deed of donation, then the donation is inter vivos. The distinction between a transfer inter vivos and mortis causa is important as the validity or revocation of the donation depends upon its nature. If the donation is inter vivos, it must be executed and accepted with the formalities prescribed by Articles 74825 and 74926 of the Civil Code, except when it is onerous in which case the rules on contracts will apply. If it is mortis causa, the donation must be in the form of a will, with all the formalities for the validity of wills, otherwise it is void and cannot transfer

ownership.27 The distinguishing characteristics of a donation mortis causa are the following: 1. It conveys no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; 2. That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; 3. That the transfer should be void if the transferor should survive the transferee.28 In the donation subject of the present case, there is nothing therein which indicates that any right, title or interest in the donated properties was to be transferred to Ursulina prior to the death of Celestina. The phrase to become effective upon the death of the DONOR admits of no other interpretation but that Celestina intended to transfer the ownership of the properties to Ursulina on her death, not during her lifetime.29 More importantly, the provision in the deed stating that if the donee should die before the donor, the donation shall be deemed rescinded and of no further force and effect shows that

the donation is a postmortem disposition. As stated in a long line of cases, one of the decisive characteristics of a donation mortis causa is that the transfer should be considered void if the donor should survive the donee.30 More. The deed contains an attestation clause expressly confirming the donation as mortis causa: SIGNED by the above-named donor, Celestina Ganuelas, at the foot of this deed of donation mortis causa, consisting of two (2) pages and on the left margin of each and every page thereof in the joint presence of all of us who at her request and in her presence and that of each other have in like manner subscribed our names as witnesses.31 (Emphasis supplied) To classify the donation as inter vivos simply because it is founded on considerations of love and affection is erroneous. That the donation was prompted by the affection of the donor for the donee and the services rendered by the latter is of no particular significance in determining whether the deed constitutes a transfer inter vivos or not, because a legacy may have an identical motivation.32 In other words, love and affection may also underlie transfers mortis causa. In Maglasang v. Heirs of Cabatingan,34 the deeds of donation contained provisions almost identical to those found in the deed

subject of the present case: That for and in consideration of the love and affection of the DONOR for the DONEE, x x x the DONOR does hereby, by these presents, transfer, convey, by way of donation, unto the DONEE the above-described property, together with the buildings and all improvements existing thereon, to become effective upon the death of the DONOR; PROVIDED, HOWEVER, that in the event that the DONEE should die before the DONOR, the present donation shall be deemed automatically rescinded and of no further force and effect. (Italics supplied) In that case, this Court held that the donations were mortis causa, for the above-quoted provision conclusively establishes the donors intention to transfer the ownership and possession of the donated property to the donee only after the formers death. Like in the present case, the deeds therein did not contain any clear provision that purports to pass proprietary rights to the donee prior to the donors death. As the subject deed then is in the nature of a mortis causa disposition, the formalities of a will under Article 728 of the Civil Code should have been complied with, failing which the donation is void and produces no effect.

As noted by the trial court, the attesting witnesses failed to acknowledge the deed before the notary public, thus violating Article 806 of the Civil Code which provides: Art. 806. Every will must be acknowledged before a notary public by the testator and the witnesses. The notary public shall not be required to retain a copy of the will, or file another with the office of the Clerk of Court. (Emphasis supplied) The trial court did not thus commit any reversible error in declaring the Deed of Donation to be mortis causa. SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs. COURT OF APPEALS and MERCEDES DANLAG y PILAPIL, respondents. Civil Law; Property; Donations; Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed.Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed. In ascertaining the intention of the donor, all of the deeds provisions must be read together. Same; Same; Same; Acceptance clause is a mark that the donation is inter vivos. Donations mortis causa, being in the form

of a will, are not required to be accepted by the donees during the donors lifetime.In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime. Same; Same; Same; A limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. The Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee. The donors right to give consent was merely intended to protect his usufructuary interests. In Alejandro, we ruled that a limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. Same; Same; Same; A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude.A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the donee to comply with the charges imposed in the donation, _____________

* SECOND DIVISION. 106 106 SUPREME COURT REPORTS ANNOTATED Gestopa vs. Court of Appeals or ingratitude. The donor-spouses did not invoke any of these reasons in the deed of revocation. Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the right to enjoy the fruits of the properties, but also prohibited the donee from selling or disposing the land without the consent and approval of the Danlag spouses. This implied that the donor still had control and ownership over the donated properties. Hence, the donation was post mortem. Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed.11 ______________ 9 Id. at 31-32.

10 Id. at 5. 11 Reyes vs. Mosqueda, 187 SCRA 661, 671 (1990). 111 VOL. 342, OCTOBER 5, 2000 111 Gestopa vs. Court of Appeals In ascertaining the intention of the donor, all of the deeds provisions must be read together.12 The deed of donation dated January 16, 1973, in favor of Mercedes contained the following: That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the herein Donee, her heirs, assigns and successors, the above-described parcels of land; That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior consent and approval by the Donor and her spouse during their lifetime. xxx That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself sufficient properties in full ownership or in usufruct enough for his

maintenance of a decent livelihood in consonance with his standing in society. That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and generosity of the Donor.13 Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee. This is a mark of a donation inter vivos.14 Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked ownership over the properties. As correctly posed by the Court of Appeals, what was the need for such reservation if the donor and his spouse remained the owners of the properties? Third, the donor reserved sufficient properties for his maintenance in accordance with his standing in society, indicating that the donor intended to part with the six parcels of land.15 Lastly, the donee accepted the donation. In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said ___________ 12 Alejandro vs. Geraldez, 78 SCRA 245, 261 (1977). 13 Records, p. 66 (back page). 14 Vita vs. Montanano, 194 SCRA 180, 190 (1991). 15 Reyes vs. Mosqueda, 187 SCRA 661, 671 (1990); Concepcion vs. Concepcion, 91 Phil. 823, 827 (1952).

112 112 SUPREME COURT REPORTS ANNOTATED Gestopa vs. Court of Appeals that a acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime. Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee. The donors right to give consent was merely intended to protect his usufructuary interests. In Alejandro, we ruled that a limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. The attending circumstances in the execution of the subject donation also demonstrated the real intent of the donor to transfer the ownership over the subject properties upon its execution.16 Prior to the execution of donation inter vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the difference between the two

donations. If they did not intend to donate inter vivos, they would not again donate the four lots already donated mortis causa. Petitioners counter argument that this proposition was erroneous because six years after, the spouses changed their intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the deed of revocation to show the spouses intent because its validity is one of the issues in this case. Petitioners assert that since private responsdent purchased two of the six parcels of land from the donor, she herself did not believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was private respondents husband who purchased the two parcels of land. As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is binding on us.18 On the alleged purchase by her husband of two parcels, it is reasonable to infer that the purchase was without private respondents consent. Purchase by her husband would make the properties conjugal to her own disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and gives credence to her claim that her husband was manipulated and unduly influenced to make the purchase, in the first place. Was the revocation valid? A valid donation, once accepted,

becomes irrevocable, except on account of officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude.19 The donor-spouses did not invoke any of these reasons in the deed of revocation. The deed merely stated: WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis Causa so as we could be sure that in case of our death, the above-described properties will be inherited and/or succeeded by Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3 of said donation to the effect that the Donee cannot dispose and/or sell the properties donated during our life-time, and that we are the one enjoying all the fruits thereof.20 Petitioners cited Mercedes vehemence in prohibiting the donor to gather coconut trees and her filing of instant petition for quieting of title. There is nothing on record, however, showing that private respondent prohibited the donors from gathering coconuts. Even assuming that Mercedes prevented the donor from gathering coconuts, this could hardly be considered an act covered by Article ____________ 18 Guerrero vs. Court of Appeals, 285 SCRA 670, 678 (1998). 19 Vda. de Arceo vs. CA, 185 SCRA 489, 497 (1990); Alejandro

vs. Geraldez 78 SCRA 245, 267 (1977). 20 Rollo, p. 79. 114 114 SUPREME COURT REPORTS ANNOTATED Gestopa vs. Court of Appeals 765 of the Civil Code.21 Nor does this Article cover respondents filing of the petition for quieting of title, where she merely asserted what she believed was her right under the law. Finally, the records do not show that the donor-spouses instituted any action to revoke the donation in accordance with Article 769 of the Civil Code.22 Consequently, the supposed revocation on September 29, 1979, had no legal effect. G.R. No. 133705. March 31, 2005.* C-J YULO & SONS, INC., petitioner, vs. ROMAN CATHOLIC BISHOP OF SAN PABLO, INC., respondent. THE RULING OF THE COURT OF APPEALS (THAT THE REVOCATION OF THE DONATION BY PETITIONER WAS IMPROPER) IS CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE. We DENY.

The Court of Appeals sustained the trial courts finding that the donation is an onerous one since the donee was burdened with the establishment on the donated property of a home for the aged and the infirm. It likewise agreed with the trial court that there were violations of the terms and conditions of the deed of donation when the donee thrice leased a portion of the property without the prior written consent of the donor. Likewise upheld by the appellate court is the ruling of the trial court that the prescriptive period of the donors right to revoke the donation is ten (10) years based on Article 1144 of the Civil Code, instead of four (4) years per Article _______________ 3 Rollo, p. 21-35. 4 Rollo, pp. 37-39. 287 VOL. 454, MARCH 31, 2005 287 C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. 764 of the same Code, and therefore the action for revocation filed by the petitioner is not barred by prescription. Even then, the Court of Appeals reversed the trial courts

decision, the reversal being premised on the appellate courts finding that the breaches thrice committed by the respondent were merely casual breaches which nevertheless did not detract from the purpose of which the donation was made: the establishment of a home for the aged and the infirm. We agree. Petitioner contends that the case at bar is similar to the 1995 case of Central Philippine University vs. Court of Appeals,5 where the donee failed for more than 50 years to establish, as required, a medical school on the land donated, and where this Court declared the donation to have been validly revoked. To the mind of the Court, what is applicable to this case is the more recent [2001] case of Republic vs. Silim,6 where respondent Silim donated a 5,600-square meter parcel of land in favor of the Bureau of Public Schools, Municipality of Malangas, Zamboanga del Sur with the condition that the said property should be used exclusively and forever for school purposes only. Although a school building was constructed on the property through the efforts of the Parent-Teachers Association of Barangay Kauswagan, the funds for a Bagong Lipunan school building could not be released because the government required that it be built on a one-hectare parcel of land. This led the donee therein to exchange the donated property for a bigger one.

In Silim, the Court distinguished the four (4) types of donations: Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3) _______________ 5 246 SCRA 511 (1995). 6 356 SCRA 1 (2001). 288 288 SUPREME COURT REPORTS ANNOTATED C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying cause is plain gratuity. This is donation in its truest form. On the other hand, a remuneratory or compensatory donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a demandable debt. A conditional or modal donation is one where the donation is made in consideration of future services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is inferior than that of the donation given. Finally, an onerous

donation is that which imposes upon the donee a reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost of which is equal to or more than the thing donated. Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts. In this regard, Article 733 of the New Civil Code provides: ARTICLE 733. Donations with onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed. The donation involved in the present controversy is one which is onerous since there is a burden imposed upon the donee to build a school on the donated property. Here, the Court of Appeals correctly applied the law on contracts instead of the law on donations because the donation involved in this case is onerous, saddled as it is by a burden imposed upon the donee to put up and operate a home for the aged and the infirm. We thus quote with approval the terse ruling of the appellate court in the challenged decision: First, the violations of the conditions of the donation committed

by the donee were merely casual breaches of the conditions of the donation and did not detract from the purpose by which the donation was made, i.e., for the establishment of a home for the aged and the infirm. In order for a contract which imposes a reciprocal obligation, which is the onerous donation in this case wherein the donor is 289 VOL. 454, MARCH 31, 2005 289 C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. obligated to donate a 41,117 square meter property in Canlubang, Calamba, Laguna on which property the donee is obligated to establish a home for the aged and the infirm (Exhibit C), may be rescinded per Article 1191 of the New Civil Code, the breach of the conditions thereof must be substantial as to defeat the purpose for which the contract was perfected (Tolentino, Civil Code of the Philippines, Vol. IV, pp. 179-180; Universal Food Corp. v. Court of Appeals, 33 SCRA 1, 18; Ocampo v. Court of Appeals, 233 SCRA 551, 562). Thus, in the case of Ocampo v. C.A. (ibid.), citing the case of Angeles v. Calasanz (135 SCRA 323, 330), the Supreme Court ruled: The right to rescind the contract for non-performance of one of

its stipulations x x x is not absolute. In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that: The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821, 827). The question of whether a breach of a contract is substantial depends upon the attendant circumstances (Corpus v. Hon. Alikpala, et al., L23707 & L-23720, Jan. 17, 1968). The above ruling of the Court of Appeals is completely in tune with this Courts disposition in Republic vs. Silim, supra. The donor therein sought to revoke the donation on the ground that the donee breached the condition to exclusively and forever use the land for school purpose only, but this Court ruled in favor of the donee: Without the slightest doubt, the condition for the donation was not in any way violated when the lot donated was exchanged with another one. The purpose for the donation remains the same, which is for the establishment of a school. The exclusivity of the purpose was not altered or affected. In fact, the exchange of the lot for a much bigger one was in furtherance and enhancement of the purpose of the donation. The acquisition of the bigger lot paved way for the release of funds for the

construction of Bagong Lipunan school building which could not be accommodated by the limited area of the donated lot. 290 290 SUPREME COURT REPORTS ANNOTATED C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. As in Silim, the three (3) lease contracts herein entered into by the donee were for the sole purpose of pursuing the objective for which the donation was intended. In fact, such lease was authorized by the donor by express provision in the deed of donation, albeit the prior written consent therefor of the donor is needed. Hence, considering that the donees acts did not detract from the very purpose for which the donation was made but precisely to achieve such purpose, a lack of prior written consent of the donor would only constitute casual breach of the deed, which will not warrant the revocation of the donation. Besides, this Court cannot consider the requirement of a prior written consent by the donor for all contracts of lease to be entered into by the donee as an absolute ground for revocation of the donation because such a condition, if not correlated with the purpose of the donation, would constitute undue restriction of the donees right of ownership over the donated property.

Instructive on this point is the ruling of this Court in The Roman Catholic Archbishop of Manila vs. Court of Appeals,7 viz.: Donation, as a mode of acquiring ownership, results in an effective transfer of title over the property from the donor to the donee. Once a donation is accepted, the donee becomes the absolute owner of the property donated. Although the donor may impose certain conditions in the deed of donation, the same must not be contrary to law, morals, good customs, public order and public policy. xxx In the case at bar, we hold that the prohibition in the deed of donation against the alienation of the property for an entire century, being an unreasonable emasculation and denial of an integral attribute of ownership, should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. Consequently, as specifically stated in said statutory provision, such _______________ 7 198 SCRA 300 (1991). 291 VOL. 454, MARCH 31, 2005 291

C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. condition shall be considered as not imposed. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. The net result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter, hence, for lack of cause of action, the case for private respondents must fail. If petitioner would insist that the lack of prior written consent is a resolutory condition that is absolute in character, the insistence would not stand the validity test under the foregoing doctrine. What would have been casual breaches of the terms and conditions of the donation, may, in that event, even be considered as no breach at all when the Court strikes down such absolute condition of prior written consent by the donor in all instances without any exception whatsoever. The Court, however, understands that such a condition was written with a specific purpose in mind, which is, to ensure that the primary objective for which the donation was intended is achieved. A reasonable construction of such condition rather than totally striking it would, therefore, be more in accord with the spirit of the donation. Thus, for as long as the contracts of lease do not detract from the purpose for which the donation was made, the

complained acts of the donee will not be deemed as substantial breaches of the terms and conditions of the deed of donation to merit a valid revocation thereof by the donor. Finally, anent petitioners contention that the Court of Appeals failed to consider that respondent had abandoned the idea of constructing a home for the aged and infirm, the explanation in respondents comment is enlightening. Petitioner relies on Bishop Bantigues letter8 dated June 21, 1990 as its basis for claiming that the donee had altogether abandoned the idea of constructing a home for the aged and the infirm on the property donated. Respondent, however, explains that the Bishop, in his letter, written in the vernacular, expressed his _______________ 8 Exhibit 6. 292 292 SUPREME COURT REPORTS ANNOTATED C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc. concern that the surrounding area was being considered to be re-classified into an industrial zone where factories are expected to be put up. There is no question that this will definitely be

disadvantageous to the health of the aged and the infirm. Thus, the Bishop asked permission from the donor for a possible exchange or sale of the donated property to ultimately pursue the purpose for which the donation was intended in another location that is more appropriate. The Court sees the wisdom, prudence and good judgment of the Bishop on this point, to which it conforms completely. We cannot accede to petitioners view, which attributed the exact opposite meaning to the Bishops letter seeking permission to sell or exchange the donated property. In Silim, supra, this Court ruled that such exchange does not constitute breach of the terms and conditions of the donation. We see no reason for the Court to think otherwise in this case. To insist that the home for the aged and infirm be constructed on the donated property, if the industrialization indeed pushes through, defies rhyme and reason. Any act by the donor to prevent the donee from ultimately achieving the purpose for which the donation was intended would constitute bad faith, which the Court will not tolerate. WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals AFFIRMED in toto. [No. 3148. February 6, 1907.] EXRIQUE MA. BARRETTO, plaintiff and appellee, vs. THE CITY

OF MANILA, defendant and appellant. 1.CONDITIONAL DONATION.When land is donated on several express conditions, acceptance by the donee will be understood to include all of the conditions not unmistakably rejected. 2.DELIVERY OF DEED.When the donee has entered into possession of the property, effect will be given to the donation according to the terms of the offer and acceptance, although the formal deed has not been executed. 3.PERFORMANCE OF CONDITIONS.When the terms of the donation do not fix the time of the performance of a condition, the proper period will be determined by the court, in accordance with article 1128 of the Civil Code.

The plaintiff thereafter sent to the Ayuntamiento his title deeds, and until the month of February, 1903, appears to have had the idea that a formal transfer of the plot had been executed by him; in fact, it had not been. The city, however, entered into possession of the land, building a railing separating it from the adjoining property, and ever since that time the ground has been used as part 419

VOL. 7, FEBRUARY 6, 1907 419 Barretto vs. City of Manila of the public street, increasing the width thereof opposite the exit from the Palace and substantially improving the appearance of the locality. The plaintiff now brings this action to recover possession of the land on account of the failure of the city to comply with the conditions of the donation. Although a formal conveyance of the property appears to have never been made, yet the taking possession of the land by the city upon the terms contained in the offer and acceptance give effect to the latter. The conditions expressed in the offer of the plaintiff were two: First. That no building should be erected upon the ground;and Second. That it should be devoted to purposes of adornment; to which end, however, the Ayuntamiento was required to acquire enough of the contiguous lots to form in all a great public plaza with gardens and paths. This last requirement is so specific and concrete that it must have formed an essential part of the conditions in the mind of the donor and must have also attracted the attention of the donee. It has never been complied with. It is contended by the city that its resolution and letter of

acceptance, omitting any express mention of this part of the condition, worked an evasion of it, and that the subsequent delivery of the plaintiff s title deeds must be taken as an acceptance of the terms specified by the city in its letter, without reference to the plaintiff's first offer. To this view we can not accede. The whole negotiation must be taken into consideration in order to determine what was in the minds of the parties at the time. The plaintiff's proposition was unmistakable. If the city designed to reject any part of it while accepting the rest, such rejection should have been in express terms. Not only do we fail to find any such rejection, but in the letter of June 19 there appears to be in its concluding words an express recognition of the terms imposed, when it is provided that the deed of cession shall be drawn "with the restrictions indicated by you." This is a reference to the restrictions in the letter of the plaintiff and operates of necessity as an acceptance of them. 420 420 PHILIPPINE REPORTS ANNOTATED Behn, Meyer & Co. vs. Mitchell The contract having fixed 110 period in which the condition should be fulfilled, the provisions of article 1128 of the Civil Code are applicable and it is the duty of the court to fix a suitable time

for its fulfillment. (Eleizegui vs. Manila Lawn Tennis Club, 2 Phil. Rep., 309.) Thereafter if the city desires to retain the property it must proceed to acquire so much land as shall satisfy the requirement of the donation. With the other condition expressed in the plaintiff's letter, that no building should be erected on the property, we think the city has sufficiently complied. The judgment of the Court of First Instance awarding the plaintiff possession of the property is reversed, and the cause is remanded to the Court of First Instance for determination of the time within which the contiguous property must be acquired by the city in order to comply with the condition of the donation. So ordered. G.R. No. 148775. January 13, 2004.* SHOPPERS PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. EFREN P. ROQUE, respondent. Civil Law; Property; Donation; In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy; It is enough, between the parties to a donation of an immovable property, that the donation be made in a public

document but, in order to bind third persons, the donation must be registered in the Registry of Property.The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee. In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons. It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third _______________ * THIRD DIVISION. 94 94

SUPREME COURT REPORTS ANNOTATED Shoppers Paradise Realty & Development Corporation vs. Roque persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds). On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memo_______________ 1 Rollo, p. 37. 97 VOL. 419, JANUARY 13, 2004 97 Shoppers Paradise Realty & Development Corporation vs. Roque randum of Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third persons, the appellate court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned. The appellate court based its

findings largely on the testimony of Veredigno Atienza during cross-examination, viz: The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee.3 In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.4 The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons.5 It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds).6 Consistently, Section 50 of Act No. 496 (Land Registration Act), as so amended by Section 51 of P.D. No 1529 (Property Registration Decree), states: _______________

2 Rollo, pp. 40-41. 3 Article 712, New Civil Code. 4 Article 749, New Civil Code. 5 Article 709, New Civil Code. 6 See Gonzales v. Court of Appeals, G.R. No. 110335, 18 June 2001, 358 SCRA 598. 99 VOL. 419, JANUARY 13, 2004 99 Shoppers Paradise Realty & Development Corporation vs. Roque SECTION 51. Conveyance and other dealings by registered owner.An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration. The act of registration shall be the operative act to convey or

affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. (emphasis supplied) A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefor, and he is not required to go beyond the certificate to determine the condition of the property7 but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.8 The appellate court was not without substantial basis when it found petitioner to have had knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During their negotiation, petitioner, through its representatives, was apprised of the fact that the subject property actually belonged to respondent. It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent. In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter.9 Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year

is considered not merely an act of administration but an act of strict do_______________ 7Santos v. Court of Appeals, G.R. No. 90380, 13 September 1990, 189 SCRA 550. 8Lagandaon v. Court of Appeals, G.R. Nos. 102526-31, 21 May 1998, 290 SCRA 330; Fernandez v. Court of Appeals, G.R. No. 83141, 21 September 1990, 189 SCRA 780. 9 Article 1868, New Civil Code. 100 100 SUPREME COURT REPORTS ANNOTATED Shoppers Paradise Realty & Development Corporation vs. Roque minion or of ownership. A special power of attorney is thus necessary for its execution through an agent. The Court cannot accept petitioners argument that respondent is guilty of laches. Laches, in its real sense, is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled

to assert it either has abandoned or declined to assert it.10 Respondent learned of the contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed the validity of the agreements. Hardly, could respondent then be said to have neglected to assert his case for an unreasonable length of time. Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real facts.11 With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or prejudice.12 It has not been shown that respondent intended to conceal the actual facts concerning the property; more importantly, petitioner has been shown not to be

totally unaware of the real ownership of the subject property. Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision. _______________ 10 Tolentino, Civil Code of the Philippines, vol. IV, 1990-1991, p. 661. 11 Kalalo v. Luz, G.R. No. L-27782, 31 July 1970, 34 SCRA 337. 12Id. 101 VOL. 419, JANUARY 13, 2004 101 Bon vs. People WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals declaring the contract of lease and memorandum of agreement entered into between Dr. Felipe C. Roque and Shoppers Paradise Realty & Development Corporation not to be binding on respondent is AFFIRMED. No costs.

IMUAN V. CERENO

Petitioners contend that since the CA and the RTC found that there was no partition of the property and no valid donation propter nuptias was made by Pablo to Juana, the rule on coownership among Pablos heirs should govern the property; that when Juana sold the property to respondents Cerenos, the rights of petitioners as co-owners should not have been affected; that the CAs finding that the joint affidavit attesting to the donation propter nuptias can be the basis of a belief in good faith that Juana was the owner of the disputed property is erroneous, since Juana had knowledge from the time she got married to Pablo that the property was acquired during the latters first marriage; that respondents Spouses Cereno could not be considered in good faith since Soledad is the daughter of Juana with her marriage to Pablo and could not be considered a third party to the dispute without knowledge _______________ 12 Id., at pp. 17-18. 432 432 SUPREME COURT REPORTS ANNOTATED Imuan vs. Cereno of the nature of the property; that being co-owners, neither

prescription nor laches can be used against them to divest them of their property rights. In their Comment, respondents argue that Juana in her own right had acquired the property by prescription; that the CA correctly considered respondents 29 years of actual and peaceful possession of the property aside from their purchase of the property from Juana in finding them as the true owners. Petitioners and respondents submitted their respective memoranda. The petition has no merit. We agree with the CA that respondents have acquired the disputed property by acquisitive prescription. Prescription is another mode of acquiring ownership and other real rights over immovable property.13 It is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse.14 Possession is open when it is patent, visible, apparent, notorious and not clandestine.15 It is continuous when uninterrupted, unbroken and not intermittent or occasional;16 exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood.17

The party who asserts ownership by ad_______________ 13 Heirs of Marcelina Arzadon-Crisologo v. Raon, G.R. No. 171068, September 5, 2007, 532 SCRA 391, 404, citing Calicdan v. Cendaa, 466 Phil. 894, 902; 422 SCRA 272, 279 (2004). 14 Id. 15 Id., citing Director of Lands v. Intermediate Appellate Court, 209 SCRA 214, 224 (1992). 16 Id. 17 Id. 433 VOL. 599, SEPTEMBER 11, 2009 433 Imuan vs. Cereno verse possession must prove the presence of the essential elements of acquisitive prescription.18 Acquisitive prescription of real rights may be ordinary or extraordinary.19 Ordinary acquisitive prescription requires possession in good faith and with just title for ten years.20 In extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted adverse

possession for thirty years without need of title or of good faith.21 The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership.22 For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right.23 Records show that as early as 1970, when the property was sold by Juana to respondents Spouses Cereno, the latter immediately took possession of the property. Since then, respondents possessed the property continuously, openly, peacefully, in the concept of an owner, exclusively and in good faith with just title, to the exclusion of the petitioners and their predecessors-ininterest until the filing of the complaint in 1999 which is the subject of this present petition. Notably, the property was traversed by a barangay road, thus, it was divided into two lots. The house of respondents is located on the eastern part of the road, while the lot on the _______________ 18 Id.

19 Civil Code, Art. 1117. 20 Civil Code, Art. 1134. 21 Civil Code, Art. 1137. 22 Calicdan v. Cendaa, supra note 13, at p. 903, citing Civil Code, Art. 1127. 23 Id., citing Civil Code, Art. 1129. 434 434 SUPREME COURT REPORTS ANNOTATED Imuan vs. Cereno western part of the road was planted to fruit- bearing trees by respondents.24 It was admitted by petitioners that they saw the house of respondents constructed on the lot and yet never questioned the same.25 It was also established that respondents are the ones gathering the fruits of the land and enjoying the same26 to the exclusion of petitioners and yet the latter never prevented them from doing so. In fact, while petitioners learned of the sale of the property by Juana to the Spouses Cereno in 1980, they never took any action to protect whatever rights they have over the property nor raised any objection on respondents possession of the property. Petitioners inaction is aggravated by the fact that petitioners just live a mere 100 meters away from the property.27

Moreover, immediately after the sale of the property to the Spouses Cereno, they declared the property in their names for taxation purposes28 and since then religiously paid the taxes29 due on the property. Petitioners admitted that they knew that the Spouses Cerenos are the ones paying the taxes;30 yet, they never challenged the same for a long period of time which clearly establishes respondents claim as owners of the property. Jurisprudence is clear that although tax declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good indicia of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not in his actual or at least _______________ 24 TSN, July 7, 1999, p. 4. 25 TSN, July 21, 1999, p. 16. 26 TSN, July 7, 1999 (Betty Velasquez), p. 4; TSN, August 11, 1999 (Rodolfo Velasquez), p. 5. 27 TSN, July 21, 1999, p. 15. 28 Exhibit 23, folder of exhibits, p. 32. 29 Annexes 25 to 25-A to 25-P, id., at pp. 34-49. 30 TSN, July 21, 1999, p. 16. 435

VOL. 599, SEPTEMBER 11, 2009 435 Imuan vs. Cereno constructive possession.31 They constitute at least proof that the holder has a claim of title over the property.32 As is well known, the payment of taxes, coupled with actual possession of the land covered by the tax declaration, strongly supports a claim of ownership.33 Respondent Juanito also exercised dominion over the property by mortgaging the same to Manaoag Rural Bank in 199434 and the mortgage was cancelled only in January 1999.35 While there is a question regarding the alleged donation propter nuptias at the time Juana executed the deed of sale in favor of the Spouses Cereno in 1970, however, the requirement of just title and good faith are still satisfied in this case. As the CA said: x x x [T]he joint affidavit that the defendants-appellants presented, attesting to the donation propter nuptias of the disputed property by Pablo to Juana, can be the basis of the belief in good faith that Juana was the owner of the disputed property. Related to this, it is undisputed that Pablo and Juana had lived in the disputed property from the time of their marriage in 1919, and Juana continued to live and to possess this property in the concept of an owner from the time of Pablos death in 1936 up to the time she sold it to spouses Cereno in 1970.

These circumstances, in our view, are sufficient bases for the belief that Juana was the owner of the property she conveyed by sale, and leave us convinced that the spouses Cereno had the good faith that acquisition by prescription requires when they became the purchasers in the contract of sale with Juana.36 _______________ 31 Heirs of Marcelina Arzadon-Crisologo v. Raon, supra note 13, at p. 410, citing Republic v. Court of Appeals, 328 Phil. 238, 248; 258 SCRA 712, 720 (1996). 32 Id. 33 Id., citing Spouses Reyes v. Court of Appeals, 393 Phil. 493; 339 SCRA 97 (2000). 34 TSN, November 10, 1999, p. 18. 35 Exhibit 24, folder of exhibits, p. 33. 36 Rollo, p. 102. 436 436 SUPREME COURT REPORTS ANNOTATED Imuan vs. Cereno Notably, one of the affiants in the joint affidavit which was executed in 1970 was Alfredo, Pablos son by his first marriage, where he attested that the property was given by his father Pablo

to Juana by donation propter nuptias. Not one among Alfredos children had ever come out to assail the validity of the affidavit executed by their father. In fact, not one of Alfredos heirs joined petitioners in this case.37 Moreover, not one among the children of the first marriage when they were still alive ever made a claim on their successional rights over the property by asking for its partition. Such joint affidavit could constitute a legal basis for Juanas adverse and exclusive character of the possession of the property38 and would show the Spouses Cerenos good faith belief that Juana was the owner of the property. Thus, when petitioners filed the instant case, more than 29 years had already elapsed, thus, the ten-year period for acquisitive prescription has already been satisfied.
PERSONS WHO MAY GIVE OR RECEIVE DONATION SOLEDAD CALICDAN, represented by her guardian GUADALUPE CASTILLO, petitioner, vs. SILVERIO CENDAA, substituted by his legal heir CELSA CENDAAALARAS, respondent. Same; Same; Same; Same; Donation; A deed of donation, albeit void for having been executed by one who was not the owner of the property donated, may still be used to show the exclusive and adverse character of the donees possession.Moreover, the deed of donation inter vivos, albeit void for having been executed by one who was not the owner of the property donated, may still be used to show the exclusive and adverse character of respondents possession. Thus, in Heirs of Segunda Maningding v. Court of Appeals, we held: Even assuming that the donation propter nuptias is void for failure to comply with formal requisites, it could still constitute a legal basis for adverse possession. With clear and convincing evidence of possession, a private document of donation may serve as basis for a claim of ownership. In Pensader v. Pensader we ruled that while the verbal donation under which the defendant and his predecessors-in-interest have been in possession of the lands in question is not effective as a transfer of title, still it is a circumstance which may explain the adverse and exclusive character of the possession. (Italics ours)

In sum, the Court of Appeals correctly ordered the dismissal of Civil Case No. D-10270 before the Regional Trial Court of Dagupan City, Branch 44, and declared respondent the rightful owner of the subject property, not on the basis of the Deed of Donation Inter Vivos, which is hereby declared void, but on extraordinary acquisitive prescription. HEIRS OF SEVILLA V. SEVILLA To resolve the issue raised in the instant petition for review, the validity of the donation inter vivos executed by Felisa Almirol in favor of Leopoldo Sevilla must first be determined. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it.21 Under Article 737 of the Civil Code, the donors capacity shall be determined as of the time of the making of the donation. Like any other contract, an agreement of the parties is essential,22 and the attendance of a vice of consent renders the donation voidable.23 In the case at bar, there is no question that at the time Felisa Almirol executed the deed of donation she was already the owner of 1/2 undivided portion of Lot No. 653. Her 1/3 undivided share therein was increased by 1/2 when she and Filomena inherited the 1/3 share of their sister Honorata after the latters death. Hence, the 1/2 undivided share of Felisa in Lot No. 653 is considered a present property which she can validly dispose of at the time of the execution of the deed of donation. There is fraud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.29 There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have _______________ 28 Petition, Rollo, pp. 10-11. 29 Civil Code, Article 1338. 511 VOL. 402, APRIL 30, 2003 511 Heirs of William Sevilla vs. Sevilla been unduly influenced was suffering from mental weakness, or was ignorant or in financial distress.30 Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must prove. We have consistently applied the ancient rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts on which he bases his claim, the defendant is under no obligation to prove his exception or defense.31 In the instant case, the selfserving testimony of the petitioners are vague on

what acts of Leopoldo Sevilla constituted fraud and undue influence and on how these acts vitiated the consent of Felisa Almirol. Fraud and undue influence that vitiated a partys consent must be established by full, clear and convincing evidence, otherwise, the latters presumed consent to the contract prevails.32 Neither does the fact that the donation preceded the partition constitute fraud. It is not necessary that partition should first be had because what was donated to Leopoldo was the 1/2 undivided share of Felisa in Lot No. 653. Moreover, petitioners failed to show proof why Felisa should be held incapable of exercising sufficient judgment in ceding her share to respondent Leopoldo.33 As testified by the notary public who notarized the Deed of Donation, Felisa confirmed to him her intention to donate her share in Lot No. 653 to Leopoldo. He stressed that though the donor was old, she was of sound mind and could talk sensibly. Significantly, there is nothing in the record that discloses even an attempt by petitioners to rebut said declaration of the notary public. Clearly, therefore, the courts below did not err in sustaining the validity of the deed of donation. In the case at bar, at the time Felisa executed the deed of extrajudicial partition dividing the share of her deceased sister Honarata between her and the heirs of Filomena Almirol de Sevilla, she was no longer the owner of the 1/2 undivided portion of Lot No. 653, having previously donated the same to respondent Leopoldo Sevilla who accepted the donation in the same deed. A donation inter vivos, as in the instant case, is immediately operative and final.36 As a mode of acquiring ownership, it results in an effective transfer of title over the property from the donor to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. And once a donation is accepted, the donee becomes the absolute owner of the property donated. Evidently, Felisa did not possess the capacity to give consent to or execute the deed of partition inasmuch as she was neither the owner nor the authorized representative of respondent Leopoldo to whom she previously transmitted ownership of her undivided share in Lot No. 653. Considering that she had no legal capacity to _______________ 35 Id., citing Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, p. 445 citing 8 Manresa 646; Bumanlag vs. Alzate, G.R. No. L39119, 14 September 1986, 144 SCRA 480; Mindanao Academy vs. Yap, 121 Phil. 204; 13 SCRA 190 (1965); Estoque v. Pajimula, 133 Phil. 55; 24 SCRA 59 (1968); Segura v. Segura, G.R. No. L-29320, 19 September 1988, 165 SCRA 368; Frias v. Esquive, G.R. No. L-24679, 30 October 1975, 167 SCRA 487; Civil Code, Articles 1317 and 1453. 36 Alejandro v. Geraldez, 78 SCRA 245, 255 (1977). 513 VOL. 402, APRIL 30, 2003 513 Heirs of William Sevilla vs. Sevilla give consent to the deed of partition, it follows that there is no consent given to the execution of the deed, and therefore, there is no contract to speak of. As such, the deed of partition is void ab initio, hence, not susceptible of ratification.

Nevertheless, the nullity of the deed of extrajudicial partition will not affect the validity of the donation inter vivos ceding to respondent Leopoldo Sevilla the 1/2 undivided share of Felisa Almirol in Lot No. 653. Said lot should therefore be divided as follows: 1/2 shall go to respondent Leopoldo Sevilla by virtue of the deed of donation, while the other half shall be divided equally among the heirs of Filomena Almirol de Sevilla including Leopoldo Sevilla, following the rules on intestate succession. Finally, we note that the name of Rosa Sevilla, daughter of Filomena Almirol de Sevilla, and one of the plaintiffs herein, was omitted in the dispositive portion of the trial courts decision.37 Her name should therefore be included in the dispositive portion as one of the heirs entitled to share in the properties of the late Filomena Almirol de Sevilla. PACITA ORTIZ, ET AL., petitioners, vs. THE COURT OF APPEALS and ANDRES BASADA, respondents. 1.DONATION OF REAL PROPERTY; WHEN DONEE ACQUIRES OWNERSHIP AND POSSESSION OF DONATED PROPERTY.From the time the public instrument of donation is simultaneously executed and acknowledged by donors and donees, the latter acquired not only the ownership but also the possession of the donated property, since the execution of a public instrument of conveyance is one of the recognized ways in which delivery (tradition) of lands may be made, unless the countrary is expressed or inferable from the terms of the deeds. 2.ID. ; DONATION is ABSOLUTE AND UNCONDITIONAL IN THE ABSENCE OF RESERVATION.Where the donation is on its face absolute and unconditional and nothing in its text authorizes us to conclude that it is limited to the naked ownership of the land donated, the absence in the deed of any express reservation of usufruct in favor of the donors is proof that no such reservation was ever intended considering that under the law, a donation of land by public instrument is required to express the charges that the donee must assume. As determined by the Court of Appeals, the parcel of land in question belonged originally to the spouses Bonifacio Yupo and Vicenta de Guerra. On April 19, 1940, the owners donated the lot (among others) to their grandchildren, petitioners Ortiz, by public document acknowledged before Notary Public Liberato Cinco, and couched in the following terms: "DEED OF DONATION LET IT BE KNOWN BY ANYBODY WHO MIGHT SEE THIS: That, we, BONIFACIO YUPO AND VICENTA DE GUERRA, Married to each other, both of age, residing at barrio Lapinig, Palapag, Samar, Philippine and CRESENCIA ORTIZPINANGAY, ALEJANDRO ORTIZ and PACITA ORTIZ, also of age all of them, the first one residing at the same place and the two others at barrio Potong, Palapag, Samar, have agreed on the following: THAT BONIFACIO YUPO and VICENTA DE GUERRA, for and in consideration of the liberality and love to their grandchildren, CRESENCIA ORTIZ-PINANGAY, ALEJANDRO ORTIZ, and PACITA ORTIZ, announce to everybody that that at their free will give and donate to CRECENCIA ORTIZ-PINANGAY, ALEJANDRO ORTIZ

and PACITA ORTIZ three (3) parcels of land which are as follows: Tax No. 19738, Awang, Lapinig, Palapag, Samar, bounded in the NorthJacoba Enage; EastJacoba Enage and Swamp, SouthAwang Stream; and on the WestFermin Espinisin, Teresa Cesesta and Francisco Donceras. Tax No: 4649, Lapinig, Palapag, Samar; bounded in the NorthBasilio Piangdon; on EastEugenio Montibon; and the SouthColina; and the WestOctavio Anacta. Tax No. 12144, Potong, Palapag, Samar, bounded on the NorthBo. de Potong; on the EastPlaya Mar; SouthJuan Sidro; on the WestJuan Sidro. 48 48 PHILIPPINE REPORTS ANNOTATED Ortiz, et al. vs. Court of Appeals and Basada We trust that the donees would divide the lands donated to them by themselves. That CRESENCIA ORTIZ-PINANGAY, ALEJANDRO ORTIZ and PACITA ORTIZ, hereby accept this donation intervivos of the above-mentioned three (8) parcels of land and that they hereby manifest their gratefulness to the sympathy; love and liberality and benevolence of BONIFICIO YUPO and VICENTA DE GUERRA, "In truth hereof, we have placed our names below this 19th day of April, 1940 at Palapag, Samar. (Sgd.) CRESENCIA ORTIZ-PINANGAY (SGD.) ALEJANDRO ORTIZ (FDO.) BONIFACIO Yupo (SGD.) PACITA ORTIZ (FDO.) VICENTA DE GUERRA Signed in the presence of: Signature illegible Signature illegible ACKNOWLEDGMENT BY NOTARY PUBLIC LlBERATO B. ClNCO. (Exhibit D-2, trans. of Exh. D)" (Dec. CA. pp. 2-3). The donors were duly notified of donee's acceptance. Alejandro Ortiz died without issue in Capas, Tarlac, as a prisoner of war, during the last occupation by the Japanese, It appears further that on August 14, 1.941, the donor spouses executed another notarial deed of donation of the same property, in favor of Andres Basada, nephew of the donor Vicenta de Guerra, subject to the condition that the donee would serve and take care of the donors until their death. This donation was also duly accepted by the donee in the same instrument (Exh. 1-a). In 1947, the first donee (Ortiz) filed revindicatory action against the second donee (Basada) alleging that in 1946; the latter entered and usurped the land donated to and owned by them, and refused to vacate the same. Basada claimed ownership of the land on the ground that the donation in favor of the Ortizes had been revoked. The Court of First Instance of Samar upheld Basada's claim and dismissed the complaint, on the ground that the donees Ortiz had abandoned the donors 49 VOL. 97, MAY 19, 1955

49 Ortiz, et al. vs. Court of Appeals and Basada "to public mercy", with" most base ingratitude and highly condemnable heartlessness". Upon appeal to the Court of Appeals, the latter correctly held that the donation in favor of appellants Ortiz had been duly perfected in accordance with law, and it should "stand until after its revocation should have been asked and granted in the proper proceedings," citing our decision in Ventura vs. Felix, 26 Phil., 500-503. It added that the subsequent donation of the property to Basada "is not, certainly, the way a prior donation should be revoked/' Nevertheless, the Court of Appeals upheld the dismissal of the complaint, holding that: "However, to all appearances, the donors in the instant case had always reserved for themselves the possession and use of the properties donated. This may be inferred from the fact that the Ortizes were in possession of the land in question from the time it was donated to them until the donors left their house, and that later, we believe, Basada took possession of it after the donation thereof in his favor was signed and the donors went to live with him. The recovery of possession of the land sought by plaintiffs is, therefore, premature because one of the donors in behalf of whom Basada is now in occupancy of the property is still living. At least he should have been included in the case to determine whether he really had parted definitely not only with the ownership but also with the use and possession of the land." Dec. CA p. 9). We agree with the petitioners that the conclusion thus drawn is unwarranted. From the time the public instrument of donation (Exh. D) was executed and acknowledged by donors and donees in 1940, the latter acquired not only the ownership but also the possession of the donated property, since the execution of a public instrument of conveyance is one of the recognized ways in which delivery (tradition) of lands may be made (Civ. Code of 1889, Art 1463; new Civil Code, Art. 1498), unless from the terms of the deed, the contrary is expressed or inferable. In the present case, the donation (Exh. D) is on its face absolute and unconditional, 50 50 PHILIPPINE REPORTS ANNOTATED Saturnino vs. Paulino, et al. and nothing in its text authorizes us to conclude that it was limited to the naked ownership of the land donated. Considering that under the law, a donation of land by Public instrument is required to express the charges that the donee must assume (old Civil Code, Art. 633; new Civil Code, Art. 749), the absence in the deed of any express reservation of usufruct in favor of the donors is proof that no such reservation was ever intended. The mere fact that the donors remain in the property after donating it is susceptible of varied explanations and does not necessarily imply that possession or usufruct was excluded from the donation. And the donees Ortiz having been vested with ownership and attendant possession since 1940, it is clear that the subsequent donation of the property in f avor of respondent Basada confered on the latter no right whatever over the property as against the former donees, Wherefore, and without prejudice to any action of revocation that may lawfully apertain

to the donors, the decisions of the Court of Appeals and of the Court of First Instance of Samar dismissing the complaint are hereby reversed, and the respondent Andres Basada is sentenced to restore possesion to petitioners Cresencia and Pacita Ortiz. The records of the case are ordered remanded to the Court of origin for assessment of the damages suffered by the petitioners. Cost against respondent Andres Basada. G.R. No. 159567. July 31, 2007.* CORAZON CATALAN, LIBRADA CATALAN-LIM, EULOGIO CATALAN, MILA CATALAN-MILAN, ZENAIDA CATALAN, ALEX CATALAN, DAISY CATALAN, FLORIDA CATALAN and GEMMA CATALAN, Heirs of the late FELICIANO CATALAN, petitioners, vs. JOSE BASA, MANUEL BASA, LAURETA BASA, DELIA BASA, JESUS BASA and ROSALINDA BASA, Heirs of the late MERCEDES CATALAN, respondents. Civil Law; Property; Contracts; Donations; A donation is an act of liberality whereby a person disposes gratuitously a thing or right in favor of another who accepts it; Requisites of Consent in Contract.A donation is an act of liberality whereby a person disposes gratuitously a thing or right in favor of another, who accepts it. Like any other contract, an agreement of the parties is essential. Consent in contracts presupposes the following requisites: (1) it should be _______________ * FIRST DIVISION. 646 646 SUPREME COURT REPORTS ANNOTATED Catalan vs. Basa intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3) it should be spontaneous. The parties intention must be clear and the attendance of a vice of consent, like any contract, renders the donation voidable. Same; Same; Same; Same; In order for donation of property to be valid, what is crucial is the donors capacity to give consent at the time of the donation; The burden of proving incapacity rests upon the person who alleges it.In order for donation of property to be valid, what is crucial is the donors capacity to give consent at the time of the donation. Certainly, there lies no doubt in the fact that insanity impinges on consent freely given. However, the burden of proving such incapacity rests upon the person who alleges it; if no sufficient proof to this effect is presented, capacity will be presumed. Same; Same; Same; Same; A person suffering from schizophrenia does not necessarily lose his competence to intelligently dispose his property.From these scientific studies it can be deduced that a person suffering from schizophrenia does not necessarily lose his competence to intelligently dispose his property. By merely alleging the existence of schizophrenia, petitioners failed to show substantial proof that at the date of the donation, June 16, 1951, Feliciano Catalan had lost total control of his mental faculties. Thus, the lower courts correctly held that Feliciano was of sound mind at that time and that this condition continued to exist until proof to the contrary was adduced. Sufficient proof of his infirmity to give consent to contracts was only established when the Court of First

Instance of Pangasinan declared him an incompetent on December 22, 1953. Same; Same; Same; Same; Competency and freedom from undue influence, shown to have existed in the other acts done or contracts executed, are presumed to continue until the contrary is shown.It is interesting to note that the petitioners questioned Felicianos capacity at the time he donated the property, yet did not see fit to question his mental competence when he entered into a contract of marriage with Corazon Cerezo or when he executed deeds of donation of his other properties in their favor. The presumption that Feliciano remained competent to execute contracts, despite his illness, is bolstered by the existence of these other contracts. Competency and freedom from undue influence, shown to have existed in the other acts done or contracts executed, are presumed to continue until the contrary is shown. G.R. No. 152317. November 10, 2004.* VICTORIA MOREO-LENTFER,** GUNTER LENTFER and JOHN CRAIGIE YOUNG CROSS, petitioners, vs. HANS JURGEN WOLFF, respondent. Donations; Words and Phrases; A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it, but when a large amount of money is involved, the Court is constrained to take the donees purported claim of liberality of the donor with more than a grain of salt; A donation of money equivalent to P3,297,800 as well as its acceptance should be in writing.Petitioner Moreo-Lentfers claim of either cash or property donation rings hollow. A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it. But when a large amount of money is involved, equivalent to P3,297,800, based on the exchange rate in the year 1992, we are constrained to take the petitioners claim of liberality of the donor with more than a grain of salt. Petitioners could not brush aside the fact that a donation must comply with the mandatory formal requirements set forth by law for its validity. Since the subject of donation is the purchase money, Art. 748 of the New Civil Code is applicable. Accordingly, the donation of money equivalent to P3,297,800 as well as its acceptance should have been in writing. It was not. Hence, the donation is invalid for non-compliance with the formal requisites prescribed by law. Constitutional Law; Land Titles; Aliens; The constitutional prohibition against aliens owning land in the Philippines has no actual bearing in a case which merely involves a lease of land where the foreigners house stands.The Court of Appeals held that respondent was not entitled to the reconveyance of the properties because, inter alia, of the express prohibition under the Constitution that non-Filipino citizens cannot acquire land in the Philippines. We note, however, that subject properties consist of a beach house and the lease right over the land where the beach house stands. The constitutional prohibition against aliens from owning land in the Philippines has no actual bearing in this case. A clear distinction exists between the ownership of a piece of land and the mere lease of the land where the foreigners house stands. Thus, we see no legal reason why reconveyance could not be allowed. G.R. No. 132681. December 3, 2001.* RICKY Q. QUILALA, petitioner, vs. GLICERIA ALCANTARA, LEONORA

ALCANTARA, INES REYES and JOSE REYES, respondents. Donations; As a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee, and is perfected from the moment the donor knows of the acceptance by the _______________ * FIRST DIVISION. 312 312 SUPREME COURT REPORTS ANNOTATED Quilala vs. Alcantara donee, provided the donee is not disqualified or prohibited by law from accepting the donation.The principal issue raised is the validity of the donation executed by Catalina in favor of Violeta. Under Article 749 of the Civil Code, the donation of an immovable must be made in a public instrument in order to be valid, specifying therein the property donated and the value of the charges which the donee must satisfy. As a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee, and is perfected from the moment the donor knows of the acceptance by the donee, provided the donee is not disqualified or prohibited by law from accepting the donation. Once the donation is accepted, it is generally considered irrevocable, and the donee becomes the absolute owner of the property. The acceptance, to be valid, must be made during the lifetime of both the donor and the donee. It may be made in the same deed or in a separate public document, and the donor must know the acceptance by the donee. Same; Words and Phrases; Donation, Defined; A stipulation in the donation that it was made for and in consideration of the love and affection which the DONEE inspires in the DONOR, and as an act of liberality and generosity is sufficient cause for a donation.In the case at bar, the deed of donation contained the number of the certificate of title as well as the technical description of the real property donated. It stipulated that the donation was made for and in consideration of the love and affection which the DONEE inspires in the DONOR, and as an act of liberality and generosity. This was sufficient cause for a donation. Indeed, donation is legally defined as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Same; Formalities; The requirement that the contracting parties and their witnesses should sign on the left-hand margin of the instrument is not absolutethe specification of the location of the signature is merely directory.As stated above, the second page of the deed of donation, on which the Acknowledgment appears, was signed by the donor and one witness on the left-hand margin, and by the donee and the other witness on the right-hand margin. Surely, the requirement that the contracting parties and their witnesses should sign on the left-hand margin of the instrument is not absolute. The intendment of the law merely is to ensure that each and every page of the instrument is authenticated by the parties. The requirement is designed to avoid the falsification of the contract after the same has already been duly executed by the parties. Hence, a contracting party affixes his

signature on each page of the instrument to certify that he is agreeing to everything that is written thereon at the time of signing. Simply put, the specification of the location of the signature is merely 313 VOL. 371, DECEMBER 3, 2001 313 Quilala vs. Alcantara directory. The fact that one of the parties signs on the wrong side of the page does not invalidate the document. The purpose of authenticating the page is served, and the requirement in the above-quoted provision is deemed substantially complied with. Same; Same; Notarial Law; Acknowledgments; The lack of an acknowledgment by the donee before the notary public does not render the donation null and void; An instrument of donation should be treated in its entiretyit cannot be considered a private document in part and a public document in another, as the fact that it was acknowledged before a notary public converts the deed of donation in its entirety a public document.In the same vein, the lack of an acknowledgment by the donee before the notary public does not also render the donation null and void. The instrument should be treated in its entirety. It cannot be considered a private document in part and a public document in another part. The fact that it was acknowledged before a notary public converts the deed of donation in its entirety a public instrument. The fact that the donee was not mentioned by the notary public in the acknowledgment is of no moment. To be sure, it is the conveyance that should be acknowledged as a free and voluntary act. In any event, the donee signed on the second page, which contains the Acknowledgment only. Her acceptance, which is explicitly set forth on the first page of the notarized deed of donation, was made in a public instrument. Same; Succession; Collation; Property donated inter vivos is subject to collation after the donors death, whether the donation was made to a compulsory heir or a stranger, unless there is an express prohibition if that had been the donors intention.It should be stressed that this Court, not being a trier of facts, can not make a determination of whether Violeta was the daughter of Catalina, or whether petitioner is the son of Violeta. These issues should be ventilated in the appropriate probate or settlement proceedings affecting the respective estates of Catalina and Violeta. Suffice it to state that the donation, which we declare herein to be valid, will still be subjected to a test on its inofficiousness under Article 771, in relation to Articles 752, 911 and 912 of the Civil Code. Moreover, property donated inter vivos is subject to collation after the donors death, whether the donation was made to a compulsory heir or a stranger, unless there is an express prohibition if that had been the donors intention. The donees acceptance of the donation was explicitly manifested in the penultimate paragraph of the deed, which reads: That the DONEE hereby receives and accepts the gift and donation made in her favor by the DONOR and she hereby expresses her appreciation and gratefulness for the kindness and generosity of the DONOR.17 Below the terms and stipulations of the donation, the donor, donee and their witnesses affixed their signature. However, the Acknowledgment appearing on the second page

mentioned only the donor, Catalina Quilala. Thus, the trial court ruled that for Violetas failure to acknowledge her acceptance before the notary public, the same was set forth merely on a private instrument, i.e., the first page of the instrument. We disagree. The pertinent provision is Section 112, paragraph 2 of Presidential Decree No. 1529, which states: Deeds, conveyances, encumbrances, discharges, powers of attorney and other voluntary instruments, whether affecting registered or unregistered land, executed in accordance with law in the form of public instruments shall be registrable: Provided, that, every such instrument shall be signed by the person or persons executing the same in the presence of at _______________ 13 Civil Code, Article 749, second par. 14 Abellera v. Balanag, 37 Phil. 865 [1918]; Alejandro v. Geraldez, 78 SCRA 295 [1977]. 15 Rollo, p. 94. 16 Civil Code, Article 725. 17 Ibid. 319 VOL. 371, DECEMBER 3, 2001 319 Quilala vs. Alcantara least two witnesses who shall likewise sign thereon, and shall be acknowledged to be the free act and deed of the person or persons executing the same before a notary public or other public officer authorized by law to take acknowledgment. Where the instrument so acknowledged consists of two or more pages including the page whereon acknowledgment is written, each page of the copy which is to be registered in the office of the Register of Deeds, or if registration is not contemplated, each page of the copy to be kept by the notary public, except the page where the signatures already appear at the foot of the instrument, shall be signed on the left margin thereof by the person or persons executing the instrument and their witnesses, and all the pages sealed with the notarial seal, and this fact as well as the number of pages shall be stated in the acknowledgment. Where the instrument acknowledged relates to a sale, transfer, mortgage or encumbrance of two or more parcels of land, the number thereof shall likewise be set forth in said acknowledgment. (italics ours). As stated above, the second page of the deed of donation, on which the Acknowledgment appears, was signed by the donor and one witness on the left-hand margin, and by the donee and the other witness on the right-hand margin. Surely, the requirement that the contracting parties and their witnesses should sign on the left-hand margin of the instrument is not absolute. The intendment of the law merely is to ensure that each and every page of the instrument is authenticated by the parties. The requirement is designed to avoid the falsification of the contract after the same has already been duly executed by the parties. Hence, a contracting party affixes his signature on each page of the instrument to certify that he is agreeing to everything that is written thereon at the time of signing.

Simply put, the specification of the location of the signature is merely directory. The fact that one of the parties signs on the wrong side of the page does not invalidate the document. The purpose of authenticating the page is served, and the requirement in the above-quoted provision is deemed substantially complied with. In the same vein, the lack of an acknowledgment by the donee before the notary public does not also render the donation null and void. The instrument should be treated in its entirety. It cannot be considered a private document in part and a public document in another part. The fact that it was acknowledged before a notary public converts the deed of donation in its entirety a public instru320 320 SUPREME COURT REPORTS ANNOTATED Quilala vs. Alcantara ment. The fact that the donee was not mentioned by the notary public in the acknowledgment is of no moment. To be sure, it is the conveyance that should be acknowledged as a free and voluntary act. In any event, the donee signed on the second page, which contains the Acknowledgment only. Her acceptance, which is explicitly set forth on the first page of the notarized deed of donation, was made in a public instrument. It should be stressed that this Court, not being a trier of facts, can not make a determination of whether Violeta was the daughter of Catalina, or whether petitioner is the son of Violeta. These issues should be ventilated in the appropriate probate or settlement proceedings affecting the respective estates of Catalina and Violeta. Suffice it to state that the donation, which we declare herein to be valid, will still be subjected to a test on its inofficiousness under Article 771,18 in relation to Articles 752, 911 and 912 of the Civil Code. Moreover, property donated inter vivos is subject to collation after the donors death,19 whether the donation was made to a compulsory heir or a stranger,20 unless there is an express prohibition if that had been the donors intention.21 VALENCIAV.. LOCQUIAO Civil Law; Donations; The celebration of the marriage between the beneficiary couple in tandem with compliance with the prescribed form was enough to effectuate the donation propter nuptias under the Old Civil Code.Under the Old Civil Code, donations propter nuptias must be made in a public instrument in which the property donated must be specifically described. However, Article 1330 of the same Code provides that acceptance is not necessary to the validity of such gifts. In other words, the celebration of the marriage between the beneficiary couple, in tandem with compliance with the prescribed form, was enough to effectuate the donation propter nuptias under the Old Civil Code. Same; Same; As provided in Article 129, express acceptance is not necessary for the validity of donations propter nuptias; Implied acceptance is sufficient.Under the New Civil Code, the rules are different. Article 127 thereof provides that the form of donations propter nuptias are regulated by the Statute of Frauds. Article 1403, paragraph 2, which contains the Statute of Frauds requires that the contracts mentioned thereunder need be in writing only to be enforceable. However, as provided in Article 129, express acceptance

is not necessary for the validity of these donations. Thus, implied acceptance is sufficient. Same; Prescription; Petitioners action which was filed on December 23, 1985 or more than forty (40) years from the execution of the deed of donation on May 22, 1944 was clearly time-barred.Viewing petitioners action for reconveyance from whatever feasible legal angle, it is definitely barred by prescription. Petitioners right to file an action for the reconveyance of the land accrued in 1944, when the Inventario Ti Sagut was executed. It must be remembered that before the effectivity of the New Civil Code in 1950, the Old Code of Civil Procedure (Act No. 190) governed prescription. Under the Old Code of Civil Procedure, an action for recovery 602 602 SUPREME COURT REPORTS ANNOTATED Valencia vs. Locquiao of the title to, or possession of, real property, or an interest therein, can only be brought within ten years after the cause of such action accrues. Thus, petitioners action, which was filed on December 23, 1985, or more than forty (40) years from the execution of the deed of donation on May 22, 1944, was clearly time-barred. Same; Same; The prescriptive period for the reconveyance of property allegedly registered through fraud is ten (10) years reckoned from the date of the issuance of the certificate of title.As early as May 15, 1970, when the deed of donation was registered and the transfer certificate of title was issued, petitioners were considered to have constructive knowledge of the alleged fraud, following the jurisprudential rule that registration of a deed in the public real estate registry is constructive notice to the whole world of its contents, as well as all interests, legal and equitable, included therein. As it is now settled that the prescriptive period for the reconveyance of property allegedly registered through fraud is ten (10) years, reckoned from the date of the issuance of the certificate of title, the action filed on December 23, 1985 has clearly prescribed. The petitioners, the appellate court and the trial court all erred in applying the requirements on ordinary donations to the present _______________ 37 Petition, p. 31, citing TSN, April 7, 1987, pp. 12-13. 38 Section 36, Rule 132, Revised Rules of Court. 39 Order dated May 22, 1987, Record, p. 192. 40 TSN, April 7, 1987, Folder of TSN, p. 107. 41 Gerales v. Court of Appeals, G.R. No. 85909, 9, February 1993, 218 SCRA 638, 648, citing Baranda v. Baranda, 150 SCRA 59 (1987). 42 Ibid., citing Collantes v. Capuno, 123 SCRA 652 (1983). 43 Article 633 of the Old Civil Code provides that the acceptance in an ordinary donation must appear in a public instrument. This requirement is the same under Article 749 of the New Civil Code. 610

610 SUPREME COURT REPORTS ANNOTATED Valencia vs. Locquiao case instead of the rules on donation propter nuptias. Underlying the blunder is their failure to take into account the fundamental dichotomy between the two kinds of donations. Unlike ordinary donations, donations propter nuptias or donations by reason of marriage are those made before its celebration, in consideration of the same and in favor of one or both of the future spouses.44 The distinction is crucial because the two classes of donations are not governed by exactly the same rules, especially as regards the formal essential requisites. Under the Old Civil Code, donations propter nuptias must be made in a public instrument in which the property donated must be specifically described.45 However, Article 1330 of the same Code provides that acceptance is not necessary to the validity of such gifts. In other words, the celebration of the marriage between the beneficiary couple, in tandem with compliance with the prescribed form, was enough to effectuate the donation propter nuptias under the Old Civil Code. Under the New Civil Code, the rules are different. Article 127 thereof provides that the form of donations propter nuptias are regulated by the Statute of Frauds. Article 1403, paragraph 2, which contains the Statute of Frauds requires that the contracts mentioned thereunder need be in writing only to be enforceable. However, as provided in Article 129, express acceptance is not necessary for the validity of these donations. Thus, implied acceptance is sufficient. The pivotal question, therefore, is which formal requirements should be applied with respect to the donation propter nuptias at hand. Those under the Old Civil Code or the New Civil Code? It is settled that only laws existing at the time of the execution of a contract are applicable thereto and not later statutes, unless the latter are specifically intended to have retroactive effect.46 Consequently, it is the Old Civil Code which applies in this case since the donation propter nuptias was executed in 1944 and the New Civil Code took effect only on August 30, 1950.47 The fact that in 1944 the Philippines was still under Japanese occupation is of no consequence. It is a well-known rule of the Law of Nations that municipal laws, as contra-distinguished from laws of political nature, are not abrogated by a change of sovereignty.48 This Court specifically held that during the Japanese occupation period, the Old Civil Code was in force.49 As a consequence, applying Article 1330 of the Old Civil Code in the determination of the validity of the questioned donation, it does not matter whether or not the donees had accepted the donation. The validity of the donation is unaffected in either case. Even the petitioners agree that the Old Civil Code should be applied. However, they invoked the wrong provisions50 thereof. Even if the provisions of the New Civil Code were to be applied, the case of the petitioners would collapse just the same. As earlier shown, even implied acceptance of a donation propter nuptias suffices under the New Civil Code.51 With the genuineness of the donation propter nuptias and compliance with the applicable mandatory form requirements fully

established, petitioners hypothesis that their action is imprescriptible cannot take off. Viewing petitioners action for reconveyance from whatever feasible legal angle, it is definitely barred by prescription. Petitioners right to file an action for the reconveyance of the land accrued in 1944, when the Inventario Ti Sagut was executed. It must be remembered that before the effectivity of the New Civil Code in 1950, the Old Code of Civil Procedure (Act No. 190) governed prescription.52 Under the Old Code of Civil Procedure, an action for recovery of the title to, or possession of, real property, or an interest therein, can only be brought within ten years after the cause of such action accrues.53 Thus, petitioners action, which was filed on December 23, 1985, or more than forty (40) years from the execution of the deed of donation on May 22, 1944, was clearly timebarred. Even following petitioners theory that the prescriptive period should commence from the discovery of the alleged fraud, the conclusion would still be the same. As early as May 15, 1970, when the deed of donation was registered and the transfer certificate of title was issued, petitioners were considered to have constructive knowledge of the alleged fraud, following the jurisprudential rule that registration of a deed in the public real estate registry is constructive notice to the whole world of its contents, as well as all interests, legal and equitable, included therein.54 As it is now settled that the prescriptive period for the reconveyance of property allegedly registered through fraud is ten (10) years, reckoned from the date of the issuance of the certificate of title,55 the action filed on December 23, 1985 has clearly prescribed. G.R. No. 148775. January 13, 2004.* SHOPPERS PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. EFREN P. ROQUE, respondent. Civil Law; Property; Donation; In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy; It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property.The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee. In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons. It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third _______________ * THIRD DIVISION. 94

94 SUPREME COURT REPORTS ANNOTATED Shoppers Paradise Realty & Development Corporation vs. Roque persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds). Same; Same; Land Registration; Where a party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefor, and he is not required to go beyond the certificate to determine the condition of the property but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him. Same; Same; Agency; The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership; A special power of attorney is thus necessary for its execution through an agent.In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter. Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent. In the instant petition for review, petitioner seeks a reversal of the decision of the Court of Appeals and the reinstatement of the ruling of the Regional Trial Court; it argues that the presumption of good faith it so enjoys as a party dealing in registered land has not been overturned by the aforequoted testimonial evidence, and that, in any event, respondent is barred by laches and estoppel from denying the contracts. The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee.3 In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.4 The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons.5 It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds).6 Consistently, Section 50 of Act No. 496 (Land Registration Act), as so amended by Section 51 of P.D. No 1529 (Property Registration Decree), states: A person dealing with registered land may thus safely rely on the correctness of the

certificate of title issued therefor, and he is not required to go beyond the certificate to determine the condition of the property7 but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.8 The appellate court was not without substantial basis when it found petitioner to have had knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During their negotiation, petitioner, through its representatives, was apprised of the fact that the subject property actually belonged to respondent. It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent. In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter.9 Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent. G.R. No. 149570. March 12, 2004.* HEIRS OF ROSENDO SEVILLA FLORENCIO, as represented by ESTRELLITA FLORENCIO-CRUZ and RODRIGO R. FLOREN-CIO, petitioners, vs. HEIRS OF TERESA SEVILLA DE LEON as represented by VALERIANA MORENTE, respondents. Remedial Law; Ejectment; In ejectment cases, the issue is the physical or material possession (possession de facto) and any pronouncement made by the trial court on the question of ownership is provisional in nature.Prefatorily, in ejectment cases, the issue is the physical or material possession (possession de facto) and any pronouncement made by the trial court on the question of ownership is provisional in nature. A judgment rendered in ejectment cases shall not bar an action between the same parties respecting title to the land and shall not be conclusive as to the facts found therein in a case between the same parties upon a different cause of action involving possession of the same property. Civil Law; Donation; Donation is one of the modes of acquiring ownership; Essential Elements of Donation.Under the New Civil Code, donation is one of the modes of acquiring ownership. Among the attributes of ownership is the right to possess the property. The essential elements of donation are as follows: (a) the essential reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; and (c) the intent to do an act of liberality or animus donandi. When applied to a donation of an immovable property, the law further requires that the donation be made in a public document and that the acceptance thereof be made in the same deed or in a separate public instrument; in cases where the acceptance is made in a separate instrument, it is mandated that the donor be notified thereof in an authentic form, to be noted in both instruments. Same; Same; Once the donation is accepted, it is generally considered irrevocable and the donee becomes the absolute owner of the property, except on account of officiousness, failure by the donee to comply with the charge imposed in the donation, or ingratitude. As a mode of acquiring ownership, donation results in an effective transfer of title over

the property from the donor to the donee, and is perfected from the moment the donor is made aware of the acceptance by the donee, provided that the donee is not disqualified or prohibited by law from accepting the donation. Once the donation is accepted, it is generally considered irrevocable, and the donee becomes the absolute owner of the property, except on account of officiousness, failure by the donee to comply with the charge imposed in _______________ * SECOND DIVISION. 448 448 SUPREME COURT REPORTS ANNOTATED Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon the donation, or ingratitude. The acceptance, to be valid, must be made during the lifetime of both the donor and the donee. It must be made in the same deed or in a separate public document, and the donees acceptance must come to the knowledge of the donor. Same; Same; In order that the donation of an immovable property may be valid, it must be made in a public document; Registration of the deed in the Office of the Register of Deeds or in the Assesors Office is not necessary for it to be considered valid and official.In order that the donation of an immovable property may be valid, it must be made in a public document. Registration of the deed in the Office of the Register of Deeds or in the Assessors Office is not necessary for it to be considered valid and official. Registration does not vest title; it is merely evidence of such title over a particular parcel of land. The necessity of registration comes into play only when the rights of third persons are affected. Furthermore, the heirs are bound by the deed of contracts executed by their predecessors-in-interest. The Ruling of the Court The threshold issue in this case is whether or not the petitioners, as heirs of Rosendo Florencio, who appears to be the donee under the unregistered Deed of Donation, have a better right to the physical or material possession of the property over the respondents, the heirs of Teresa de Leon, the registered owner of the property. The petition has no merit. Prefatorily, in ejectment cases, the issue is the physical or material possession (possession de facto) and any pronouncement made by the trial court on the question of ownership is provisional in nature.38 A judgment rendered in ejectment cases shall not bar an action between the same parties respecting title to the land and shall not be conclusive as to the facts found therein in a case between the same parties upon a different cause of action involving possession of the same property.39 We agree with the petitioners that under the New Civil Code, donation is one of the modes of acquiring ownership.40 Among the attributes of ownership is the right to possess the property.41 The essential elements of donation are as follows: (a) the essential reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; and (c) the intent

to do an act of liberality or animus donandi. When applied to a donation of an immovable property, the law further requires that the donation be made in a public document and that the acceptance thereof be made in the same deed or in a separate public instrument; in cases where the acceptance is made in a separate instrument, it is mandated that the donor be notified thereof in an authentic form, to be noted in both instruments.42 As a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee, and is perfected from the moment the donor is made aware of the acceptance by the donee, provided that the donee is not disqualified or prohibited by law from accepting the donation.43 Once the donation is accepted, it is generally considered irrevocable, and the donee becomes the absolute owner of the property, except on account of officiousness, failure by the donee to comply with the charge imposed in the donation, or ingratitude.44 The acceptance, to be valid, must be made during the lifetime of both the donor and the donee. It must be made in the same deed or in a separate public document, and the donees acceptance must come to the knowledge of the donor.45 In order that the donation of an immovable property may be valid, it must be made in a public document.46 Registration of the deed in the Office of the Register of Deeds or in the Assessors Office is not necessary for it to be considered valid and official. Registration does not vest title; it is merely evidence of such title over a particular parcel of land.47 The necessity of registration comes into play only when the rights of third persons are affected.48 Furthermore, the heirs are bound by the deed of contracts executed by their predecessors-in-interest.

On the other hand, the fundamental principle is that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears _______________ 42 Republic vs. Guzman, 326 SCRA 90 (2000). 43 Quilala vs. Alcantara, 371 SCRA 311 (2001). 44 Gestopa vs. Court of Appeals, 342 SCRA 105 (2000). 45 See note 43, supra. 46 Article 749, New Civil Code. 47 Cabrera vs. Court of Appeals, 276 SCRA 339 (1997).

48 Gonzales vs. Court of Appeals, 358 SCRA 598 (2001). 49 San Agustin vs. Court of Appeals, 371 SCRA 348 (2001). 460 460 SUPREME COURT REPORTS ANNOTATED Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon therein as the registered owner.50 The registered owner has the right to possess, enjoy and dispose of the property without any limitations other than those imposed by law. In this case, the deed of donation, on its face, appears to bear all the essential requisites of a valid donation inter vivos. With Teresa de Leon as the donor and Rosendo Florencio as the donee, the deed of donation appears to have been notarized by Notary Public Tirso Manguiat. On this premise, Florencio, and after his death, his heirs, acquired ownership over the property although Certificate of Title No. T-44349 under the name of Teresa de Leon had not yet been cancelled. However, as pointed out by the RTC and the Court of Appeals, there are cogent facts and circumstances of substance which engender veritable doubts as to whether the petitioners have a better right of possession over the property other than the respondents, the lawful heirs of the deceased registered owner

of the property, Teresa de Leon, based on the Deed of Donation. First. Teresa de Leon purportedly executed the Deed of Donation on October 1, 1976 in favor of Rosendo S. Florencio. If she, indeed, donated the property, she would surely have turned over the owners duplicate of TCT No. T-44349 to Florencio, to facilitate the issuance of a new title over the property in his favor. There was an imperative need for the deed to be registered in the Office of the Register of Deeds, and the title to the property to be thereafter issued in the name of the donee, Florencio. Before then, Florencio and his family had been residing in the property solely at the sufferance of Teresa de Leon and her husband. Their possession of the property and their continued stay therein was precarious. They could be driven out from the property at any time by De Leon if she disowned the deed or, after her death, by her heirs. It behooved Florencio to have the said deed filed and duly registered51 with the _______________ 50 Retuerto vs. Barz, 372 SCRA 712 (2001). 51 In Cheng vs. Genato, 300 SCRA 722 (1998), we held that: Registration, defined by Soler and Castillo, means any entry made in the books of the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. In its strict acceptance, it is the entry made in the

registry which records solemnly and permanently the right of ownership and other real rights. We have ruled before that when a Deed of Sale is inscribed in the registry of property on the original document 461 VOL. 425, MARCH 12, 2004 461 Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon Office of the Register of Deeds without delay and, thereafter, to secure a new title under his name. This would have resulted in the cancellation of TCT No. T-44349 under the name of Teresa de Leon, and thereby averted any disturbance of Florencios possession of the property, and after his death, that of his heirs. At the very least, Florencio should have caused the annotation of the deed immediately after October 1, 1976 or shortly thereafter, at the dorsal portion of TCT No. T-44349. Such annotation would have been binding on the respondents, as De Leons successors-in-interest, as well as to third persons. However, Florencio failed to do so. Even as De Leon died intestate in 1978, Florencio failed to secure title over the property in his name before he himself died intestate in 1995. If, as the petitioners claimed, Florencio acquired ownership over the

property under the deed, it is incredible that he would fail to register the deed and secure title over the property under his name for almost twenty years. All these years, Florencio, and thereafter, his heirs, remained passive and failed to act upon the deed of donation to protect their right. This, the Court finds difficult to understand. The claim that Florencio and his heirs sought the registration of the deed and the transfer of the title to and under Florencios name from 1978 to 1991, in coordination with Jose de Leon is incredible. There is no evidence on record that the deed of donation was ever filed with and registered in the Office of the Register of Deeds at any time during the period from 1978 to 1991. The petitioners claim that the registration of the deed was delayed and later aborted by the demise of Jose de Leon is not substantiated by evidence. Moreover, there is no reason why Florencio, or after his death, the petitioners, could not have had the deed registered even after Jose de Leons death. Second. Florencio failed to inform the heirs of De Leon that the latter, before her death, had executed a deed of donation on October 1, 1976 over the property in his favor. It was only in 1996, or eighteen years after the death of De Leon when the respondents sued the petitioners for ejectment that the latter claimed, for the first time, that De Leon had executed a deed of donation over the property in favor of their predecessor,

Florencio. _______________ itself, what was done with respect to said entries or annotations and marginal notes amounted to a registration of the sale. 462 462 SUPREME COURT REPORTS ANNOTATED Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon Third. In the meantime, the respondents consistently paid the realty taxes for the property from 1978 up to 1996, completely oblivious to the existence of the deed of donation. On the other hand, Florencio, and, after his death, the petitioners, never paid a single centavo for the realty taxes due on the property, even as they continued staying in the property without paying a single centavo therefor. The petitioners should have declared the property under their names and paid the realty taxes therefor, if they truly believed that they were its owners. They failed to do so. The fact of Florencios inaction and that of the petitioners weakened the latters claim that they acquired ownership over the property under the deed of donation. Fourth. The petitioners never adduced in evidence the owners

duplicate of TCT No. T-44349 under the name of De Leon. Their possession of the owners duplicate of the title would have fortified their claim that indeed, De Leon had intended to convey the property by donation to Florencio. Furthermore, the petitioners did not explain why they failed to adduce in evidence the said owners duplicate of the title. The only conclusion is that the said owners duplicate copy was not turned over to Florencio contemporaneously with or after the execution of the deed of donation; hence, their failure to secure title over the property.52 Fifth. The respondents adduced in evidence the affidavitcomplaint of Valeriana Morente dated May 8, 1996, one of the witnesses to the deed, for falsification and perjury against Florencio and Atty. Tirso Manguiat. They also adduced the Certification _______________ 52 Section 1 of P.D. No. 1529 provides that: SEC. 53. Presentation of owners duplicate upon entry of new certificate.No voluntary instrument shall be registered by the Register of Deeds, unless owners duplicate certificate is presented with such instrument, except in case expressly provided for in this Decree or upon order of the court, for cause shown. The production of the owners duplicate certificate, whenever any

voluntary is presented for registration, shall be conclusive authority from the registered owner to the Register of deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith. 463 VOL. 425, MARCH 12, 2004 463 Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon dated April 23, 1996 issued by Teresita R. Ignacio, Chief, Archives Division of the Records Management and Archives Division of Manila, to the effect that nothing in the notarial register of Atty. Tirso L. Manguiat, a notary public of Manila, showed that the latter notarized a Deed of Donation executed by De Leon and Florencio in San Miguel, Bulacan dated October 1, 1976. However, the petitioners failed to adduce in evidence Atty. Manguiats counter-affidavit to the said complaint, or, at the very least, a separate affidavit explaining the facts and circumstances surrounding the notarization of the deed of donation. Sixth. A reading of the deed will show that at the bottom of page

one thereof, Florencio was to subscribe and swear to the truth of his acceptance of the donation before Municipal Mayor Marcelo G. Aure of San Miguel, Bulacan. However, the mayor did not affix his signature above his typewritten name, thus: SUBSCRIBED AND SWORN to before me this 1st day of October, 1976, the DONOR having exhibited her Res. Cert. No. A-3723337 issued at Quezon City on January 10, 1976. MARCELO G. AURE Municipal Mayor53 It appears that a second page was added, with the name of Atty. Manguiat typewritten therein as notary public, obviously, with the use of a different typewriter. In sum then, we agree with the RTC and the Court of Appeals that the deed of donation relied upon by the petitioners is unreliable as evidence on which to anchor a finding that the latter have a better right over the property than the respondents, who, admittedly, are the heirs of Teresa de Leon, the registered owner of the property under TCT No. T-44349 of the Registry of Deeds of Bulacan. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decisions of the Regional Trial Court of Malolos, Bulacan, Branch 20, in Civil Cases Nos. 1018-M-99 and 1019-M-99, and the Court of Appeals in CA-G.R. SP No. 59698-99, are AFFIRMED.

G.R. No. 141882. March 11, 2005.* J.L.T. AGRO, INC., represented by its Manager, JULIAN L. TEVES, petitioner, vs. ANTONIO BALANSAG and HILARIA CADAYDAY, respondents. Civil Law; Contracts; All things, even future ones which are not outside the commerce of man may be the object of a contract, except that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080.Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080. _______________ * SECOND DIVISION. 212 212 SUPREME COURT REPORTS ANNOTATED J.L.T. Agro, Inc. vs. Balansag

Same; Legitimes; Preterition; Preterition is defined as the omission of the heir in the will, either by not naming him at all or, while mentioning him as father, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the properties; It is the total omission of a compulsory heir in the direct line from inheritance; There is no preterition where the testator allotted to a descendant a share less than the legitime, since there was no total omission of a forced heir.Article 854 provides that the preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. Manresa defines preterition as the omission of the heir in the will, either by not naming him at all or, while mentioning him as father, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the properties. It is the total omission of a compulsory heir in the direct line from inheritance. It consists in the silence of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case. But there is no preterition where the testator allotted to a

descendant a share less than the legitime, since there was no total omission of a forced heir. Same; Donation; Title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been accepted in a public instrument and the donor duly notified thereof.In Sumipat, et al. v. Banga, et al., this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the deed of donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the deed of donation and in the separate acceptance, the donation is null and void. 213 VOL. 453, MARCH 11, 2005 213 J.L.T. Agro, Inc. vs. Balansag Same; Land Titles; A certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose

name appears therein.Well-settled, of course, is the rule that a certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose name appears therein. A certificate of title accumulates in one document a precise and correct statement of the exact status of the fee held by its owner. The certificate, in the absence of fraud, is the evidence of title and shows exactly the real interest of its owner. Same; Same; To successfully assail the juristic value of what a Torrens title establishes, a sufficient and convincing quantum of evidence on the defect of the title must be adduced to overcome the predisposition in law in favor of a holder of a Torrens title. To successfully assail the juristic value of what a Torrens title establishes, a sufficient and convincing quantum of evidence on the defect of the title must be adduced to overcome the predisposition in law in favor of a holder of a Torrens title. Thus, contrary to the appellate courts ruling, the appearance of a mere thumbmark of Don Julian instead of his signature in the Supplemental Deed would not affect the validity of petitioners title for this Court has ruled that a thumbmark is a recognized mode of signature. petitioner assigns as errors the following rulings of the appellate court, to wit: (a) that future legitime can be determined, adjudicated and reserved prior to the death of Don Julian; (b)

that Don Julian had no right to dispose of or assign Lot No. 63 to petitioner because he reserved the same for his heirs from the second marriage pursuant to the Compromise Agreement; Well-entrenched is the rule that all things, even future ones, which are not outside the commerce of man may be the object of a contract. The exception is that no contract may be entered into with respect to future inheritance, and the exception to the exception is the partition inter vivos referred to in Article 1080.35 For the inheritance to be considered future, the succession must not have been opened at the time of the contract.36 A contract may be classified as a contract upon future inheritance, prohibited under the second paragraph of Article 1347, where the following requisites concur: (1) That the succession has not yet been opened; (2) That the object of the contract forms part of the inheritance; and (3) That the promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. The first paragraph of Article 1080, which provides the exception to the exception and therefore aligns with the general rule on future things, reads: ART. 1080. Should a person make a partition of his estate by an

act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs. .... In interpreting this provision, Justice Edgardo Paras advanced the opinion that if the partition is made by an act inter vivos, no formalities are prescribed by the Article.38 The partition will of course be effective only after death. It does not necessarily require the formalities of a will for after all it is not the partition that is the mode of acquiring ownership. Neither will the formalities of a donation be required since donation will not be the mode of acquiring the ownership here after death; since no will has been made it follows that the mode will be succession (intestate succession). Besides, the partition here is merely the physical determination of the part to be given to each heir.39 The historical antecedent of Article 1080 of the New Civil Code is Article 105640 of the old Civil Code. The only change in the provision is that Article 1080 now permits any person (not a testator, as under the old law) to partition his estate by act inter vivos. This was intended to abrogate the then prevailing doctrine that for a testator to partition his estate by an act inter vivos, he must first make a will with all the formalities provided by law.41 Article 1056 of the old Civil Code (now Article 1080) authorizes a

testator to partition inter vivos his property, and distribute them among his heirs, and this partition is neither a donation nor a testament, but an instrument of a special character, sui generis, which is revocable at any time by the causante during his lifetime, and does not operate as a conveyance of title until his death. It derives its binding force on the heirs from the respect due to the will of the owner of the property, limited only by his creditors and the intangibility of the legitime of the forced heirs.42 The partition inter vivos of the properties of Don Julian is undoubtedly valid pursuant to Article 1347. However, considering that it would become legally operative only upon the death of Don Julian, the right of his heirs from the second marriage to the properties adjudicated to him under the compromise agreement was but a mere expectancy. It was a bare hope of succession to the property of their father. Being the prospect of a future acquisition, the interest by its nature was inchoate. It had no attribute of property, and the interest to which it related was at the time nonexistent and might never exist.43 Evidently, at the time of the execution of the deed of assignment covering Lot No. 63 in favor of petitioner, Don Julian remained the owner of the property since ownership over the subject lot would only pass to his heirs from the second marriage at the time of his death. Thus, as the owner of the subject lot, Don

Julian retained the absolute right to dispose of it during his lifetime. His right cannot be challenged by Milagros Donio and her children on the ground that it had already been adjudicated to them by virtue of the compromise agreement. Emerging as the crucial question in this case is whether Don Julian had validly transferred ownership of the subject lot during his lifetime. The lower court ruled that he had done so through the Supplemental Deed. The appellate court disagreed, holding that the Supplemental Deed is not valid, containing as it does a prohibited preterition of Don Julians heirs from the second marriage. Petitioner contends that the ruling of the Court of Appeals is erroneous. The contention is well-founded. Article 854 provides that the preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. Manresa defines preterition as the omission of the heir in the will, either by not naming him at all or, while mentioning him as father, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the properties.44 It is the total omission of a compulsory heir in the direct line from inheritance.45 It consists in the silence

of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case.46 But there is no preterition where the testator allotted to a descendant a share less than the legitime, since there was no total omission of a forced heir.47 In the case at bar, Don Julian did not execute a will since what he resorted to was a partition inter vivos of his properties, as evidenced by the court approved Compromise Agreement. Thus, it is premature if not irrelevant to speak of preterition prior to the death of Don Julian in the absence of a will depriving a legal heir of his legitime. Besides, there are other properties which the heirs from the second marriage could inherit from Don Julian upon his death. A couple of provisions in the Compromise Agreement are indicative of Don Julians desire along this line.48 Hence, the total omission from inheritance of Don Julians heirs from the second marriage, a requirement for preterition to exist, is hardly imaginable as it is unfounded. Despite the debunking of respondents argument on preterition, still the petition would ultimately rise or fall on whether there was a valid transfer effected by Don Julian to petitioner. Notably, Don Julian was also the president and director of petitioner, and his daughter from the first marriage, Josefa, was the treasurer

thereof. There is of course no legal prohibition against such a transfer to a family corporation. Yet close scrutiny is in order, especially considering that such transfer would remove Lot No. 63 from the estate from which Milagros and her children could inherit. Both the alleged transfer deed and the title which necessarily must have emanated from it have to be subjected to incisive and detailed examination. Article 1318 of the New Civil Code enumerates the requisites of a valid contract, namely: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established. Thus, Article 1352 declares that contracts without cause, or with unlawful cause produce no effect whatsoever. Those contracts lack an essential element and they are not only voidable but void or inexistent pursuant to Article 1409, paragraph (2).59 The absence of the usual recital of consideration in a transaction which normally should be supported by a consideration such as the assignment made by Don Julian of all nineteen (19) lots he still had at the time, coupled with the fact that the assignee is a corporation of which Don Julian himself was also the President and Director, forecloses the application of the presumption of existence of consideration established by law.60

Neither could the Supplemental Deed validly operate as a donation. Article 749 of the New Civil Code is clear on the point, thus: Art. 749. In order that the donation of the immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. In Sumipat, et al. v. Banga, et al.,61 this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a deed of donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the deed of donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the deed of donation and in the separate acceptance, the donation is null and void.

In the case at bar, although the Supplemental Deed appears in a public document,62 the absence of acceptance by the donee in the same deed or even in a separate document is a glaring violation of the requirement. In the instant case, the correct characterization of the Supplemental Deed, i.e., whether it is valid or void, is unmistakably determinative of the underlying controversy. In other words, the issue of validity or nullity of the instrument which is at the core of the controversy is interwoven with the issues adopted by the parties and the rulings of the trial court and the appellate court.66 Thus, this Court is also resolute in striking down the alleged deed in this case, especially as it appears on its face to be a blatant nullity. G.R. No. 178906. February 18, 2009.*

ELVIRA T. ARANGOTE, petitioner, vs. SPS. MARTIN MAGLUNOB and LOURDES S. MAGLUNOB, and ROMEO SALIDO, respondents. Donation; Requisites for Validity of a Simple Donation of a Real Property.There are three requisites for the validity of a simple donation of a real property, to wit: (1) it must be made in a public instrument; (2) it must be accepted, which acceptance may be

made either in the same Deed of Donation or in a separate public instrument; and (3) if the acceptance is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments. Same; Title to immovable property does not pass from the donor to the donee by virtue of a Deed of Donation until and unless it has been accepted in a public instrument and the donor duly notified thereof.In Sumipat v. Banga, 436 SCRA 521 (2004), this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a Deed of Donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the Deed of Donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the Deed of Donation and in the separate acceptance, the donation is null and void. Same; While it is true that the acceptance of a donation may be made at any time during the lifetime of the donor, and granting arguendo that such acceptance may still be admitted in evidence on appeal, there is still need for proof that a formal notice of such accep-

622 622 SUPREME COURT REPORTS ANNOTATED Arangote vs. Maglunob tance was received by the donor and noted in both the Deed of Donation and the separate instrument embodying the acceptance.It is true that the acceptance of a donation may be made at any time during the lifetime of the donor. And granting arguendo that such acceptance may still be admitted in evidence on appeal, there is still need for proof that a formal notice of such acceptance was received by the donor and noted in both the Deed of Donation and the separate instrument embodying the acceptance. At the very least, this last legal requisite of annotation in both instruments of donation and acceptance was not fulfilled by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears the fact that Esperanza received notice of the acceptance of the donation by petitioner. For this reason, even Esperanzas one-third share in the subject property cannot be adjudicated to the petitioner. In this case, the petitioner derived her title to the subject property from the notarized Affidavit executed by Esperanza, wherein the latter relinquished her rights, share, interest and participation

over the same in favor of the petitioner and her husband. A careful perusal of the said Affidavit reveals that it is not what it purports to be. Esperanzas Affidavit is, in fact, a Donation. Esperanzas real intent in executing the said Affi_______________ 35 CA Rollo, p. 53. 637 VOL. 579, FEBRUARY 18, 2009 637 Arangote vs. Maglunob davit was to donate her share in the subject property to petitioner and her husband. As no onerous undertaking is required of petitioner and her husband under the said Affidavit, the donation is regarded as a pure donation of an interest in a real property covered by Article 749 of the Civil Code.36 Article 749 of the Civil Code provides: Art. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless

it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. From the aforesaid provision, there are three requisites for the validity of a simple donation of a real property, to wit: (1) it must be made in a public instrument; (2) it must be accepted, which acceptance may be made either in the same Deed of Donation or in a separate public instrument; and (3) if the acceptance is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments. This Court agrees with the RTC and the Court of Appeals that the Affidavit executed by Esperanza relinquishing her rights, share, interest and participation over the subject property in favor of the petitioner and her husband suffered from legal infirmities, as it failed to comply with the aforesaid requisites of the law. _______________ 36 Supra note 25. 638 638 SUPREME COURT REPORTS ANNOTATED Arangote vs. Maglunob

In Sumipat v. Banga,37 this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a Deed of Donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the Deed of Donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given to the donor or else not noted in the Deed of Donation and in the separate acceptance, the donation is null and void.38 In the present case, the said Affidavit, which is tantamount to a Deed of Donation, met the first requisite, as it was notarized; thus, it became a public instrument. Nevertheless, it failed to meet the aforesaid second and third requisites. The acceptance of the said donation was not made by the petitioner and her husband either in the same Affidavit or in a separate public instrument. As there was no acceptance made of the said donation, there was also no notice of the said acceptance given to the donor, Esperanza. Therefore, the Affidavit executed by Esperanza in favor of petitioner and her husband is null and void. The subsequent notarized Deed of Acceptance39 dated 23 September 2000, as well as the notice40 of such acceptance,

executed by the petitioner did not cure the defect. Moreover, it was only made by the petitioner several years after the Complaint was filed in court, or when the RTC had already rendered its Decision dated 12 September 2000, although it was still during Esperanzas lifetime. Evidently, its execution was _______________ 37 G.R. No. 155810, 13 August 2004, 436 SCRA 521. 38 J.L.T. Agro, Inc. v. Balansag, G.R. No. 141882, 11 March 2005, 453 SCRA 211, 233-234. 39 CA Rollo, p. 24. 40 Id., at pp. 25-26. 639 VOL. 579, FEBRUARY 18, 2009 639 Arangote vs. Maglunob a mere afterthought, a belated attempt to cure what was a defective donation. It is true that the acceptance of a donation may be made at any time during the lifetime of the donor. And granting arguendo that such acceptance may still be admitted in evidence on appeal, there is still need for proof that a formal notice of such acceptance was received by the donor and noted in both the

Deed of Donation and the separate instrument embodying the acceptance.41 At the very least, this last legal requisite of annotation in both instruments of donation and acceptance was not fulfilled by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears the fact that Esperanza received notice of the acceptance of the donation by petitioner. For this reason, even Esperanzas one-third share in the subject property cannot be adjudicated to the petitioner. With the foregoing, this Court holds that the RTC and the Court of Appeals did not err in declaring null and void Esperanzas Affidavit. UNCHUAN V. LOZADA Constitutional Law; Corporation Law; Republic Act No. 7042; Republic Act No. 7042, particularly Section 3, a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine National.In this case, we find nothing to show that the sale between the sisters Lozada and their nephew Antonio violated the public policy prohibiting aliens from owning lands in the Philippines. Even as Dr. Lozada advanced the money for the payment of Antonios share, at no point were the lots registered

in Dr. Lozadas name. Nor was it contemplated that the lots be under his control for they are actually to be included as capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively. Under Republic Act No. 7042, particularly Section 3, a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine National. As such, the corporation may acquire disposable lands in the Philippines. Neither did petitioner present proof to belie Antonios capacity to pay for the lots subjects of this case. Evidence; Documents; A party producing a document as genuine which has been altered and appears to have been altered after its execution, in a part material to the question in dispute, to account for the alteration.When the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. Here, the Deed of Donation does not appear to be duly notarized. In page three of the deed, the stamped name of Cresencio Tomakin appears above the words Notary Public until _______________

* SECOND DIVISION. 422 422 SUPREME COURT REPORTS ANNOTATED Unchuan vs. Lozada December 31, 1983 but below it were the typewritten words Notary Public until December 31, 1987. A closer examination of the document further reveals that the number 7 in 1987 and Series of 1987 were merely superimposed. This was confirmed by petitioners nephew Richard Unchuan who testified that he saw petitioners husband write 7 over 1983 to make it appear that the deed was notarized in 1987. Moreover, a Certification from Clerk of Court Jeoffrey S. Joaquino of the Notarial Records Division disclosed that the Deed of Donation purportedly identified in Book No. 4, Document No. 48, and Page No. 35 Series of 1987 was not reported and filed with said office. Pertinent to this, the Rules require a party producing a document as genuine which has been altered and appears to have been altered after its execution, in a part material to the question in dispute, to account for the alteration. He may show that the alteration was made by another, without his concurrence, or was made with the consent of the parties affected by it, or was otherwise properly or innocently made, or that the alteration did

not change the meaning or language of the instrument. If he fails to do that, the document shall, as in this case, not be admissible in evidence. In this case, we find nothing to show that the sale between the sisters Lozada and their nephew Antonio violated the public policy prohibiting aliens from owning lands in the Philippines. Even as Dr. Lozada advanced the money for the payment of Antonios share, at no point were the lots registered in Dr. Lozadas name. Nor was it contemplated that the lots be under his control for they are actually to be included as capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively. Under Republic Act No. 7042,27 particularly Section 3,28 a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine National. As such, the corporation may acquire disposable lands in the Philippines. Neither did petitioner present proof to belie Antonios capacity to pay for the lots subjects of this case. Petitioner, likewise, calls on the Court to ascertain Peregrinas physical ability to execute the Deed of Sale on March 11, 1994.

This essentially necessitates a calibration of facts, which is not the function of this Court.29 Nevertheless, we have sifted through the Decisions of the RTC and the Court of Appeals but found no reason to overturn their factual findings. Both the trial court and appellate court noted the lack of substantial evidence to establish total impossibility for Peregrina to execute the Deed of Sale. In support of its contentions, petitioner submits a copy of Peregrinas medical records to show that she was confined at the Martin Luther Hospital from February 27, 1994 until she died on April 4, 1994. However, a Certification30 from Randy E. Rice, Manager for the Health Information Management of the hospital undermines the authenticity of said medical records. In the certification, Rice denied having certified or having mailed copies of Peregrinas medical records to the Philippines. As a rule, a document to be admissible in evidence, should be previously authenticated, that is, its due execution or genuineness should be first shown.31 Accordingly, the unauthenticated medical records were excluded from the evidence. Even assuming that Peregrina was confined in the cited hospital, the Deed of Sale was executed on March 11, 1994, a month before Peregrina reportedly succumbed to Hepato Renal Failure caused by Septicemia due to Myflodysplastic Syndrome.32 Nothing in the records appears to show that Peregrina was so incapacitated as

to prevent her from executing the Deed of Sale. Quite the contrary, the records reveal that close to the date of the sale, specifically on March 9, 1994, Peregrina was even able to issue checks33 to pay for her attorneys professional fees and her own hospital bills. At no point in the course of the trial did petitioner dispute this revelation. Now, as to the validity of the donation, the provision of Article 749 of the Civil Code is in point: ART. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. When the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable.34 Here, the Deed of Donation does not appear to be duly notarized. In page three of the deed, the stamped name of Cresencio Tomakin appears above the words Notary Public

until December 31, 1983 but below it were the typewritten words Notary Public until December 31, 1987. A closer examination of the document further reveals that the number 7 in 1987 and Series of 1987 were merely superimposed.35 This was confirmed by petitioners nephew Richard Unchuan who testified that he saw petitioners husband write 7 over 1983 to make it appear that the deed was notarized in 1987. Moreover, a Certification36 from Clerk of Court Jeoffrey S. Joaquino of the Notarial Records Division disclosed that the Deed of Donation purportedly identified in Book No. 4, Document No. 48, and Page No. 35 Series of 1987 was not reported and filed with said office. Pertinent to this, the Rules require a party producing a document as genuine which has been altered and appears to have been altered after its execution, in a part material to the question in dispute, to account for the alteration. He may show that the alteration was made by another, without his concurrence, or was made with the consent of the parties affected by it, or was otherwise properly or innocently made, or that the alteration did not change the meaning or language of the instrument. If he fails to do that, the document shall, as in this case, not be admissible in evidence.37 Remarkably, the lands described in the Deed of Donation are covered by TCT Nos. 7364538 and 73646,39 both of which had been previously cancelled by an Order40 dated April 8, 1981 in

LRC Record No. 5988. We find it equally puzzling that on August 10, 1987, or six months after Anita supposedly donated her undivided share in the lots to petitioner, the Unchuan Development Corporation, which was represented by petitioners husband, filed suit to compel the Lozada sisters to surrender their titles by virtue of a sale. The sum of all the circumstances in this case calls for no other conclusion than that the Deed of Donation allegedly in favor of petitioner is void. Having said that, we deem it unnecessary to rule on the issue of laches as the execution of the deed created no right from which to reckon delay in making any claim of rights under the instrument.

G.R. No. 185477.

December 4, 2009.*

HERMINIO M. GUTIERREZ and ELISA A. GUTIERREZMAYUGA, petitioners, vs. FLORA MENDOZA-PLAZA and PONCIANO HERNANDEZ, respondents. Donation; Notarial Law; A notarial document is evidence of the facts expressed thereinit enjoys a prima facie presumption of authenticity and due execution.Petitioners seem to have overlooked the fact that the deed of donation inter vivos is a notarized document. According to Section 30, Rule 132 of the Rules of Court, every instrument duly acknowledged or proved and certified as provided by law, may be presented in evidence

without further proof, the certificate of acknowledgment being a prima facie evidence of the execution of the instrument or document involved. A notarial document is evidence of the facts expressed therein. A notarized document enjoys a prima facie presumption of authenticity and due execution. Clear and convincing evidence must be presented to overcome such legal presumption. Same; Land Titles; Registration is not a requirement for validity of a contract as between the parties, for the effect of registration serves chiefly to bind third persons.The non-registration of the aforesaid deed does not also affect the validity thereof. Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property has been entered into. The conveyance of unregistered land shall not be valid against any person unless registered, except (1) the grantor, (2) his _______________ * THIRD DIVISION. 808 808

SUPREME COURT REPORTS ANNOTATED Guitierrez vs. Mendoza-Plaza heirs and devisees, and (3) third persons having actual notice or knowledge thereof. As held by the Court of Appeals, petitioners are the heirs of Ignacio, the grantor of the subject property. Thus, they are bound by the provisions of the deed of donation inter vivos. Pleadings and Practice; Appeals; Due Process; Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage.Anent the argument that the donation inter vivos impaired the legitimes of petitioners, the Court deems it unnecessary to discuss the same. Said argument was indeed only raised for the first time on appeal to the Court of Appeals and in the Supplement to the Motion for Reconsideration of the appellate courts Amended Decision at that. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. Basic considerations of due process underlie this rule. Petitioners insist on disputing the authenticity of the deed of

donation inter vivos in favor of the children of Ignacio and his second wife, Ignacia. Not only was the deed belatedly introduced by Ponciano; the same is also fatally invalid in view of its nonregistration as prescribed by law. Supposedly, the said deed is likewise inherently flawed substantively, because its provisions totally exclude petitioners from participating in the sharing of the property subject of the case, thereby impairing their legitimes. Furthermore, petitioners claim that they have occupied and possessed a portion of the subject property in their own right and in the concept of owners, thus acquiring the same by prescription, if not laches. We deny the petition. Petitioners seem to have overlooked the fact that the deed of donation inter vivos is a notarized document. According to Section 30, Rule 132 of the Rules of Court, every instrument duly acknowledged or proved and certified as provided by law, may be presented in evidence without further proof, the certificate of acknowledgment being a prima facie evidence of the execution of the instrument or document involved. A notarial document is evidence of the facts expressed _______________ 19 Rollo, pp. 161-162. 817

VOL. 607, DECEMBER 4, 2009 817 Guitierrez vs. Mendoza-Plaza therein.20 A notarized document enjoys a prima facie presumption of authenticity and due execution. Clear and convincing evidence must be presented to overcome such legal presumption.21 In the instant case, petitioners failed to adduce sufficient evidence to overcome the above presumption. The only evidence offered by petitioners to impugn the deed of donation inter vivos was the testimony22 of petitioner Elisa, wherein she stated that the contents of the deed could not have been true, given that petitioners inherited the subject property from Victoria Mendoza, the daughter of Ignacio with his first wife Juana. Such testimony was utterly lacking. Furthermore, the Court finds nothing wrong and/or unusual in the fact that the deed of donation inter vivos was produced and made known to petitioners only in the early part of the year 2006 or more than sixty (60) years after its execution. Understandably, it was only when petitioners claimed ownership of a portion of the subject property that respondents were compelled to assert their own title to the property, which they traced to the deed of donation inter vivos.

The non-registration of the aforesaid deed does not also affect the validity thereof. Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property has been entered into.23 The conveyance of unregistered land shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. As held by the Court of Appeals, petitioners are the heirs of Ignacio, the grantor of the subject property. Thus, they are bound by the provisions of the deed of donation inter vivos. _______________ 20 Mendiola v. Court of Appeals, 193 Phil. 326, 335; 106 SCRA 130, 139 (1981). 21 Domingo v. Robles, 493 Phil. 916, 921; 453 SCRA 812, 818 (2005). 22 TSN, 25 January 2007, pp. 28-30. 23 Heirs of Eduardo Manlapat v. Court of Appeals, G.R. No. 125585, 8 June 2005, 459 SCRA 412, 426. 818

818 SUPREME COURT REPORTS ANNOTATED Guitierrez vs. Mendoza-Plaza Anent the argument that the donation inter vivos impaired the legitimes of petitioners, the Court deems it unnecessary to discuss the same. Said argument was indeed only raised for the first time on appeal to the Court of Appeals and in the Supplement to the Motion for Reconsideration of the appellate courts Amended Decision at that. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. Basic considerations of due process underlie this rule.24 Petitioners claim of prescription in their favor likewise deserves scant consideration. Unlike respondents who can trace their title to the subject property by virtue of the deed of donation inter vivos, petitioners cannot adequately explain how they entered and possessed the subject property to become owners thereof. More importantly, petitioners cannot even rebut the testimony25 of Mercedes Mendoza that she was present when Victoria entreated their father Ignacio to allow her (Victoria) to construct a house on a portion of the subject property. Ignacio gave permission to Victoria, but only on the condition that she would have to leave when his children by his second marriage would

need the property. Thus, the possession of the property by Victoria was only by virtue of the mere tolerance thereof by Ignacio and the children of his second marriage. As such, the alleged possession by petitioners, which they claim to trace to Victoria, was also by mere tolerance on the part of respondents.

EFFECTS AND LIMITATIONS HEIRS OF VELASQUEZ V. CA Property; Donations; Partition; An action for partition will not lie if the claimant has no rightful interest over the subject property. In actions for partition, the court cannot properly issue an order to divide the property unless it first makes a determination as to the existence of co-ownership. The court must initially settle the issue of ownership, the first stage in an action for partition. Needless to state, an action for partition will not lie if the claimant has no rightful interest over the subject property. In fact, Section. 1 of Rule 69 requires the party filing the action to state in his complaint the nature and the extent of his title to the real estate. Until and ________________

* THIRD DIVISION. 553 VOL. 325, FEBRUARY 15, 2000 553 Heirs of Cesario Velasquez vs. Court of Appeals unless the issue of ownership is definitely resolved, it would be premature to effect a partition of the properties. Same; Same; Same; A donation as a mode of acquiring ownership results in an effective transfer of title over the property from the donor to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. And once a donation is accepted, the donee becomes the absolute owner of the property donated.A donation as a mode of acquiring ownership results in an effective transfer of title over the property from the donor to the donee and the donation is perfected from the moment the donor knows of the acceptance by the donee. And once a donation is accepted, the donee becomes the absolute owner of the property donated. The donation of the first parcel made by the Aquino spouses to petitioners Jose and Anastacia Velasquez who were then nineteen (19) and ten (10) years old respectively was accepted through their father Cesario Velasquez, and the acceptance was incorporated in the body of the same deed of donation and made

part of it, and was signed by the donor and the acceptor. Legally speaking there was delivery and acceptance of the deed, and the donation existed perfectly and irrevocably. The donation inter vivos may be revoked only for the reasons provided in Articles 760, 764 and 765 of the Civil Code. The donation propter nuptias in favor of Cesario Velasquez and Camila de Guzman over the third and sixth parcels including a portion of the second parcel became the properties of the spouses Velasquez since 1919. The deed of donation propter nuptias can be revoked by the nonperformance of the marriage and the other causes mentioned in article 86 of the Family Code. The alleged reason for the repudiation of the deed, i.e., that the Aquino spouses did not intend to give away all their properties since Anatalia (Leoncias sister) had several children to support is not one of the grounds for revocation of donation either inter vivos or propter nuptias, although the donation might be inofficious. Petitioners next contend that private respondent Santiago Meneses failed to prove the nullity of the Deeds of Conveyance executed by the Aquino spouses in favor of petitioners Jose and Anastacia Velasquez and their predecessors-in-interest Cesario Velasquez and Camila de Guzman since he failed to adduce any evidence to support his claim other than his bare allegations of its nullity. Petitioners claim that they were able to show by

documentary evidence that the Aquino spouses during their lifetime disposed of the four parcels of land subject of the complaint, to wit: (a) Escritura de Donacion propter nuptias dated February 15, 1919 in favor of then future spouses Cesario Velasquez and Camila de Guzman (petitioners parents) conveying to them a portion of the second parcel and the entirety of the third and sixth parcels in the complaint; (b) Deed of donation inter vivos dated April 10, 1939 conveying the first parcel in favor of petitioners Anastacia Velasquez and Jose Velasquez; (c) Escritura de Compraventa dated August 25, 1924 conveying another portion of the second parcel in favor of Cesario Velasquez and Camila de Guzman with a P500 consideration; (d) Deed of Conveyance dated July 14, 1939 in favor of Cesario Velasquez and Camila de Guzman conveying to them the remaining portion of the second parcel for a consideration of P600 and confirming in the same Deed the Escritura de Donacion propter nuptias and Escritura de compraventa abovementioned. Petitioners claim that the record is bereft of any evidence showing the infirmities in these formidable array of documentary evidence but the courts below declared their nullity on the basis of the telltale story of Santiago Meneses. They contend that in giving credence to the testimony of Santiago Meneses that all the deeds of conveyances executed by the Aquino spouses in favor of the

petitioners were a nullity, Santiago would want to make it appear that the spouses Aquino, in giving dowry thru escritura de donacion propter nuptias and donation intervivos, were only fooling the innocent youngsters and then future spouses Cesario Velasquez and Camila de Guzman, and the innocent minors donees Jose and Anastascia Velasquez respectively. Petitioners submission is impressed with merit. After an examination of the records, we find that there is no preponderance of evidence adduced during the trial to support the findings and conclusions of the courts below, which error justifies a review of said evidence. As a rule, factual findings of the lower courts are final and binding upon this Court. This Court is not expected nor required to examine or contrast the oral and documentary evidence submitted by the parties.14 However, although this Court is not a trier of facts, it has the authority to review and reverse the factual findings of the lower courts if it finds that these do not con________________ 14 Imperial vs. CA, 259 SCRA 65, 71. 566 566 SUPREME COURT REPORTS ANNOTATED

Heirs of Cesario Velasquez vs. Court of Appeals form to the evidence on record,15 in the instant case, we are not bound to adhere to the general rule since both courts clearly failed to consider facts and circumstances which should have drawn a different conclusion.16 In actions for partition, the court cannot properly issue an order to divide the property unless it first makes a determination as to the existence of co-ownership. The court must initially settle the issue of ownership, the first stage in an action for partition.17 Needless to state, an action for partition will not lie if the claimant has no rightful interest over the subject property. In fact, Section 1 of Rule 69 requires the party filing the action to state in his complaint the nature and the extent of his title to the real estate. Until and unless the issue of ownership is definitely resolved, it would be premature to effect a partition of the properties.18 We are unable to sustain the findings of the respondent Court that it has been adequately shown that the alleged transfers of properties to the petitioners predecessor-in-interest made by the Aquino spouses were repudiated before Leoncias death; thus private respondents are still entitled to share in the subject properties. There is no preponderance of evidence to support the findings and conclusions of both courts. The trial court declared the nullity of the donation inter vivos in favor of petitioners Jose

and Anastacia Ve lasquez over the first parcel of land described in the complaint, the deed of sale to Cesario Velasquez and Camila de Guzman over the second parcel and the deed of donation propter nuptias over the third and sixth parcels and the sale to third parties of fourth and fifth parcels insofar as the 1/2 of these parcels of land are concerned which legitimately belong to plaintiff. It would appear that the trial court relied solely on the basis of Santiago Meneses testimony that in 1944 _________________ 15 Cang vs. CA, 296 SCRA 128; citing PNB vs. CA, 187 SCRA 735; Ongsiako vs. IAC, 152 SCRA 627. 16 P.M. Pastera Brokerage vs. CA, 266 SCRA 365. 17 De Mesa v. CA, 231 SCRA 773. 18 Fabrica vs. CA, 146 SCRA 250. 567 VOL. 325, FEBRUARY 15, 2000 567 Heirs of Cesario Velasquez vs. Court of Appeals when his aunt Leoncia de Guzman was still alive, she called a conference among them, the plaintiffs and their mother Anatalia, Cesario Velasquez and his mother Tranquilina, telling them that all their properties which are conjugal in nature shall be divided

equally between Anatalia and Tranquilina and not to believe the documents purportedly signed by her because she did not sign them.19 Private respondent Santiago Meneses testimony is to the effect that Leoncia never signed any deed of conveyance of the subject properties in favor of the petitioners. However, Santiago Meneses testimony was never corroborated by any other evidence despite his testimony that the alleged conference was also made in the presence of third parties. Moreover, if the alleged conference really took place in 1944, a year before Leoncias death, Leoncia could have executed another set of documents revoking or repudiating whatever dispositions she had earlier made to show her alleged intention of giving her properties in equal shares to her sisters Anatalia and Tranquilina de Guzman but there was none. The trial court found the testimony of Santiago Meneses who is eighty years old to be credible, and this was affirmed by the respondent court which stated that the matter of ascribing credibility belongs to the trial court. However, the fact that a person has reached the twilight of his life is not always a guaranty that he would tell the truth. It is also quite common that advanced age makes a person mentally dull and completely hazy about things which has appeared to him, and at times it weakens his resistance to outside influence.20 On the other hand, petitioners were able to adduce the

uncontroverted and ancient documentary evidence showing that during the lifetime of the Aquino spouses they had already disposed of four of the six parcels of land subject of the complaint starting in the year 1919, and the latest was in 1939 as follows: (a) Escritura de donacion propter nuptias dated Feb________________ 19 TSN, November 8,1990, pp. 16-18. 20 Regalado, Remedial Law Compendium, Vol. II, p. 553 citing People vs. Juarez (CA), 57 OG 2518. 568 568 SUPREME COURT REPORTS ANNOTATED Heirs of Cesario Velasquez vs. Court of Appeals ruary 15, 1919 in favor of the future spouses Cesario Velasquez and Camila de Guzman (petitioners parents) conveying to them a portion of the second parcel in the complaint and the entirety of the third and sixth parcels;21 (b) Deed of donation inter vivos dated April 10, 1939 conveying the first parcel in favor of petitioners Anastacia Velasquez and Jose Velasquez;22 (c) Escritura de Compraventa dated August 25, 1924 conveying another portion of the second parcel in favor of Cesario Velasquez and Camila de Guzman with a P500 consideration;23

(d) Deed of Conveyance dated July 14, 1939 in favor of Cesario Velasquez and Camila de Guzman conveying to them the remaining portion of the second parcel for a consideration of P600 and confirming in the same Deed the Escritura de donation propter nuptias and Escritura de Compraventa abovementioned.24 It was reversible error for the court to overlook the probative value of these notarized documents. A donation as a mode of acquiring ownership results in an effective transfer of title over the property from the donor to the donee25 and the donation is perfected from the moment the donor knows of the acceptance by the donee.26 And once a donation is accepted, the donee becomes the absolute owner of the property donated.27 The donation of the first parcel made by the Aquino spouses to petitioners Jose and Anastacia Ve_________________ 21 Exhibit 3. 22 Exhibit 1. 23 Exhibit 5. 24 Exhibit 6. 25 Article 712, Civil Code Art. 712. Ownership is acquired by occupation and by intellectual creation.Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and

intestate succession, and in consequence of certain contracts, by tradition. They may also be acquired by means of prescription. 26 Article 734, Civil Code. 27 Tanpingco vs. IAC, 207 SCRA 652; Quijada vs. CA, 299 SCRA 695. 569 VOL. 325, FEBRUARY 15, 2000 569 Heirs of Cesario Velasquez vs. Court of Appeals lasquez who were then nineteen (19) and ten (10) years old respectively was accepted through their father Cesario Velasquez, and the acceptance was incorporated in the body of the same deed of donation and made part of it, and was signed by the donor and the acceptor. Legally speaking, there was delivery and acceptance of the deed, and the donation existed perfectly and irrevocably. The donation inter vivos may be revoked only for the reasons provided in Articles 760, 764 and 765 of the Civil Code.28 The donation propter nuptias in favor of Cesario Velasquez and Camila de Guzman over the third and sixth parcels including a portion of the second parcel became the properties of the spouses Velasquez since 1919. The deed of donation propter nuptias can be revoked by the non-

performance of the marriage and the other causes mentioned in article 86 of the Family Code.29 The alleged reason for the repudiation of the deed, i.e., that the Aquino spouses did not intend to give away all their properties since Anatalia (Leoncias sister) had several children to support is not one of the grounds for revocation of donation either inter vivos or propter nuptias, although the donation might be inofficious. The Escritura Compraventa over another portion of the second parcel and the Deed of conveyance dated July 14,1939 in favor of Cesario and Camila Velasquez over the remaining portion of the second parcel is also valid. In fact in the deed of sale dated July 14, 1939, the Aquino spouses ratified and confirmed the rights and interests of Cesario Velasquez and Camila de Guzman including the previous deeds of conveyance executed by the Aquino spouses over the second parcel in the complaint and such deed of sale became the basis for the issuance of TCT No. 15129 in the names of Cesario Velasquez and Camila de Guzman on July 25, 1939. The best proof of the ownership of the land is the certificate of title30 and it requires more than a bare allegation to defeat the face value of TCT No. 15129 which enjoys a legal presumption of regularity of issuance.31 Notably, during the lifetime of Cesario Velasquez, he entered into contracts of mortgage and lease over the property as annotated at the back of the certificate of title which

clearly established that he exercised full ownership and control over the property. It is quite surprising that it was only after more than fifty years that private respondents asserted co-ownership claim over the subject property. The Aquino spouses had disposed the four parcels of land during their lifetime and the documents were duly notarized so that these documents enjoy the presumption of validity.32 Such presumption has not been overcome by private respondent Santiago Meneses with clear and convincing evidence. In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence.33 Petitioners were able to establish that these four parcels of land were validly conveyed to them by the Aquino spouses hence they no longer formed part of the conjugal properties of the spouses at the time of their deaths. As regards the fourth and fifth parcels, petitioners alleged that these were also conveyed to third persons and they do not claim any right thereto. In view of the foregoing, we conclude that this action of partition cannot be maintained. The properties sought to be partitioned by private respondents have already been deliv________________ 30 Halili vs. CIR, 257 SCRA 174. 31 Chan vs. CA (Special 7th Division), 298 SCRA 713.

32 Favor vs. CA, 194 SCRA 308. 33 Section 1, Rule 133, Revised Rules of Court. 572 572 SUPREME COURT REPORTS ANNOTATED People vs. Chowdury ered to petitioners and therefore no longer part of the hereditary estate which could be partitioned. After finding that no coownership exists between private respondents and petitioners, we find no reason to discuss the other arguments raised by the petitioners in support of their petition.

G.R. No. 111904. October 5, 2000.* SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs. COURT OF APPEALS and MERCEDES DANLAG y PILAPIL, respondents. Civil Law; Property; Donations; Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed.Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended to transfer the

ownership over the properties upon the execution of the deed. In ascertaining the intention of the donor, all of the deeds provisions must be read together. Same; Same; Same; Acceptance clause is a mark that the donation is inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime.In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime. Same; Same; Same; A limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. The Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee. The donors right to give consent was merely intended to protect his usufructuary interests. In Alejandro, we ruled that a limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. Same; Same; Same; A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the

donee to comply with the charges imposed in the donation, or ingratitude.A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the donee to comply with the charges imposed in the donation, _____________ * SECOND DIVISION. 106 106 SUPREME COURT REPORTS ANNOTATED Gestopa vs. Court of Appeals or ingratitude. The donor-spouses did not invoke any of these reasons in the deed of revocation.p Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the right to enjoy the fruits of the properties, but also prohibited the donee from selling or disposing the land without the consent and approval of the Danlag spouses. This implied that the donor still had control and ownership over the donated properties. Hence, the donation was post mortem. Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the donor intended

to transfer the ownership over the properties upon the execution of the deed.11 ______________ 9 Id. at 31-32. 10 Id. at 5. 11 Reyes vs. Mosqueda, 187 SCRA 661, 671 (1990). 111 VOL. 342, OCTOBER 5, 2000 111 Gestopa vs. Court of Appeals In ascertaining the intention of the donor, all of the deeds provisions must be read together.12 The deed of donation dated January 16, 1973, in favor of Mercedes contained the following: That for and in consideration of the love and affection which t he Donor inspires in the Donee and as an act of liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the herein Donee, her heirs, assigns and successors, the above-described parcels of land; That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior consent and approval by

the Donor and her spouse during their lifetime. xxx That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself sufficient properties in full ownership or in usufruct enough for his maintenance of a decent livelihood in consonance with his standing in society. That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and generosity of the Donor.13 Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee. This is a mark of a donation inter vivos.14 Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked ownership over the properties. As correctly posed by the Court of Appeals, what was the need for such reservation if the donor and his spouse remained the owners of the properties? Third, the donor reserved sufficient properties for his maintenance in accordance with his standing in society, indicating that the donor intended to part with the six parcels of land.15 Lastly, the donee accepted the donation. In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said ___________

12 Alejandro vs. Geraldez, 78 SCRA 245, 261 (1977). 13 Records, p. 66 (back page). 14 Vita vs. Montanano, 194 SCRA 180, 190 (1991). 15 Reyes vs. Mosqueda, 187 SCRA 661, 671 (1990); Concepcion vs. Concepcion, 91 Phil. 823, 827 (1952). 112 112 SUPREME COURT REPORTS ANNOTATED Gestopa vs. Court of Appeals that a acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted by the donees during the donors lifetime. Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee. The donors right to give consent was merely intended to protect his usufructuary interests. In Alejandro, we ruled that a limitation on the right to sell during the donors lifetime implied that ownership had passed to the donees and donation was already effective during the donors lifetime. The attending circumstances in the execution of the subject donation also demonstrated the real intent of the donor to

transfer the ownership over the subject properties upon its execution.16 Prior to the execution of donation inter vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the difference between the two donations. If they did not intend to donate inter vivos, they would not again donate the four lots already donated mortis causa. Petitioners counter argument that this proposition was erroneous because six years after, the spouses changed their intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use the deed of revocation to show the spouses intent because its validity is one of the issues in this case. Petitioners aver that Mercedes tax declarations in her name can not be a basis in determining the donors intent. They claim that it is easy to get tax declarations from the government offices such that tax declarations are not considered proofs of ownership. However, unless proven otherwise, there is a presumption of regularity in the performance of official duties.17 We find that petitioners did not overcome this presumption of regularity in the issuance of the tax declarations. We also note that the Court of Appeals did not refer to the tax declarations as proofs of ownership but only as evidence of the intent by the donor to transfer ownership.

_________________ 16 Sicad vs. CA, 294 SCRA 183, 191 (1998). 17 Revised Rules of Court, Rule 131, Sec. 3(m). 113 VOL. 342, OCTOBER 5, 2000 113 Gestopa vs. Court of Appeals Petitioners assert that since private responsdent purchased two of the six parcels of land from the donor, she herself did not believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was private respondents husband who purchased the two parcels of land. As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is binding on us.18 On the alleged purchase by her husband of two parcels, it is reasonable to infer that the purchase was without private respondents consent. Purchase by her husband would make the properties conjugal to her own disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and gives credence to her claim that her husband was manipulated and unduly influenced to make the purchase, in the first place. Was the revocation valid? A valid donation, once accepted,

becomes irrevocable, except on account of officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude.19 The donor-spouses did not invoke any of these reasons in the deed of revocation. The deed merely stated: WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis Causa so as we could be sure that in case of our death, the above-described properties will be inherited and/or succeeded by Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3 of said donation to the effect that the Donee cannot dispose and/or sell the properties donated during our life-time, and that we are the one enjoying all the fruits thereof.20 Petitioners cited Mercedes vehemence in prohibiting the donor to gather coconut trees and her filing of instant petition for quieting of title. There is nothing on record, however, showing that private respondent prohibited the donors from gathering coconuts. Even assuming that Mercedes prevented the donor from gathering coconuts, this could hardly be considered an act covered by Article 765 of the Civil Code.21 Nor does this Article cover respondents filing of the petition for quieting of title, where she merely asserted what she believed was her right under the law. Finally, the records do not show that the donor-spouses

instituted any action to revoke the donation in accordance with Article 769 of the Civil Code.22 Consequently, the supposed revocation on September 29, 1979, had no legal effect. G.R. No. 155080. February 5, 2004.* SOLEDAD CALICDAN, represented by her guardian GUADALUPE CASTILLO, petitioner, vs. SILVERIO CENDAA, substituted by his legal heir CELSA CENDAA-ALARAS, respondent. Supra
REVOCATIONA ND REDUCTION OF DONATION See doctrines on previous cases [No. L-7510. March 30, 1957] CARIDAD ONGSIACO, ET AL., plaintiffs and appellants, vs. EMILIA ONGSIACO, ET AL., defendants and appellees. Appeal from an order of the Court of First Instance of Nueva Ecija (Civil Case No. 755), granting the motion to dismiss the complaint of Caridad Ongsiaco and her husband against her sister Emilia and the latter's husband. The complaint alleged three (3) causes of action. In the motion to dismiss it was alleged that all the causes of action had become barred by extinctive prescription. First Cause of Action: Alleged Revocation of the Donation. The cause of action for the revocation of the donation made by the donor, Gorgonia Vda. de Ongsiaco, accrued from the time the donee, Emilia Ongsiaco, failed to pay the yearly pension of P1,000 to the donor, and that was on September 30, 1930; hence, the action to revoke, being based on a written contract, prescribed ten years thereafter, i.e., on September 30,, 1940, under sec. 43 of Act 190, long before the present case was instituted. Second Cause of Action: Construction of Dikes Interfering with Appellants' Easement of Drainage. The basis of this cause of action can only be the legal servitude of drainage of rural estate regulated by Art. 552 of the Civil Code of 1889. Since the enjoyment of this servitude does not depend upon acts of man because descent of rain water from the higher to the lower estates is due to the force of gravity, this easement must be classed among the continuous ones (Art. 532, old Civil Code; 615, new), and it is subject to extinction by non-user for the period required by law (Art. 546),

old Civil Code; Art. 631, new). The original 20-year period of extinc-tive prescription by non-user under Art. 546 of the old Code was reduced by sec. 41 of Act 190 to ten years from their violation, servitudes being clearly "interest in land." (Soriano vs. Sternberg, 41 Phil., 211-212). Since according to plaintiffs' own evidence, the dikes obstructing the overflow from their land were built in 1937 or 1938, and the present action for their destruction was filed in 1951, the lower court committed no error in holding that the easement sought to be enforced had already been extinguished, and plaintiffs' action is barred by prescription. Third Cause of Action: Fraudulent 1197 Reduction of Appellant's Share and Its Usurpation by Defendants. It is alleged that through. illegal manipulations of defendant Alzate, husband of Emilia Ongsiaco, the share of plaintiff Caridad Ongsiaco was made to include public properties, thereby reducing its area, while proportionately increasing that of defendants. When the present case was instituted in 1951, more than 20 years had run since the partition. Hence, this cause of action is barred by prescription. Order affirmed. Reyes, J. B. L., J. ponente. G.R. No. 105944. February 9, 1996.* SPOUSES ROMULO AND SALLY EDUARTE, petitioners, vs. THE HONORABLE COURT OF APPEALS and PEDRO CA-LAPINE (substituted by ALEXANDER CALAPINE and ARTEMIS CALAPINE), respondents. Donations; Revocation of Donation; All crimes which offend the donor show ingratitude and are causes for revocation.As noted in the aforecited opinion all crimes which offend the donor show ingratitude and are causes for revocation. Petitioners attempt to categorize the offenses according to their classification under the Revised Penal Code is therefore unwarranted considering that illegal detention, threats and coercion are considered as crimes against the person of the donor despite the fact that they are classified as crimes against personal liberty and security under the Revised Penal Code.

Anent the revocation of the first deed of donation, petitioners submit that paragraph (1) of Article 765 of the Civil Code does not apply in this case because the acts of ingratitude referred to therein pertain to offenses committed by the donee against the person or property of the donor. Petitioners argue that as the offense imputed to herein donee Helen Doriafalsification of a public documentis neither a crime against

_______________ 2 Decision, pp. 1-5, Rollo, pp. 32-36. 3 Rollo, p. 32. 398 398 SUPREME COURT REPORTS ANNOTATED Eduarte vs. Court of Appeals the person nor property of the donor but is a crime against public interest under the Revised Penal Code, the same is not a ground for revocation. In support of this contention, petitioners cite the following portions found in Tolentinos Commentaries and Jurisprudence on the Civil Code: Offense against Donorx x x. The crimes against the person of the donor would include not only homicide and physical injuries, but also illegal detention, threats and coercion; and those against honor include offenses against chastity and those against the property, include robbery, theft, usurpation, swindling, arson, damages, etc. (5 Manresa 175-176).4 This assertion, however, deserves scant consideration. The full text of the very same commentary cited by petitioners belies their claim that falsification of the deed of donation is not an act of

ingratitude, to wit: Offense Against Donor.All crimes which offend the donor show ingratitude and are causes for revocation. There is no doubt, therefore, that the donee who commits adultery with the wife of the donor, gives cause for revocation by reason of ingratitude. The crimes against the person of the donor would include not only homicide and physical injuries, but also illegal detention, threats, and coercion; those against honor include offenses against chastity; and those against the property, include robbery, theft, usurpation, swindling, arson, damages, etc. [Manresa 175-176].5 (Italics supplied). Obviously, the first sentence was deleted by petitioners because it totally controverts their contention. As noted in the aforecited opinion all crimes which offend the donor show ingratitude and are causes for revocation. Petitioners attempt to categorize the offenses according to their classification under the Revised Penal Code is therefore unwarranted considering that illegal detention, threats and coercion are considered as crimes against the person of the donor despite the fact that they are classified as crimes against personal liberty and security under the Revised Penal Code.6
GENERAL PROVISIONS

G.R. No. 114508. November 19, 1999.* PRIBHDAS J. MIRPURI, petitioner, vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents. Intellectual Property; Trademarks and Trade Names; Words and Phrases; Trademark, Defined and Explained.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. 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. 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 genu_______________ * FIRST DIVISION. 517

VOL. 318, NOVEMBER 19, 1999 517 Mirpuri vs. Court of Appeals ine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. Same; Same; Three Distinct Functions of Trademarks.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. Same; Same; Today, the trademark is not merely a symbol of origin and goodwillit is often the most effective agent for the actual creation and protection of goodwill.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. 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. Internet; Words and Phrases; Internet and World Wide Web, Explained.The Internet is a decentralized computer network linked together through routers and communications protocols that enable anyone connected to it to communicate with others likewise connected, regardless of physical location. Users of the Internet have a wide variety of communication methods available to them and a tremendous wealth of information that they may access. The growing popularity of the Net has been driven in large part by the World Wide Web, i.e., a system that facilitates use of the Net by sorting through the great mass of information available on it. Advertising on the Net and cybershopping are turning the Internet into a commercial marketplace.Maureen ORourke, Fencing Cyberspace: Drawing Borders in a Virtual World, Minnesota Law Review, vol. 82:609-611, 615-618 [Feb. 1998]. Intellectual Property; Convention of Paris for the Protection of Industrial Property; Trademarks and Trade Names; International Law; Conflict of Laws; 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.The Convention of Paris for the Protection of Industrial Property, other519 VOL. 318, NOVEMBER 19, 1999 519 Mirpuri vs. Court of Appeals wise 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. 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. 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. Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property.

Same; Same; Same; Same; Same; Actions; Article 6bis of the Paris Convention governs protection of well-known trademarks.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: 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. Same; Same; Same; Same; Same; Same; Article 6bis of the Paris Convention is a self-executing provision and does not require legislative enactment to give it effect in the member country.Article 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 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. 520 520 SUPREME COURT REPORTS ANNOTATED Mirpuri vs. Court of Appeals Same; Same; Same; Same; Same; Same; The power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use.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. Same; Same; Three Classes of Provisions of the Paris Convention.The Paris Convention has 3 classes of provisions: (1) provisions obligating members of the Union to create and maintain certain national law or regulations; (2) provisions merely referring to the national law of each country and making it applicable or permitting each country to pass such legislation as it may choose; and (3) provisions establishing common

legislation for all members of the Union and obligating them to grant to persons entitled to the benefits of the Convention the rights and advantages specified in such provisions, notwithstanding anything in their national law to the contrary Ladas, supra, at 209; see also Callmann, supra, vol. 2, at 17231724. Provisions under the third class are self-executing and Article 6bis is one of themLadas, supra, vol. 1, at 209. Same; Same; Trademarks and Trade Names; Actions; Judgments; Res Judicata; Pleadings and Practice; 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.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 respondents 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 respondents claim as originator of the word and symbol Barbizon, 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 peti521 VOL. 318, NOVEMBER 19, 1999 521 Mirpuri vs. Court of Appeals tioners 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. Same; Same; Same; Same; Same; Same; 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.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 petitioners 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. 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. Same; Same; Same; Same; Same; Same; 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, and 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.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) on confusing similarity of trademarks and Section 8 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. Causes of action which are distinct and 522 522 SUPREME COURT REPORTS ANNOTATED Mirpuri vs. Court of Appeals 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. 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. Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Same; Same; Same; Same; Intellectual and industrial property rights cases are not simple property cases.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. 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 trade names, are intimately connected with economic development. 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. These advantages have been acknowledged by the Philippine government itself. Same; Same; Same; World Trade Organization; International Law; Conflict of Laws; Intellectual Property Code of the Philippines; The Intellectual Property Code of the Philippines was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the countrys accession to the Agreement Establishing the World Trade Organization (WTO).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. The Intellectual Property Code took effect on January 1, 1998 and by its express provision, repealed the Trademark Law, the Patent Law, Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, and the Decree on Compulsory Reprinting of Foreign Textbooks. The Code was

enacted to strengthen the intellectual and industrial property system in the 523 VOL. 318, NOVEMBER 19, 1999 523 Mirpuri vs. Court of Appeals Philippines as mandated by the countrys accession to the Agreement Establishing the World Trade Organization (WTO). Same; Same; Same; Same; Same; Same; Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPs); 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.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. 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. 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. 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 Organizations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. Same; Same; Same; Same; Same; Same; Same; Background of World Trade Organization.The WTO was created at the Uruguay Round of multilateral trade negotiations sponsored by the General Agreement on Tariffs and Trade (GATT) in 1994. The GATT was established in 1947 to promote a multilateral trading system among countries through non-discriminatory trade liberalization, and through fair and effective rules and disciplines. The GATT was composed of 120 contracting parties and observers that account for about 90% of the world trade. It, however, dealt with trade in tangible goods alone. As successor of the GATT, the WTO also covers trade in services, intellectual

property rights and provides for an effective mechanism for dispute settlementGrowth Opportunities 524 524 SUPREME COURT REPORTS ANNOTATED Mirpuri vs. Court of Appeals Into the 21st Century, A Question and Answer Primer Prepared by the Bureau of International Trade Relations, Department of Trade and Industry, pp. 1, 37 [1994], hereinafter referred to as DTI-BITR Primer; see News of the Uruguay Round of Multilateral Trade Negotiations, issued by the Information and Media Relations division of the GATT, Geneva, p. 5 [5 April 1994]; see also Taada v. Angara, 272 SCRA 18 [1997]. Same; Same; Same; Same; Same; Same; Same; TRIPs Agreement, Explained.The TRIPs Agreement is said to be the most comprehensive multilateral agreement on intellectual property. It addresses not only and more explicitly the primary regimes of intellectual property, viz., patent including the protection of new varieties of plants, trademarks including service marks, and copyright and its related rights; but also the non-traditional categories of geographical indications including appellations of origin, industrial design, layout design of integrated circuits, and undisclosed information including trade

secrets. It also establishes standards of protection and rules of enforcement and provides for the uniform applicability of the WTO dispute settlement mechanism to resolve disputes among member states.Anita S. Regalado, WTO Dispute Settlement Procedure: Its Impact on Copyright Protection, The Court Systems Journal, vol. 3:67, 78 [March 1998]. Same; Same; Same; Same; Same; Same; Same; Same; 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 multilateral trading system to bring about economic, cultural and technological independence.A major proportion of international trade depends on the protection of intellectual property rights. Since the late 1970s, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues. 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 multilateral trading system to bring about economic, cultural and technological independence. 525

VOL. 318, NOVEMBER 19, 1999 525 Mirpuri vs. Court of Appeals Same; Same; Same; Same; Same; Same; Same; Protectionism and isolationism belong to the pastthe 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 millennium.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. 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. 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 millennium. G.R. No. 100098. December 29, 1995.* EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER

and H.D. LEE COMPANY, INC., respondents. Trademarks and Tradenames; The reckoning point for the filing of a petition for cancellation of certificate of registration of trademark is not from the alleged date of use but from the date the certificate of registration was published in the Official Gazette and issued to the registrant.Petitioner alleges that it has been using its trademark STYLISTIC MR. LEE since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioners certificate of registration for the said trademark. We reject petitioners contention. Petitioners trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette. The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. Same; Estoppel; Laches; Actions; To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy.Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioners application for registration in the principal register

since said application was published only on 20 February 1984. From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. Same; In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deducedeach case must be decided on its own merits. Practical _____________ * FIRST DIVISION. 601 VOL. 251, DECEMBER 29, 1995 601 Emerald Garment Manufacturing Corporation vs. Court of Appeals application of the provision of Section 22 of R.A. No. 166 (Trademark Law) is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case

must be decided on its own merits. Same; Infringements; The essential element of infringement is colorable imitation.Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other. Same; Same; In determining whether colorable imitation exists, jurisprudence has developed two kinds of teststhe Dominancy Test and the Holistic Test.In determining whether colorable imitation exists, jurisprudence has developed two kinds of teststhe Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals and its proponent cases. Same; Same; Dominancy Test and Holistic Test, Compared. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be

considered in determining confusing similarity. Same; Same; Maong pants and jeans are not inexpensive, and as the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase, confusion and deception is less likely.The products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. 602 602 SUPREME COURT REPORTS ANNOTATED Emerald Garment Manufacturing Corporation vs. Court of Appeals Same; Same; Words and Phrases; Ordinary Purchaser, Defined.The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present case. There, the ordinary purchaser was defined as one 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. Same; Same; A personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname.LEE is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term . . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, Wellington is a surname, and its first user has no cause of action against the junior user of Wellington a s it is incapable of exclusive appropriation. Same; Same; Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark.In addition to the foregoing, we are constrained to

agree with petitioners 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). Same; Same; International Law; Conflict of Laws; Paris Convention for the Protection of Industrial Property; Following universal acquiescence and comity, our municipal law on trademarks regarding the requirements of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being de603 VOL. 251, DECEMBER 29, 1995 603 Emerald Garment Manufacturing Corporation vs. Court of Appeals cided by a municipal tribunal.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: 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. Same; Evidence; A registration certificate serves merely as prima facie evidenceit is not conclusive but can and may be rebutted by controverting evidence.The credibility placed on a certificate of registration of ones 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. Same; Same; A supplemental register was created precisely for the registration of marks which are not registrable on the

principal register due to some defects.Moreover, the aforequoted provision applies only to registrations in the principal register. Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. Same; Same; Administrative Law; The findings of fact of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence.The determination as to who is the prior user of the trademark is a question of fact and it is this Courts working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 604 604 SUPREME COURT REPORTS ANNOTATED G.R. No. 184850. October 20, 2010.*

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, petitioners, vs. SHEN DAR ELECTRICITY AND MACHINERY

CO., LTD., respondent. Administrative Law; Intellectual Property Office (IPO); Trademarks and Trade Names; Inter Partes Proceedings; As a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes Proceedings, the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO) is not bound by technical rules of procedure; As long as the petition is verified and the pieces of evidence consisting of the affidavits of the witnesses and the original of other documentary evidence are attached to the petition and properly marked, these shall be considered as the evidence of the petitionerthere is no requirement under the rules that the evidence of the parties must be formally offered to the Bureau of Legal Affairs (BLA).In other words, as long as the petition is verified and the pieces of evidence consisting of the affidavits of the witnesses and the original of other documentary evidence are attached to the petition and properly marked in accordance with Secs. 7.1 and 8.1 abovementioned, these shall be considered as the evidence of the petitioner. There is no requirement under the abovementioned rules that the evidence of the parties must be formally offered to the BLA. In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes Proceedings, the BLA is not bound by technical

rules of procedure. The evidence attached to the petition may, therefore, be properly considered in the resolution of the case. Same; Same; Same; Same; The fact that no petition for cancellation was filed against the Certificate of Registration (COR) issued to a party does not preclude the cancellation of its COR.The fact that no petition for cancellation was filed against the COR issued to Shen Dar does not preclude the cancellation of Shen Dars COR. It must be emphasized that, during the hearing for the cancellation of EYIS COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the true owner of the mark VESPA and, thus, entitled to have it registered. Shen Dar had more than sufficient opportunity to present its evidence and argue its case, and it did. It was given its day in court and its right to due process was respected. The IPO Director Generals disregard of the procedure for the cancellation of a registered mark was a valid exercise of his discretion. Same; Same; Same; Same; Notarial Law; While a Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact of first use of a mark.The CA anchors its finding that Shen Dar was the first to use the mark on the statements of the parties in their respective Declarations of Actual Use. Such conclusion is premature at best. While a

Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact of first use of a mark. The declaration must be accompanied by proof of actual use as of the date claimed. In a declaration of actual use, the applicant must, therefore, present evidence of such actual use. Same; Same; Same; Same; Invoices; The fact that the seller described itself in its sales invoice as an importer, wholesaler and retailer does not preclude its being a manufacturerthere is no requirement that a sales invoice should accurately state the nature of all the businesses of the seller.This is a non sequitur. It does not 367 VOL. 634, OCTOBER 20, 2010 367 E.Y. Industrial Sales, Inc. vs. Shen Dar Electricity and Machinery Co., Ltd. follow. The fact that EYIS described itself in its sales invoice as an importer, wholesaler and retailer does not preclude its being a manufacturer. Sec. 237 of the National Internal Revenue Code states: x x x There is no requirement that a sales invoice should accurately state the nature of all the businesses of the seller. There is no legal ground to state that EYIS declaration in its sales invoices that it is an importer, wholesaler and retailer is

restrictive and would preclude its being a manufacturer. Same; Same; Same; Same; Intellectual Property Code (R.A. No. 8293); First-to-File Rule; Republic Act (RA) No. 8293 espouses the first-to-file rule; While Republic Act (RA) No. 8293 removed the previous requirement of proof of actual use prior to the filing of an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. RA 8293 espouses the first-to-file rule as stated under Sec. 123.1(d) which states: Section 123. Registrability.123.1. A mark cannot be registered if it: x x x x (d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of: (i) The same goods or services, or (ii) Closely related goods or services, or (iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion. Under this provision, the registration of a mark is prevented with the filing of an earlier application for registration. This must not, however, be interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing of an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark. Same; Same; Same; Same; Same; Same; The prior and

continuous use of a mark may even overcome the presumptive ownership of the registrant and be held as the owner of the mark.Sec. 134 of the IP Code provides that any person who believes that he would be damaged by the registration of a mark x x x may file an opposition to the application. The term any person encompasses the true owner of the markthe prior and continuous user. Notably, the Court has ruled that the prior and continuous use of a mark may even overcome the presumptive ownership of the registrant and be held as the owner of the mark. As aptly stated by the Court in Shan368 368 SUPREME COURT REPORTS ANNOTATED E.Y. Industrial Sales, Inc. vs. Shen Dar Electricity and Machinery Co., Ltd. gri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc., 486 SCRA 405 (2006): Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former

to be declared owner in an appropriate case. x x x x Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. For 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 pre-requisite to the acquisition of the right of ownership.
PATENTS

G.R. No. 113388. September 5, 1997.* ANGELITA MANZANO, petitioner, vs. COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY MANUFACTURING CORPORATION, respondents. Patents; An invention must possess the essential elements of novelty, originality and precedence, and for the patentee to be entitled to the protection the invention must be new to the world.The element of novelty is an essential requisite of the patentability of an invention or discovery. If a device or process has been known or used by others prior to its invention or discovery by the applicant, an application for a patent therefor should be denied; and if the application has been granted, the

court, in a judicial proceeding in which the validity of the patent is drawn in question, will hold it void and ineffective. It has been repeatedly held that an invention must possess the essential elements of novelty, originality and precedence, _______________ * FIRST DIVISION. 689 VOL. 278, SEPTEMBER 5, 1997 689 Manzano vs. Court of Appeals and for the patentee to be entitled to the protection the invention must be new to the world. Same; Evidence; Burden of Proof; The burden of proving want of novelty is on him who avers it and the burden is a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt.In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an LPG Burner on 22 July 1981, the Philippine Patent Office found her invention novel and patentable. The issuance of such patent creates a presumption which yields only to clear and cogent evidence that the patentee was the original and first inventor. The burden of proving want of novelty is on him who avers it and the burden is

a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt. Hence, a utility model shall not be considered new if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country. Same; Same; Philippine Patent Office; There is a presumption that the Philippine Patent Office has correctly determined the patentability of the model and such action must not be interfered with in the absence of competent evidence to the contrary.The validity of the patent issued by the Philippine Patent Office in favor of private respondent and the question over the inventiveness, novelty and usefulness of the improved model of the LPG burner are matters which are better determined by the Patent Office. The technical staff of the Philippine Patent Office composed of experts in their field has by the issuance of the patent in question accepted private respondents model of gas burner as a discovery. There is a presumption that the Office has correctly determined the patentability of the model and such action must not be interfered with in the absence of competent evidence to the contrary. Same; Same; Same; Administrative Law; The findings of fact of

the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on the Supreme Court when supported by substantial evidence.The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by substantial evidence. Petitioner has failed to show compelling grounds for a 690 690 SUPREME COURT REPORTS ANNOTATED Manzano vs. Court of Appeals reversal of the findings and conclusions of the Patent Office and the Court of Appeals. Same; Same; Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral testimony to show anticipation is open to suspicion and if uncorroborated by cogent evidence, it may be held insufficient.The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the petition. Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral

testimony to show anticipation is open to suspicion and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient. Evidence; Questions of Fact; Words and Phrases; There is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevance of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation.It has been held that the question on priority of invention is one of fact. Novelty and utility are likewise questions of fact. The validity of patent is decided on the basis of factual inquiries. Whether evidence presented comes within the scope of prior art is a factual issue to be resolved by the Patent Office. There is question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevance of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation. Same; Supreme Court; It is not the function of the Supreme Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower tribunal or

office.Time and again we have held that it is not the function of the Supreme Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower tribunal or office. The Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, its findings of fact being conclusive and not reviewable by this Court. The element of novelty is an essential requisite of the patentability of an invention or discovery. If a device or process has been known or used by others prior to its invention or discovery by the applicant, an application for a patent therefor should be denied; and if the application has been granted, the court, in a judicial proceeding in which the validity of the patent is drawn in question, will hold it void and ineffective.2 It has been repeatedly held that an invention must possess the essential elements of novelty, originality and precedence, and for the patentee to be entitled to the protection the invention must be new to the world.3 In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an LPG Burner on 22 July 1981, the Philippine Patent Office found her invention novel and patentable. The issuance of such patent creates a presumption which yields only to clear and cogent evidence that the patentee was the original and first

inventor. The burden of proving want of novelty is on him who avers it and the burden is a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt.4 Hence, a utility model shall not be considered new if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country.5 As found by the Director of Patents, the standard of evidence sufficient to overcome the presumption of legality of the issuance of UM-4609 to respondent Madolaria was not legally met by petitioner in her action for the cancellation of the patent. Thus the Director of Patents explained his reasons for the denial of the petition to cancel private respondents patentScrutiny of Exhs. D and E readily reveals that the utility model (LPG Burner) is not anticipated. Not one of the various pictorial representations of burners clearly and convincingly show that the device presented therein is identical or substantially identical in construction with the aforesaid utility model. It is relevant and material to state that in determining whether novelty or newness is negatived by any prior art, only one item of the prior art may be used at a time. For anticipation to occur, the prior art must show that each element is found either expressly or described or

under principles of inherency in a single prior art reference or that the claimed invention was probably known in a single prior art device or practice. (Kalman v. Kimberly Clark, 218 USPQ 781, 789) Even assuming gratia arguendi that the aforesaid brochures do depict clearly on all fours each and every element of the patented gas burner device so that the prior art and the said patented device become identical, although in truth they are not, they cannot serve as anticipatory bars for the reason that they are undated. The dates when they were distributed to the public were not indicated and, therefore, they are useless prior art references. xxxx Furthermore, and more significantly, the model marked Exh. K does not show whether or not it was manufactured and/or cast before the application for the issuance of patent for the LPG burner was filed by Melecia Madolaria. With respect to Exh. L, petitioner claimed it to be her own model of LPG burner allegedly manufactured sometime in 1974 or 1975 and sold by her in the course of her business operation in the name of Besco Metal Manufacturing, which burner was denominated as Ransome burner xxxx But a careful examination of Exh. L would show that it does not

bear the word Ransome which is the burner referred to as the product being sold by the Petitioner. This is not the way to prove that Exh. L anticipates Letters Patent No. UM-4609 through Exhs. C and D. Another factor working against the Petitioners claims is that an examination of Exh. L would disclose that there is no indication of the time or date it was manufactured. This Office, thus has no way of determining whether Exh. L was really manufactured before the filing of the aforesaid application which matured into Letters Patent No. UM-4609, subject matter of the cancellation proceeding. 699 VOL. 278, SEPTEMBER 5, 1997 699 Manzano vs. Court of Appeals At this juncture, it is worthwhile to point out that petitioner also presented Exh. M which is the alleged burner cup of an imported Ransome burner. Again, this Office finds the same as unreliable evidence to show anticipation. It observed that there is no date indicated therein as to when it was manufactured and/or imported before the filing of the application for issuance of patent of the subject utility model. What is more, some component parts of Exh. M are missing, as only the cup was presented so that the same could not be compared to the utility model (subject

matter of this case) which consists of several other detachable parts in combination to form the complete LPG burner. xxxx It must likewise be pointed out that Ong Bun Tua testified on the brochures allegedly of Manila Gas and of Esso Gasul marked Exhs. E and F and on the alleged fact that Manila Gas Corporation was importing from the United States Ransome burners. But the same could not be given credence since he himself admitted during cross-examination that he has never been connected with Manila Gas Corporation. He could not even present any importation papers relating to the alleged imported ransome burners. Neither did his wife.6 The above findings and conclusions of the Director of Patent were reiterated and affirmed by the Court of Appeals.7 The validity of the patent issued by the Philippine Patent Office in favor of private respondent and the question over the inventiveness, novelty and usefulness of the improved model of the LPG burner are matters which are better determined by the Patent Office. The technical staff of the Philippine Patent Office composed of experts in their field has, by the issuance of the patent in question, accepted private respondents model of gas burner as a discovery. There is a presumption that the Office has correctly determined the patentability of the model8 and such action must not be interfered with in the absence of competent

evidence to the contrary. _________________ 6 Rollo, pp. 143-167. 7 Id., pp. 204-214. 8 Aguas v. de Leon, No. L-32160, 30 January 1982, 111 SCRA 238. 700 700 SUPREME COURT REPORTS ANNOTATED Manzano vs. Court of Appeals The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by substantial evidence. Petitioner has failed to show compelling grounds for a reversal of the findings and conclusions of the Patent Office and the Court of Appeals. The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the petition. Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral testimony to show anticipation

is open to suspicion and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient. G.R. No. 118708. February 2, 1998.* CRESER PRECISION SYSTEMS, INC., petitioner, vs. COURT OF APPEALS AND FLORO INTERNATIONAL CORP., respondents. Patents; Infringement; Actions; Words and Phrases; Only the patentee or his successors-in-interest may file an action for infringementthe phrase anyone possessing any right, title or interest in and to the patented invention in Sec. 42 of R.A. 165 refers only to the patentees successors-in-interest, assignees or grantees.Section 42 of R.A. 165, otherwise known as the Patent Law, explicitly provides: Section 42. Civil action for infringement.Any patentee, or anyone possessing any right, title or interest in and to the patented invention, whose rights have been infringed, may bring a civil action before the proper Court of First Instance (now Regional Trial Court), to recover from the infringer damages sustained by reason of the infringement and to secure an injunction for the protection of his rights. x x x Under the aforequoted law, only the patentee or his successors-in-interest may file an action for infringement. The phrase anyone possessing any right, title or interest in and to the patented invention upon which petitioner maintains its

present suit, refers only to the patentees successors -in-interest, assignees or grantees since actions for infringement of patent may be brought in the name of the person or persons interested, whether as patentee, assignees, or as grantees, of the exclusive right. _______________ * SECOND DIVISION. 14 14 SUPREME COURT REPORTS ANNOTATED Creser Precision Systems, Inc. vs. Court of Appeals Same; Same; Same; A person or entity who has not been granted letters patent over an invention and has not acquired any right or title thereto either as assignee or as licensee, has no cause of action for infringement because the right to maintain an infringement suit depends on the existence of the patent. Moreover, 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. In short, a person or entity who has not been granted letters patent over an invention and has not acquired any right or title thereto either as assignee or as licensee, has no cause of action for

infringement because the right to maintain an infringement suit depends on the existence of the patent. Same; Same; Same; A person claiming to be an inventor of an article has no right of property over the same upon which it can maintain a suit unless it obtains a patent therefor.Petitioner admits it has no patent over its aerial fuze. Therefore, it has no legal basis or cause of action to institute the petition for injunction and damages arising from the alleged infringement by private respondent. While petitioner claims to be the first inventor of the aerial fuze, still it has no right of property over the same upon which it can maintain a suit unless it obtains a patent therefor. Under American jurisprudence, an inventor has no common-law right to a monopoly of his invention. He has the right to make, use and vend his own 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, using or selling the invention. Same; Same; Same; Anyone who has no patent over an invention but claims to have a right or interest thereto can not file an action for declaratory judgment or injunctive suit which is not recognized in this jurisdiction but he can, under Section 28 of the Patent Law, file a petition for cancellation of the patent within three (3) years from the publication of the patent with the

Director of Patents.Further, the remedy of declaratory judgment or injunctive suit on patent invalidity relied upon by petitioner cannot be likened to the civil action for infringement under Section 42 of the Patent Law. The reason for this is that the said remedy is available only to the patent holder or his successors-in-interest. Thus, anyone who has no patent over an invention but claims to have a right or inter15 VOL. 286, FEBRUARY 2, 1998 15 Creser Precision Systems, Inc. vs. Court of Appeals est thereto can not file an action for declaratory judgment or injunctive suit which is not recognized in this jurisdiction. Said person, however, is not left without any remedy. He can, under Section 28 of the aforementioned law, file a petition for cancellation of the patent within three (3) years from the publication of said patent with the Director of Patents and raise as ground therefor that the person to whom the patent was issued is not the true and actual inventor. Hence, petitioners remedy is not to file an action for injunction or infringement but to file a petition for cancellation of private respondents patent. Petitioner however failed to do so. As such, it can not now assail or impugn the validity of the private respondents letters patent

by claiming that it is the true and actual inventor of the aerial fuze. It is petitioners contention that it can file, under Section 42 of the Patent Law (R.A. 165), an action for infringement not as a patentee but as an entity in possession of a right, title or interest in and to the patented invention. It advances the theory that while the absence of a patent may prevent one from lawfully suing another for infringement of said patent, such absence does not bar the first true and actual inventor of the patented invention from suing another who was granted a patent in a suit for declaratory or injunctive relief recognized under American patent laws. This remedy, petitioner points out, may be likened to a civil action for infringement under Section 42 of the Philippine Patent Law. We find the above arguments untenable. Section 42 of R.A. 165, otherwise known as the Patent Law, explicitly provides: SECTION 42. Civil action for infringement.Any patentee, or anyone possessing any right, title or interest in and to the patented invention, whose rights have been infringed, may bring a civil action before the proper Court of First Instance (now Regional Trial Court), to recover from the infringer damages sustained by reason of the infringement and to secure an

injunction for the protection of his right. x x x Under the aforequoted law, only the patentee or his successorsin-interest may file an action for infringement. The phrase anyone possessing any right, title or interest in and to the patented invention upon which petitioner maintains its present suit, refers only to the patentees successors-in-interest, assignees or grantees since actions for infringement _______________ 11 Rollo, p. 69. 21 VOL. 286, FEBRUARY 2, 1998 21 Creser Precision Systems, Inc. vs. Court of Appeals of patent may be brought in the name of the person or persons interested, whether as patentee, assignees, or as grantees, of the exclusive right.12 Moreover, 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.13 In short, a person or entity who has not been granted letters patent over an invention and has not acquired any right or title thereto either as assignee or as licensee, has no cause of action for infringement because the right to maintain an

infringement suit depends on the existence of the patent.14 Petitioner admits it has no patent over its aerial fuze. Therefore, it has no legal basis or cause of action to institute the petition for injunction and damages arising from the alleged infringement by private respondent. While petitioner claims to be the first inventor of the aerial fuze, still it has no right of property over the same upon which it can maintain a suit unless it obtains a patent therefor. Under American jurisprudence, an inventor has no common-law right to a monopoly of his invention. He has the right to make, use and vend his own 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, using or selling the invention.15 Further, the remedy of declaratory judgment or injunctive suit on patent invalidity relied upon by petitioner cannot be likened to the civil action for infringement under Section 42 of the Patent Law. The reason for this is that the said remedy is available only to the patent holder or his successors-in-interest. Thus, anyone who has no patent over an invention _______________ 12 Moore vs. Marsh, 7 Wall 5125, 19 L. Ed. 37e. 13 Anchor Hocking Glass Corp. vs. White Cap., Co., D.C. Del.,

47 F Supp. A451, 453 cited in 21 Words and Phrases, p. 634. 14 Peck vs. Collins, 103 U.S. 660, 26 L. Ed. 512 cited in 60 Am. Jur., 2d, p. 687. 15 Bauer & Cie vs. ODonnel, 229 US 1, 57 L. Ed. 38 Sct. 616. 22 22 SUPREME COURT REPORTS ANNOTATED Creser Precision Systems, Inc. vs. Court of Appeals but claims to have a right or interest thereto can not file an action for declaratory judgment or injunctive suit which is not recognized in this jurisdiction. Said person, however, is not left without any remedy. He can, under Section 28 of the aforementioned law, file a petition for cancellation of the patent within three (3) years from the publication of said patent with the Director of Patents and raise as ground therefor that the person to whom the patent was issued is not the true and actual inventor. Hence, petitioners remedy is not to file an action for injunction or infringement but to file a petition for cancellation of private respondents patent. Petitioner however failed to do so. As such, it can not now assail or impugn the validity of the private respondents letters patent by claiming that it is the true and actual inventor of the aerial fuze. Thus, as correctly ruled by the respondent Court of Appeals in its

assailed decision: since the petitioner (private respondent herein) is the patentee of the disputed invention embraced by letters of patent UM No. 6938 issued to it on January 23, 1990 by the Bureau of Patents, it has in its favor not only the presumption of validity of its patent, but that of a legal and factual first and true inventor of the invention. In the case of Aguas vs. De Leon,16 we stated that: The validity of the patent issued by the Philippine Patent Office in favor of the private respondent and the question over the investments, novelty and usefulness of the improved process therein specified and described are matters which are better determined by the Philippine Patent Office. The technical staff of the Philippine Patent Office, composed of experts in their field, have, by the issuance of the patent in question, accepted the thinness of the private respondents new tiles as a discovery. There is a presumption that the Philippine Patent Office has correctly determined the patentability of the improvement by the private respondent of the process in question. _______________ 16 111 SCRA 238. 23 VOL. 286, FEBRUARY 2, 1998

23 Creser Precision Systems, Inc. vs. Court of Appeals In fine, in the absence of error or abuse of power or lack of jurisdiction or grave abuse of discretion, we sustain the assailed decision of the respondent Court of Appeals. WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Regalado (Chairman), Melo, Puno and Mendoza, JJ., concur. Reviewed decision affirmed. Notes.The findings of fact of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. (Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]) A patentee shall have the exclusive right to make, use and sell the patented machine, article or product for the purpose of industry or commerce, throughout the territory of the Philippines for the term of the patent, and such making, using or selling by any person without authorization of the patentee constitutes infringement of his patent. (Del Rosario vs. Court of Appeals, 255 SCRA 152 [1996]) o0o KENNETH V. TAYPIN

The issue involving the existence of unfair competition as a felony involving design patents, referred to in Art. 189 of the Revised Penal Code, has been rendered moot and academic by the repeal of the article. The search warrant cannot even be issued by virtue of a possible violation of the IPR Code. The assailed acts specifically alleged were the manufacture and fabrication of wrought iron furniture similar to that patented by MENDCO, without securing any license or patent for the same, for the purpose of deceiving or defrauding Mendco and the buying public.20 The Code defines unfair competition thus 168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deeds, or his business, or services for those of the one having established such goodwill, or shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. _______________ 18 Original Record, pp. 239-240. 19 Subsection 239.1, Section 239, Part V, RA 8293. 20 See Note 16.

704 704 SUPREME COURT REPORTS ANNOTATED Kenneth Roy Savage/K Angelin Export Trading vs. Taypin 168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit goods, businesses or services of another.21 There is evidently no mention of any crime of unfair competition involving design patents in the controlling provisions on Unfair Competition. It is therefore unclear whether the crime exists at all, for the enactment of RA 8293 did not result in the reenactment of Art. 189 of the Revised Penal Code.In the face of this ambiguity, we must strictly construe the statute against the State and liberally in favor of the accused,22 for penal statutes cannot be enlarged or extended by intendment, implication or any equitable consideration.23 Respondents invoke jurisprudence to support their contention that _______________ 21 Sec. 168., Part III, RA 8293. 22 People v. Subido, G.R. No. 21734, 5 September 1975, 66 SCRA 545. 23 People v. Garcia, 85 Phil. 651 (1950). 705 VOL. 331, MAY 11, 2000 705

Kenneth Roy Savage/K Angelin Export Trading vs. Taypin unfair competition exists in this case.24 However, we are prevented from applying these principles, along with the new provisions on Unfair Competition found in the IPR Code, to the alleged acts of the petitioners, for such acts constitute patent infringement as defined by the same Code Sec. 76 Civil Action for Infringement.76.1. The making, using, offering for sale, selling, or importing a patented product or a product obtained directly or indirectly from a patented process, or the use of a patented process without authorization of the patentee constitutes patent infringement.25 Although this case traces its origins to the year 1997 or before the enactment of the IPR Code, we are constrained to invoke the provisions of the Code. Article 22 of the Revised Penal Code provides that penal laws shall be applied retrospectively, if such application would be beneficial to the accused.26 Since the IPR Code effectively obliterates the possibility of any criminal liability attaching to the acts alleged, then that Code must be applied here. G.R. No. 121867. July 24, 1997.* SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner, vs. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and

DOCTORS PHARMACEUTICALS, INC., respondents. Patents and Trademarks; Treaties and Conventions; Paris Convention for the Protection of Industrial Property (Paris Convention); Section A(2) of Article 5 of the Paris Convention unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to ______________ * THIRD DIVISION. 225 VOL. 276, JULY 24, 1997 225 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals prevent abuses which might result from the exercise of the exclusive rights conferred by the patent.It is thus clear that Section A(2) of Article 5 above unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is failure to work; however, as such is merely supplied by way of an example, it is plain that the treaty does not

preclude the inclusion of other forms or categories of abuses. Same; Same; Same; Statutes; Republic Act No. 165; Monopolies; Certainly, the growth of monopolies was among the abuses which Section 1, Article 5 of the Paris Convention foresaw and which Congress likewise wished to prevent in enacting R.A. No. 165.Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165. Same; Same; General Agreement on Tariff and Trade; World Trade Organization; The GATT Treaty, Uruguay Act (Uruguay Final Act) has no retroactive effect.Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary Rizalino Navarro. Forming integral parts thereof are

the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services. The Agreement establishing the World Trade Organization includes various agreements and associated legal instruments. It was only on 14 December 1994 that the Philippine Senate, in the exercise of its power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the ratification by the President of the Agreement. The President signed the 226 226 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals instrument of ratification on 16 December 1994. But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty. Same; Evidence; Findings of facts of the Court of Appeals are conclusive; Exceptions.The second and third assigned errors relate more to the factual findings of the Court of Appeals. Wellestablished is the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a finding grounded entirely on speculation or conjecture; (2) the inference made is

manifestly absurd; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both the appellant and appellee. Petitioner has not convinced us that the instant case falls under any of the exceptions. On the contrary, we find the findings of fact and conclusions of respondent Court of Appeals and that of the BPTTT to be fully supported by the evidence and the applicable law and jurisprudence on the matter. Same; Due Process; There is no denial of due process where fullblown adversarial proceedings are conducted before an administrative body.Petitioners claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere conclusions which it failed to convincingly support. As to the due process argument, suffice it to say that full-blown adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with the Court of Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by substantial evidence. Same; Same; A patent holder is not unduly deprived of its property rights where the law not only grants him a protective period of two years to enjoy his exclusive rights thereto but

subsequently recognizes just compensation in the form of royalties.It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not only grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but subsequently, the law recognizes just compensation in the form of royalties. 227 VOL. 276, JULY 24, 1997 227 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals Appeals; Jurisdiction; Pleadings and Practice; Laches; Estoppel; Administrative Law; Where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred on the ground of laches or estoppeland this is a rule applicable with equal force to quasi-judicial bodies such as the BPTTT.As to the fourth assigned error, we hold that petitioner can no longer assail the jurisdiction of the BPTTT, raising this issue only for the first time on appeal. In Pantranco North Express, Inc. v. Court of Appeals, we ruled that where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred on the ground of laches or estoppel under the circumstances therein stated. It is now settled that this rule applies with equal force to quasi-judicial bodies such as the BPTTT. Here, petitioner has not

furnished any cogent reason to depart from this rule.

COURT OF APPEALS DECISION: In its decision of 4 November 1994,6 the Court of Appeals affirmed in toto the challenged decision. We quote its findings and conclusion upon which the affirmance is anchored, viz.: An assiduous scrutiny of the impugned decision of the public respondent reveals that the same is supported by substantial evidence. It appears that at the time of the filing of the petition for compulsory license on March 24, 1987, the subject letters Patent No. 12207 issued on November 29, 1978 has been in effect for more than two (2) years. The patented invention relates to compound and compositions used in inhibiting certain actions of the histamine, hence, it relates to medicine. Moreover, after hearing and careful consideration of the evidence presented, the Director of Patents ruled thatthere is ample evidence to show that [private respondent] possesses such capability, having competent personnel, machines and equipment as well as permit to manufacture different drugs containing patented active ingredients such as ethambutol of American Cyanamid and Ampicillin and Amoxicillin of Beecham Groups, Ltd. As to the claim by the petitioner that it has the capacity to work the patented product although it was not shown that any

pretended abuse has been committed, thus the reason for granting ______________ 5 Rollo, 48-49; OR, 11. 6 Supra note 1. 233 VOL. 276, JULY 24, 1997 233 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals compulsory license is intended not only to give a chance to others to supply the public with the quantity of the patented article but especially to prevent the building up of patent monopolities [sic]. [Parke Davis v. Doctors Pharmaceuticals, Inc., 14 SCRA 1053]. We find that the granting of compulsory license is not simply because Sec. 34 (1) e, R.A. No. 165 allows it in cases where the invention relates to food and medicine. The Director of Patents also considered in determining that the applicant has the capability to work or make use of the patented product in the manufacture of a useful product. In this case, the applicant was able to show that Cimetidine, (subject matter of latters Patent No. 12207) is necessary for the manufacture of an anti-ulcer

drug/medicine, which is necessary for the promotion of public health. Hence, the award of compulsory license is a valid exercise of police power. We do not agree to [sic] petitioners contention that the fixing of the royalty at 2.5% of the net wholesale price amounted to expropriation of private property without just compensation. Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No. 1267, states: SEC. 35-B. Terms and Conditions of Compulsory License. (1). x x x (2). x x x (3). A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 34-A) of the patented commodity and/or commodity manufactured under the patented process, the same rate of royalty shall be paid whenever two or more patents are

involved, which royalty shall be distributed to the patentees in rates proportional to the extent of 234 234 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent. The foregoing provision grants the Director of Patents the use of his sound discretion in fixing the percentage for the royalty rate. In the instant case, the Director of Patents exercised his discretion and ruled that a rate of 2.5% of the net wholesale price is fair enough for the parties. In Parke Davis & Co. vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it was held thatliberal treatment in trade relations should be afforded to local industry for as reasoned out by respondent company, it is so difficult to compete with the industrial grants [sic] of the drug industry, among them being the petitioner herein, that it always is necessary that the local drug companies should sell at much lower (than) the prices of said foreign drug entities. Besides, foreign produce licensor can later on ask for an increase in percentage rate of royalty fixed by the Director of Patents if local sales of license should increase. Further, in Price vs. UNILAB,

the award of royalty rate of 2.5% was deemed to be just and reasonable, to wit [166 SCRA 133]: Moreover, what UNILAB has with the compulsory license is the bare right to use the patented chemical compound in the manufacture of a special product, without any technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB will only be used, distributed, and disposed locally. Therefore, the royalty rate of 2.5% is just and reasonable. It appearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee may manufacture using any or all of the patented compounds, the petitioner cannot complain of a deprivation of property rights without just compensation [Price v. UNILAB, L-82542, September 19, 1988]. After a careful perusal of the pleadings and evaluation of the arguments adduced by the parties, we find this petition to be without merit. In its first assigned error, petitioner invokes Article 5 of the Paris Convention for the Protection of Industrial Property,8 or Paris Convention, for short, of which the Philippines became a party thereto only in 1965.9 Pertinent portions of said Article 5, Section A, provide: A. x x x

(2) Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from ______________ 8 Of 20 March 1883, as subsequently revised. See World Intellectual Property Organization, vol. 1 [1995], 3 et seq. 9 This was concurred in by the Philippine Senate through S.R. No. 69, 10 May 1965, while the Instrument of Ratification was signed by the President on 11 October 1965. See List of Treaties and Other International Agreements of the Republic of the Philippines, University of the Pilippines Law Center [1966]. 237 VOL. 276, JULY 24, 1997 237 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals the exercise of the exclusive rights conferred by the patent, for example, failure to work. xxx (4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the

patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license. It is thus clear that Section A(2) of Article 5 above unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is failure to work; however, as such is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms or categories of abuses. Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies.10 Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of

the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165. ______________ 10 Congressional Record, House of Representatives, 12 May 1957, 998. 238 238 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals R.A. No. 165, as amended by Presidential Decree No. 1263, promulgated on 14 December 1977, provides for a system of compulsory licensing under a particular patent. Sections 34 and 35, Article Two, of Chapter VIII read as follows: SEC. 34. Grounds for Compulsory Licensing.(1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason; (b) If the demand for the patented article in the Philippines is not

being met to an adequate extent and on reasonable terms; (c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; (d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; or (e) If the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. (3) The term worked or working as used in this section means the manufacture and sale of the patented article, of the patented machine, or the application of the patented process for production, in or by means of a definite and substantial

establishment or organization in the Philippines and on a scale which is 239 VOL. 276, JULY 24, 1997 239 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals reasonable and adequate under the circumstances. Importation shall not constitute working. xxx SEC. 35. Grant of License.(1) If the Director finds that a case for the grant of a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. (2) A compulsory license sought under Section 34-B shall be issued within one hundred twenty days from the filing of the proponents application or receipt of the Board of Investments endorsement. The case at bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34the patented invention or article relates to food or medicine or manufactured products or

substances which can be used as food or medicine, or is necessary for public health or public safety. And it may not be doubted that the aforequoted provisions of R.A. No. 165, as amended, are not in derogation of, but are consistent with, the recognized right of treaty signatories under Article 5, Section A(2) of the Paris Convention. Parenthetically, it must be noted that paragraph (4) of Section A, Article 5 of the Paris Convention setting time limitations in the application for a compulsory license refers only to an instance where the ground therefor is failure to work or insufficient working, and not to any ground or circumstance as the treaty signatories may reasonably determine. Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary Rizalino Navarro.11 Forming integral parts thereof are the Agreement ______________ 11 Taada v. Angara, G.R. No. 118295, 2 May 1997. 240 240 SUPREME COURT REPORTS ANNOTATED

Smith Kline & French Laboratories, Ltd. vs. Court of Appeals Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services.12 The Agreement establishing the World Trade Organization includes various agreements and associated legal instruments. It was only on 14 December 1994 that the Philippine Senate, in the exercise of its power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the ratification by the President of the Agreement. The President signed the instrument of ratification on 16 December 1994.13 But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty. G.R. No. 121267. October 23, 2001.* SMITH KLINE & FRENCH LABORATORIES, LTD., plaintiffappellee, vs. COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant. Patent Law; Intellectual Property; The grant of the compulsory license satisfies the requirements of Section 34 of the Patent Law.The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years have passed since the patent for Cimetidine was issued to

petitioner and its predecessors-in-interest, and the compulsory license applied for by private respondent is for the use, manufacture and sale of a medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability to work Cimetidine or to make use thereof in the manufacture of a useful product. Same; Same; There is no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of peti-tioners property without just compensation. There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of petitioners property without just compensation. It must be pointed out that as owner of Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture, use and sell Cimetidine for at least two years from its grant in November, 1978, Even if other entities like private respondent are subsequently allowed to manufacture, use and sell the patented invention by virtue of a compulsory license, petitioner as owner of the patent would still receive remuneration for the use of such product in the form of royalties. Same; Same; Identical royalty rates have been prescribed by the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) in numerous cases; Factual findings of administrative bodies, which are considered as experts in their

respective fields, are accorded not only respect but even finality if the same are supported by substantial evidence.The Court agrees with the appellate courts ruling that the rate of royalty payments fixed by the Director of the BPTTT is reasonable. The appellate court, citing Price vs. United Laboratories, ruled as such, considering that the compulsory license awarded to private respondent consists only of the bare right to use the patented invention in the manufacture of ________________ * FIRST DIVISION. 10 10 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals another product, without any technical assistance from the licensor. Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been prescribed by the Director of the BPTTT in numerous patent cases. There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule is that factual findings of administrative

bodies, which are considered as experts in their respective fields, are accorded not only respect but even finality if the same are supported by substantial evidence Held: The petition has no merit. _________________ of a sub-license, except with that part of the enterprise or goodwill which exploits such license. 21 Petition, Rollo, pp. 1718. 22 Id., at 20. 23 Id., at 2122. 24 Id., at 2428. 25 Comment to Petition for Review on Certiorari, Id., at 60 66. 16 16 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals The Court of Appeals did not err in affirming the validity of the grant by the BPTTT of a compulsory license to private respondent for the use, manufacture and sale of Cimetidine. The said grant is in accord with Section 34 of the Patent Law which

provides: Grounds for Compulsory Licensing.(1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (e) If the patented invention or article relates to food or medicine or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years have passed since the patent for Cimetidine was issued to petitioner and its predecessors17 VOL. 368, OCTOBER 23, 2001 17 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals in-interest, and the compulsory license applied for by private

respondent is for the use, manufacture and sale of a medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability to work Cimetidine or to make use thereof in the manufacture of a useful product. Petitioners contention that Section 34 of the Patent Law contravenes the Paris Convention because the former provides for grounds for the grant of a compulsory license in addition to those found in the latter, is likewise incorrect. Article 5, Section A(2) of the Paris Convention states: Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.26 This issue has already been resolved by this Court in the case of Smith Kline & French Laboratories, Ltd. vs. Court of Appeals,27 where petitioner herein questioned the BPTTTs grant of a compulsory license to Doctors Pharmaceuticals, Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency between Section 34 and the Paris Convention and held that: It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of

member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is failure to work; however, as such, is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses. Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford ________________ 26 61 O.G. 8011, 8016 (1965). 27 276 SCRA 224 (1997). 18 18 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of

monopolies [Congressional Record, House of Representatives, 12 May 957, 998]. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165.28 (Emphasis supplied.) Neither does the Court agree with petitioner that the grant of the compulsory license to private respondent was erroneous because the same would lead the public to think that the Cimetidine is the invention of private respondent and not of petitioner. Such fears are unfounded since, as the appellate court pointed out in the assailed decision, by the grant of the compulsory license, private respondent as licensee explicitly acknowledges that petitioner is the source of the patented product Cimetidine.29 Even assuming arguendo that such confusion may indeed occur, the disadvantage is far outweighed by the benefits resulting from the grant of the compulsory license, such as an increased supply of pharmaceutical products containing Cimetidine, and the consequent reduction in the prices thereof.30 There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of petitioners property without just compensation. It must be pointed out that as owner of Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture,

use and sell Cimetidine for at least two years from its grant in November, 1978. Even if other entities like private respondent are subsequently allowed to manufacture, use and sell the patented invention by virtue of a compulsory license, petitioner as owner of the patent would still receive remuneration for the use of such product in the form. of royalties. Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of Appeals correctly held that the rate of 2.5% of _______________ 28 Id., at 237. 29 Decision of the Court of Appeals, Rollo, p. 38. 30 See Parke Davis & Co. vs. Doctors Pharmaceuticals, Inc., 14 SCRA 1053, 1061 (1965). 19 VOL. 368, OCTOBER 23, 2001 19 Smith Kline & French Laboratories, Ltd. vs. Court of Appeals net wholesale price fixed by the Director of the BPTTT is in accord with the Patent Law. Said law provides: Sec. 35. Grant of License.(1) If the Director finds that a case for the grant of a license under Section 34 hereof has been

made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. Section 35-B. Terms and Conditions of Compulsory License. (1) A compulsory license shall be non-exclusive, but this shall be without prejudice to the licensees right to oppose an application for such a new license. A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. Under the aforequoted provisions, in the absence of any agreement between the parties with respect to a compulsory license, the Director of the BPTTT may fix the terms thereof, including the rate of the royalty payable to the licensor. The law explicitly provides that the rate of royalty shall not exceed five percent (5%) of the net wholesale price. 20

20 SUPREME COURT REPORTS ANNOTATED Smith Kline & French Laboratories, Ltd. vs. Court of Appeals The Court agrees with the appellate courts ruling that the rate of royalty payments fixed by the Director of the BPTTT is reasonable. The appellate court, citing Price vs. United Laboratories,31 ruled as such, considering that the compulsory license awarded to private respondent consists only of the bare right to use the patented invention in the manufacture of another product, without any technical assistance from the licensor.32 Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been prescribed by the Director of the BPTTT in numerous patent cases.33 There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule is that factual findings of administrative bodies, which are considered as experts in their respective fields, are accorded not only respect but even finality if the same are supported by substantial evidence.34 Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by private respondent for failure to comply with the publication reqiurement under Section 35-F of R.A. No. 165,

the Court holds that petitioner is estopped from questioning the same since it did not raise the issue of lack of jurisdiction at the earliest possible opportunity, i.e., during the hearings before the BPTTT.35 The Court notes that petitioner raised this contention for the first time when it appealed the case to the appellate court.

TRADEMARKS [No. L-8072. October 31, 1956] LIM HOA, petitioner, vs. DIRECTOR OF PATENTS, respondent. 1.TRADEMARK; INFRINGEMENT OF, HOW DETERMINEDIt has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form, and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (Co. Tiong Sa vs. Director of Patents, L-5372, May 24, 1954. 2.ID.; ID.; MARKS WHICH WOULD LIKLY CAUSE CONFUSION

OR EVEN DECEPTION; CASE AT BARThe two roosters appearing on the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of diffirent sexes, belong to the same family of the chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food seasoning product for the kitchen, the brand of Manok or Marca Ma 215 VOL. 100, OCTOBER 31, 1956 215 Lim Hoa vs. Director of Patents nok would most likely be upper most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two rooster. To her, they are all manok. Therein lies the confusion, even deception. After a careful examination of the facts above mentioned, and after comparing the two brands, we do not hesitate to say and to hold that there is such similarity between the two brands as to cause confusion in the mind of the public that buys the food seasoning product on the strenght and on the indication of the trademark or brand identifying or distinguishing the same. In the

case of Go Tiong Sa vs. Director of Patents, (95 Phil., 1), we had occasion to say the following: "* * * It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form, and color, -while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or 217 VOL. 100, OCTOBER 31, 1956 217 Lim Hoa vs. Director of Patents imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F. 489, 495, citing Eagle White Lead Co. v. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F 2d 588, 590, citing Procter and Gamble Co. vs. J.L. Prescot Co., 49 F 2d 959, 18 CCPA, Patents, 1433; Pepsodent Co. vs. Comfort

Manufacturing Co., 83 F 2d 906; 23 CCPA, Patents, 124)" The danger of confusion in trademarks and brands which are similar may not be so great in the case of commodities or articles of relatively great value, such as, radio and television sets, air conditioning units, machinery, etc., for the prospective buyer, generally the head of the family or a businessman, before making the purchase, reads the pamphlets and all literature available, describing the article he is planning to buy, and perhaps even makes comparisons with similar articles in the market. He is not likely to be deceived by similarity in the trademarks because he makes a more or less thorough study of the same and may even consult his friends about the relative merit and performance of the article or machinery, as compared to others also for sale. But in the sale of a food seasoning product, a kitchen article of everyday consumption, the circumstances are far different. Said product is generally purchased by cooks and household help, sometimes illiterate who are guided by pictorial representations and the sound of the word descriptive of said representation. The two roosters appearing in the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food

seasoning product for the kitchen the brand of Manok or Marca Manok would most likely be upper 218 218 PHILIPPINE REPORTS ANNOTATED Lim Hoa vs. Director of Patents most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two roosters. To her, they are all manok. Therein lies the confusion, even deception. We do not see why applicant could not have streched his imagination even a little and extended his choice to other members of the animal kingdom, as a brand to differentiate his product from similar products in the market. In a similar case decided by this Tribunal wherein, although one brand consisting of the representation of a rooster was already being used by one party, another party wanted to register a similar brand, consisting of two roosters on a similar product, namely, candy, this Court said: Counsel for defendant insists that there is no real resemblance between a picture of one rooster and a picture of two roosters; that no person could or would be deceived by the use by the defendant of a trade-mark wholly distinct from that of the plaintiff;

that the fact that the defendant used two roosters as its trademark clearly discloses its innocence of any intent to deceive, since a comparison of the trade-mark of the plaintiff with that of the defendant makes apparent at once that was not intended to be an imitation of the other. We ask, however, why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to chose from, the defendant company selected two roosters as its trade-mark, although its directors, and managers must have been well aware of the long-continued use of a rooster by the plaintiff in connection with the sale and advertisement of his goods? There is nothing in the picture of one or more roosters which in itself is discriptive of the goods sold by the plaintiff or by the defendant corporation, or suggestive of the quality of these goods. A cat, or dog, a carabao, a shark, or an eagle stamped upon the container in which candies are sold would serve as well as a rooster for purposes of identification as the product of defendants factory. Why did defendant select two roosters as its trade-mark? We can not doubt that it was because the plaintiffs candies had acquired a certain reputation under the trade-mark of a rooster, and the defendant corporation hoped to profit unjustly by that reputation. Defendant knew that the use of a single rooster would be prohibited as a technical infringement of

plaintiffs trade-mark, but it hoped that it could avoid that danger by the use of two roosters; 219 VOL. 100, OCTOBER 31, 1956 219 Lampa, et al. vs. Ramirez and Guila and at the Same time get such advantage as it must have believed it could secure from the use of a design on the containers of its goods, not absolutely identical with that used by the plaintiff, but so similar in the dominant idea as to confuse or mislead the purchasers. * * *." (Clarke vs. Manila Candy Co., 100 Phil. 36). [No. L-4531. January 10, 1958] Ang Si Heng and S. lustiana Dee, plaintiffs and appellants, vs. Wellington Department Store Inc., Benjamin Chua, S. R. Mendinueto, and Filemon Cosio, defendants and appellees. 1.Trademarks and Trade Names; Geographical Names Cannot be Appropriated as Such.Mere geographical names are ordi449 VOL. 92, JANUARY 10, 1953

449 Ang Si Heng and Dee vs. Wellington Dept. Store Inc., et al. narily regarded as common property, and it is a general rule that the same cannot be appropriated as the subject of an exclusive trademark or trade name. 2.Id.; Name of Person as Trademark or Trade Name; Damages; Right to Enjoin Use of Such Name.Even if "Wellington were a surname, it cannot be validly registered as a trade name, it not being the name of the plaintiffs. (Rep. Act 166, sec. 4-e.) As the term cannot be appropriated as a trademark or a trade name, no action for violation thereof can be maintained, as none is granted by the statute in such cases. The right to damages and for an injunction for infringement of a trademark or a trade name is granted only to those entitled to the exclusive use of a registered trademark or trade name. (Rep. Act 166, sec. 23.) 3.Id.; Unfair Competition, Distinguished from Violation of Trademark or Trade Name.Where the complaint alleges that the defendants have the actual intent to mislead the public and to defraud the plaintiffs, as by the use of the name "Wellington Department Store, they have deceived the public into buying its goods under the mistaken belief that the same are the plaintiffs' or have the same source as the plaintiffs'' goods, the action is one for unfair competition which is defined in Chapter VI, section 29, of Republic Act No. 166, not one for violation of a trademark

or a trade name. 4.Id.; Id.; What Determines Liability for Unfair Competition. In order to determine whether defendants are liable for unfair competition and have deceived the public into believing that the goods they sell are of plaintiffs' manufacture or proceed from the same source as plaintiffs' goods, all the surrounding circumstances must be taken into account, especially the identity or similarity of names, the identity or similarity of their business, how far the names are a true description of the kind and quality of the articles manufactured or the business carried on, the extent of the confusion which may be created or produced, the distance between the place of business of one and the other party, etc. 5.Id.; Id.; Id.; Case at Bar.While there is a similarity between the trademark or trade name "Wellington Company and that of "Wellington Department Store," no confusion or deception can possibly result or arise from such similarity because the latter is a "department store" while the former does not purport to be so. The name "Wellington" is admittedly the name of the trademark on the shirts, pants, drawers, and other articles of wear for men, women and children, whereas the name used by the defendant indicates not these manufactured articles or any similar merchandise, but a department store. Neither can the public be deceived into the belief that the goods being sold in defendant's

store originate from the plaintiffs, because the defendant's store is situated on the Escolta, while plaintiffs' store or place of business is located in another business district far away from the Escolta. The mere fact that two or more customers of the plaintiffs thought of the probable identity of the products sold by one and the other, is not sufficient proof of the supposed confusion that the public has been led into by the use of the name adopted by the defendants. The plaintiffs-appellants allege that the use of the words "Wellington Department Store" as a business name and as a corporate name by the defendant-appellee deceives the public into buying defendant corporation's goods under the mistaken belief that the names are the plaintiff's or have the same source as plaintiffs' goods, thereby resulting in damage to them. They, therefore, pray that the defendant corporation be enjoined from using the business name "Wellington Department Store" and the corporate name "Wellington Department Store, Inc."; that the Director of Commerce be ordered to cancel the registration of said business name, and the Securities and Exchange Commissioner be also ordered to cancel the corporate name "Wellington Department Store, Inc." In their answer the defendants Wellington Department Store, Inc., and Benjamin Chua allege, by way of special defense, that the plaintiffs are

engaged in the manufacture or production of shirts, pants, drawers, and other articles of wear for men, women, and children, and keep a dry goods store for the sale of the same, whereas they (the defendants) are not engaged in the same business or in the manufacture or sale of articles with the trademark "Wellington," and that they are keeping a store for articles such as shoes, hats, toys, perfumes, bags, apparels, and the like, most of which are different from those manufactured and sold by plaintiffs-appellants. Upon the above issues the parties went to trial, and thereafter the court a quo dismissed the complaint and absolved the defendants therefrom, holding that the cor452 452 PHILIPPINE REPORTS ANNOTATED Ang Si Heng and Dee vs. Wellington Dept. Store Inc., et al. porate name "Wellington Department Store, Inc.," has not been previously acquired and appropriated by any person or corporation, siting the cases of Compaa General de Tabacos vs. Alhambra Cigar & etc, Co., 33 Phil., 485, and Walter E. Olsen & Co, vs. Lambert, 42 Phil, 633. Against this decision the plaintiffs have prosecuted this appeal, contending that the appellees' business is similar and identical to that of the

appellants; that the use of the business name "Wellington Department Store, Inc. misleads and confuses the public; that plaintiffs-appellants have acquired a property right in the name "Wellington;" and that if the defendants-appellees are not liable for any infringement of tradename, at least they are liable for unfair competition. The term "Wellington" is either a geographical name (see Webster's International Dictionary, where it is said to be the capital of New Zealand; urban district of Shropshire, England and of Somersetshire, England; co. seat, of Summer co., Kans, etc.), or the surname of a person. But mere geographical names are ordinarily regarded as common property, and it is a general rule that the same cannot be. appropriated as the subject of an exclusive trademark or tradename. (52 Am. Jur., 548.) Even if Wellington were a surname, which is not even that of the plaintiffs-appellants, it cannot also be validly registered as a tradename. (Section 4, Paragraph (e), Republic Act No. 166.) As the term cannot be appropriated as a trademark or a tradename, no action for violation thereof can be maintained, as none is granted by the statute in such cases. The right to damages and for an injunction for infringement of a trademark or a tradename is granted only to those entitled to the exclusive use of a registered trademark or tradename. (Section 23. Republic Act No. 166.) It is evident, therefore, that no action may lie in fevor of

the plaintiffs-appellants herein for damages or injunctive relief for the use by the defendants-appellees of the name "Wellington." 453 VOL. 92, JANUARY 10, 1953 453 Ang Si Heng and Dee vs. Wellington Dept. Store Inc., et al. The complaint, however, alleges that the defendants-appellees have the actual intent to mislead the public and to defraud the plaintiffs, as by the use of the name "Wellington Department Store," they have deceived the public into buying its goods under the mistaken belief that the same are the plaintiffs' or have the same source as the plaintiffs' goods. The action is evidently one for unfair competition, which is defined in Chapter VI, Section 29, of Republic Act No. 166, not one for violation of a trademark or a tradename. In order to determine whether defendants are liable in this respect and have deceived the public into believing that the goods they sell are of plaintiffs' manufacture or proceed from the same source as plaintiffs' goods, all the surrounding circumstances must be taken into account, especially the identity or similarity of names, the identity or similarity of their business, how far the names are a true description of the kind and quality of the articles manufactured or the business carried on, the extent of the confusion which may be created or produced, the

distance between the place of business of one and the other party, etc. (Chas. S. Hig-gins Co. vs. Higgins Soap Co., 144 N. Y. 462, 39 N. E. 490, 27 L. R. A. 42, 43 Am. St. Rep. 769.) While there is similarity between the trademark or tradename "Wellington Company" and that of "Wellington Department Store," no confusion or deception can possibly result or arise from such similarity because the latter is a "department store," while the former does not purport to be so. The name "Wellington" is admittedly the name of the trademark on the shirts, pants, drawers, and other articles of wear for men, women and children, whereas the name used by the defendant indicates not these manufactured articles or any similar merchandise, hut a department store. Neither can the public be said to be deceived into the belief that the goods being sold in defendant's store originate from the plaintiffs, because the evidence shows that defendant's store sells no shirts or wear bearing the trademark "Wellington," but other trademarks. 454 454 PHILIPPINE REPORTS ANNOTATED Ang Si Heng and Dee vs. Wellington Dept. Store Inc., et al. Neither could such deception be by any possibility produced because defendant's store is situated on the Escolta, while

plaintiffs' store or place of business is located in another business district far away from the Escolta. The mere lact that two or more customers of the plaintiffs thought of the probable identity of the products sold by one and the other is not sufficient proof of the supposed confusion that the public has been led into by the use of the name adopted by tfcfe defdfidants. No evidence has been submitted that customers of the plaintiffsappellants had actually been misled into purchasing defendant's articles and merchandise, for the very witnesses who have supposedly noted the use of plaintiffs' tradename do not claim to have actually purchased any articles from defendant's store. No. L-14761. January 28, 1961. ARCE SONS AND COMPANY, petitioner, vs. SELECTA BISCUIT COMPANY, INC., ET AL., respondents. No. L-17981. January 28, 1961. ARCE SONS AND COMPANY, plaintiff-appellee, vs. SELECTA BISCUIT COMPANY, INC., defendant-appellant. Trademark; Definition.A trademark is a distinctive mark of authenticity through which the merchandise of a particular producer or manufacturer may be distinguished from that of others, and its sole function is to designate distinctively the origin of the products to which it is attached.

Same; Trademark "Selecta".Where the petitioner and its predecessor have used since 1933 the name "Selecta" as the name of its restaurant and as the mark for its dairy and bakery products, the conclusion is that it has used that name as a trademark to distinguish its products from those sold by other merchants or businessmen. The Director of Patents erred in holding that the petitioner used the word merely as a tradename. Same; Secondary meaning of "Selecta".The word "Selecta" may be an ordinary or common word in the sense that it may be used or employed by anyone in promoting his business or enterprise, but once adopted as an emblem, sign or device to characterize its products, or as a badge of authenticity, it may acquire a secondary meaning as to be exclusively associated with the user's products and business. Same; Rule as to secondary meaning.A word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might neverthless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. At the outset one cannot but note that in the two cases appealed before us which involve the same parties and the same issues of

fact and law, the court a quo and the Director of Patents have rendered contradictory decisions. While the former is of the opinion that the word "SELECTA" has been used by petitioner, or its predecessor-in-interest, as a trade-mark in the sale and distribution of its dairy and bakery products as early as 1933 to the extent that it has acquired a proprietary connotation 60 that to allow respondent to use it now as a trade-mark in its business would be a usurpation of petitioner's goodwill and an infringement of its property right, the Director of Patents entertained a contrary opinion. He believes that the word as used by petitioner f unctions only to point to the -place of business or location of its restaurant while the same word as used by respondent points to the origin of the products it manufactures and sells and he predicates this distmction upon the fact that while the goods of petitioner are only served within its restaurant or sold only on special orders in the City of Manila, respondent's goods are ready-made and are for sale throughout the length and breadth of the country. He is of the opinion that the use of said trade-mark by respondent has not resulted in confusion in trade contrary to the finding of the court a quo. Which of these opinions is correct is the issue now for determination. It appears that Ramon Arce, predecessor-in-interest of petitioner, started his milk business as early as 1933. He sold his milk

products in bottles covered by caps on which the words "SELECTA FRESH MILK" were inscribed. Expanding his business, he established a store at Lepanto Street, City of Manila, where he sold, in addition to his milk products, ice cream, sandwiches and other food products, placing right in front of his establishment a signboard with the name "SELECTA" inscribed thereon. Special containers made of tin cans with the word "SELEC261 VOL. 1, JANUARY 28, 1961 261 Arce Sons and Company vs. Selecta, Biscuit Co., Inc. TA" written on their covers were used for his products. Bottles with the same word embossed on their sides were used for his milk products. The sandwiches he sold and distributed were wrapped in carton boxes with covers bearing the same name. He used several cars and trucks for delivery purposes on the sides of which were written the same word. As new products were produced for sale, the same were placed in containers with the same name written on their covers. After the war, he added to his business such items as cakes, bread, cookies, pastries and assorted bakery products. Then his business was acquired by petitioner, a co-partnership organized by his sons, the purposes

of which are "to conduct a first class restaurant business; to engage in the manufacture and sale of ice cream, milk, cakes and other dairy and bakery products; and to carry on such other legitimate business as may produce profit." The foregoing unmistakably show that petitioner, through its predecessor-in-interest, had made use of the word "SELECTA" not only as a trade-name indicative of the location of the restaurant where it manufactures and sells Its products, but as trade-mark to indicate the goods it offers for sale to the public. No other conclusion can be drawn. This is the very meaning or essence in which a trade-mark is used. This is not only in accordance with its general acceptation but with our law on the matter. " 'Trade-mark' or 'trade-name,' distinction being highly technical, is sign, device, or mark by which articles produced are dealt in by particular person or organization are distinguished or distinguishable from those produced or dealt in by others." (Church of God v. Tomlinson Church of God, 247 SW 2d, 63, 64) "A 'trade-mark' is a distinctive mark of authenticity through which the merchandise of a particular producer or manufacturer may be distinguished from that of others, and its sole function is to designate distinctively the origin of the products to which it is attached." (Reynolds & Reynolds Co. v. Norick, et al., 114 F 2d, 278)

"The term trade-mark' includes 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." (Section 38, Republic Act No. 166). Verily, the word "SELECTA" has been chosen by peti262 262 SUPREME COURT REPORTS ANNOTATED Arce Sons and Company vs. Selecta, Biscuit Co., Inc. tioner and has been inscribed on all its products to serve not only as a sign or symbol that may indicate that they are manufactured and sold by it but as a mark of authenticity that may distinguish them f rom the products manufactured and sold by other merchants or businessmen. The Director of Patents, therefore, erred in holding that petitioner made use of that word merely as a trade-name and not as a trade-mark within the meaning of the law.1 The word "SELECTA", it is true, may be an ordinary or common word in the sense that it may be used or employed by any one in promoting his business or enterprise, but once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, it may

acquire a secondary meaning as to be exclusively associated with its products and business.2 In this sense, its use by another may lead to confusion in trade and cause damage to its business. And this is the situation of petitioner when it used the word "SELECTA" as a trade-mark. In this sense, the law gives it protection and guarantees its use to the exclusion of all others (G. & C. Merriam Co. v. Saalfield, 198 F. 369, 373). And it is also in this sense that the law postulates that "The ownership or possession of a trade-mark, x x x shall be recognized and protected in the same manner and to the _______________ 1 "A trade-mark is generally described as a sign, device or mark by which the articles produced or dealt in by a particular person or organization are distinguished or distinguishable f rom those produced or dealt in by others, and must be affixed to the goods or articles, while a trade-name is descriptive of the manufacturer or dealer himself as much as his own name is, and frequently includes the name of the place where the business is located; it involves the individuality of the maker or daeler for protection in trade, and to avoid confusion in business, and to secure the advantages of a good reputation; it is more popularly applied to the good will of a business, and need not be affixed to the goods sold. In other words, it is not regarded as a trade-mark in the

strict technical sense. 52 Am. Jur., p. 507, et seq, 63 C.J., p. 322, et seq." (Katz Drug Co. v. Katz, 217 2d. 286, 289) 2 "This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so 263 VOL. 1, JANUARY 28, 1961 263 Arce Sons and Company vs. Selecta, Biscuit Co., Inc. same extent, as are other property rights known to the law," thereby giving to any person entitled to the exclusive use of such trade-mark the right to recover damages in a civil action from any person who may have sold goods of similar kind bearing such trade-mark (Sections 2-A and 23, Republic Act No. 166, as amended). The term "SELECTA" may be placed at par with the words "Ang Tibay" which this Court has considered not merely as a descriptive term within the meaning of the Trade-mark Law but as a fanciful or coined phrase, or a trade-mark. In that case, this Court found that respondent has constantly used the term "Ang Tibay", both as a trademark and a trade-name, in the manufacture and sale of slippers, shoes and indoor baseballs for

twenty-two years before petitioner registered it as a trade-name for pants and shirts so that it has performed during that period the function of a trade-mark to point distinctively, or by its own meaning or by association, to the origin or ownership of the wares to which it applies. And in holding that respondent was entitled to protection in the use of that trademark, this Court made the following comment: "The function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. 'Ang Tibay,' as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. 'Ang Tibay' shoes and slippers are, by association, known throughout the Philippines as products of the 'Ang Tibay' factory owned and operated by the respondent. Even if 'Ang Tibay,' therefore, were not capable of exclusive appropriation as a trade-mark, the application of the doctrine of secondary meaning could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might

nevertheless have been used so long and so exclusively by _______________ exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has -come to mean that the article was his product. (G. & C. Merriam Co. vs. Saalfield, 198 F. 369, 373.)" (Ang v. Teodoro, 74 Phil. 50, 53). 264 264 SUPREME COURT REPORTS ANNOTATED Arce Sons and Company vs. Selecta Biscuit Co., Inc. one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that article was his product." (Ang v. Teodoro, supra.) The rationale in the Ang Tibay case applies on all fours to the case of petitioner. But respondent claims that it adopted the trade-mark "SELECTA" in good faith and not precisely to engage in unfair competition with petitioner. It tried to establish that respondent was organized as a corporation under the name of Selecta Biscuit Company, Inc. on March 2, 1955 and started operations

as a biscuit factory on June 20, 1955; that the name "SELECTA" was chosen by the organizers of respondent who are Chinese citizens as a translation of the Chinese word "Ching Suan" which means "mapili" in Tagalog, and "Selected" in English; that, thereupon, it registered its articles of incorporation with the Securities and Exchange Commission and the name "SELECTA" as a business name with the Bureau of Commerce which issued to it Certificate of Registration No. 55594; and that it also registered the same trade-name with the Bureau of Internal Revenue and took steps to obtain a patent from the Patent Office by filing with it an application for the registration of said tradename. The suggestion that the name "SELECTA" was chosen by the organizers of respondent merely as a translation from a Chinese word "Ching Suan" meaning "mapili" in the dialect is betrayed by the very manner of its selection, for if the only purpose is to make an English translation of that word and not to complete with the business of petitioner, why choose the word "SELECTA", a Spanish word, and not "Selected", the English equivalent thereof, as was done by other well-known enterprises? In the words of petitioner's counsel, "Why with all the words in the English dictionary and all the words in the Spanish dictionary and all the phrases that could be coined, should defendant-appellant (respondent) choose 'SELECTA' if its

purpose was not and is not to fool the people and to damage plaintiff-appellee?" In this respect, we find appropriate the following comment of the trial court: "Eventually, like the plaintiff, one is tempted to ask as 265 VOL. 1, JANUARY 28, 1961 265 Arce Sons and Company vs. Selecta Biscuit Co., Inc. to why with the richness in words of the English language and with the affluence of the Spanish vocabulary or, for that matter, of our own dialects, should the defendant choose the controverted word 'Selecta,' which has already acquired a secondary meaning by virtue of plaintiff's prior and continued use of the same as a trade-mark or trade-name for its products? The explanation given by Sy Hap, manager of the defendant, that the word 'Selecta' was chosen for it3 bakery products by the organizers of said company from the Chinese Word 'Ching Suan' meaning 'mapili,' which in English means 'Selected,' and that they chose 'selecta,' being the English translation, is, to say the least, very weak and untenable. Sy Hap himself admitted that he had known Eulalio Arce, the person managing plaintiff's business, since 1954; that since he began to reside at 10th Avenue, Grace Park, he had known the Selecta Restaurant on

Azcarraga street; that at the time he established the defendant company, he knew that the word 'Selecta' was being employed in connection with the business of Eulalio Arce; that he had seen signboards of 'Selecta' on Azcarraga Street and Dewey Boulevard and that he even had occasion to eat in one of the restaurants of the plaintiff. All of these circumstances tend to conspire in inducing one to doubt defendant's motive for using the same word 'Selecta' for its bakery products. To allow the defendant here to use the word 'Selecta' in spite of the fact that this word has already been adopted and exploited by Ramon Arce and by his family thru the organization of Arce Sons and Company, for the maintenance of its goodwill, for which said plaintiff and its predecessor have spent time, effort, and fortune, is to permit business pirates and buccaneers to appropriate for themselves and to their profit and advantage the trade names and trade marks of well established merchants with all their attendant good will and commercial benefit. Certainly, this cannot be allowed, and it becomes the duty of the court to protect the legitimate owners of said trade-names and trademarks, for under the law, the same constitute one kind of property right entitled to the necessary legal protection." Other points raised by respondent to show that the trial court erred in holding that the adoption by it of the word "SELECTA" is tantamount to unfair competition are: (1) that its products are

biscuits, crackers and cookies, wrapped in cellophane packages, placed in tin containers, and that its products may last a year without spoilage, while the ice cream, milk, cakes and other bakery products which. petitioner matiufactUres last only for two or three days; (2) that the sale and distribution of petitioner's products are on retail basis, limited to the City of Manila and suburbs, and its place of business is local266 266 SUPREME COURT REPORTS ANNOTATED Arce Sons and Company vs. Selecta Biscuit Co., Inc. ized at Azcarraga, corner of Lepanto Street and at Dewey Boulevard, Manila, while that of respondent is on a wholesale basis, extending throughout the length and breadth of the Philippines; (3) that petitioner's signboard on its place of business reads "SELECTA" and on its delivery trucks "Selecta, Quality Always, Restaurant and Caterer, Azcarraga, Dewey Boulevard, Balintawak and Telephone number", in contrast with respondent's signboard on 'its factory which reads "Selecta Biscuit Company, Inc.," and on its delivery trucks "Selecta Biscuit Company, Inc., Tuason Avenue, Malabon, Rizal, Telephone No. 2-13-27; (4) that the business name of petitioner is different from the business name of respondent; (5) that petitioner has only a

capital investment of P25,000.00 whereas respondent has a fully paid-up stock in the amount of P234,000.00 out of the P500.000.00 authorized capital, and (6) that the use of the name "SELECTA" by respondent cannot lead to confusion in the business operation of the parties. We have read carefully the reasons advanced in support of the points raised by counsel in an effort to make inroads into the findings of the court a quo on unfair competition, but we believe them to be insubstantial and untenable. They appear to be well answered and refuted by counsel for petitioner in his brief, which refutation we do not need to repeat here. Suffice it to state that we agree with the authorities and reasons advanced therein which incidentally constitute the best support of the decision of the court a quo. With regard to the claim that petitioner failed to present sufficient evidence on the contract of lease of the business from its predecessor-in-interest, we find that under the circumstances secondary evidence is admissible. In view of the foregoing, we hold that the Director of Patents committed an error in dismissing the opposition of petitioner and in holding that the registration of the trade-mark "SELECTA" in favor of respondent will not cause damage to petitioner, and, consequently, we hereby reverse his decision.

No. L-18337. January 30, 1965. CHUA CHE, petitioner, vs. PHILIPPINES PATENT OFFICE and SY TUO, respondents. Patents; Appeal from decisions of Director of Patents ordinarily allowed only on questions of law.Ordinarily, only questions of law should be raised in appeals from decisions of the Director of Patents. The only exception to this rule is when the findings of fact in the decision are not supported by substantial evidence. Same; Same; Finding of priority of use and adoption of trademark is one of fact.The finding of the Director of Patents to the effect that the oppositor had priority of use and adoption of the trademark in question is, for all intents and purposes, one of fact. Same; Registration of trademark refused where it will cause confusion with similar mark on goods of different cate68 68 SUPREME COURT REPORTS ANNOTATED Chua Che vs. Philippines Patent Office gory.Registration of a trademark should be refused in cases where there is a likelihood of confusion, mistake, or deception, even though the goods fall under different categories.

The above judgment is now before Us, applicant-appellant claiming that it was error for the Director to conclude that opposer SY TUO had priority to use the trademark in question, and that the use by appellant of the trade72 72 SUPREME COURT REPORTS ANNOTATED Chua Che vs. Philippines Patent Office mark X-7 on granulated soap to be manufactured and sold by him, would likely mislead purchasers. At the very outset, we would like to state that in cases of the nature of the one at bar, only questions of law should be raised, and the only exception to this rule, meaning that findings of facts may be reviewed, is when such findings are not supported by substantial evidence (Sec. 2, Rule 44, Revised Rules). The finding of the Director of Patents Office to the effect that opposer-appellee Sy Tuo had priority of use and adoption of the trademark X-7, is for all intents and purposes, one of fact. This being the case, such finding becomes conclusive to this Court. Even on this sole issue alone, the petition for review must fall. However, there are other matters which must be clarified. For instance, the fact that appellee has not yet used the trademark

X-7 on granulated soap, the product on which appellant wants to use the said trademark. The circumstance of non-actual use of the mark on granulated soap by appellee, does not detract from the fact that he lias already a right to such a trademark and should, therefore, be protected. The observation of the Director of Patents to the effect that the average purchasers are likely to associate X-7 laundry soap with X-7 perfume, lipstick and nail polish or to think that the products have common origin or sponsorship, is indeed well taken. It has been pointed out by appellant that the product upon which the trademark X-7 will be used (laundry soap) is different from those of appellees, and therefore no infringement and/or confusion may result. We find no merit in the above contention, for it has been held that while it is no longer necessary to establish that the goods of the parties possess the same descriptive properties, as previously required under the Trade Mark Act of 1905, registration of a trademark should be refused in cases where there is a likelihood of confusion, mistake, or deception, even though the goods fall into different categories. (Application of Sylvan Sweets Co., 205 F. 2nd, 207.) The products of appellee are common household items nowadays, in the same manner as laundry soap. The likelihood of purchasers to 73

VOL. 13, JANUARY 30, 1965 73 Cayetano vs. Ceguerra associate those products to a common origin is not farfetched. Both from the standpoint of priority of use and for the protection of the buying public and, of course, appellees rights to the trademark X-7, it becomes manifest that the registration of said trademark in favor of applicant-appellant should be denied. No. L-17501. April 27, 1963.

MEAD JOHNSON and COMPANY, petitioner, vs. N. V. J. VAN DORP, LTD., ET AL., respondents. Trademarks and tradenames; Test in determining whether two trademarks are confusingly similar; Two marks in their entirety to be considered in relation to the goods to which they are attached.In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must 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 on both labels. Petitioner contends that the Director of the Patent Office erred (1) in holding that the mark which respondent seeks to register

does not resemble petitioners mark as to be likely when applied to the goods to cause confusion or mistake or to deceive purchasers, and (2) in holding that the trademark sought to be registered has become distinctive based on its extensive sales. Anent the first point, petitioner seems to dispute the finding of the Director of the Patent Office by emphasiz770 770 SUPREME COURT REPORTS ANNOTATED Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd. ing the striking similarities existing between the trademark ALASKA which is sought to be registered and that of ALACTA which petitioner has long registered for the protection of its products. Thus, it is argued, in appearance and sound the trademarks ALASKA and ALACTA are sufficiently close. The three vowels are the same in both and the public would pronounce them short accenting on the second syllable. Both marks have the same number of letters and the vowels are placed on the same position. The general form and sound of the words are of marked similarity so as to suggest the likelihood of confusion. While ALACTA and ALASKA differ entirely in meaning, they are confusingly similar in appearance. The three letter prefixes of both marks are identical. Both marks end with

the same letter A. The only difference lies in the letters CT in ALACTA and SK in ALASKA. And in support of its contention, petitioner cites the case of Esso Standard Oil Company v. Sun Oil Company, et al., 46 TMR 444, wherein it was held that SUNVIS and UNIVIS are quite different in sound and meaning but in their entireties they are confusingly similar in appearance. Said the Court: As already noted, it found on the basis of the evidence before it that the two marks are quite different in sound and meaning but that in their entireties the marks are confusingly similar in appearance, because of their having identical suffixes and three letter prefixes with the same two letters UN in the same order. On the other hand, respondent contends that it is not correct to say that in passing on the question as to whether the two marks are similar only the words ALASKA and ALACTA should be taken into account since this would be a most arbitrary way of ascertaining whether similarity exists between two marks. Rather, respondent contends, the two marks in their entirety and the goods they cover should be considered and carefully compared to determine whether petitioners opposition to the registration is capricious or well-taken. In this connection, respondent invokes the following rules of interpretation: (1) appellants mark is to be compared with all of the 771

VOL. 7, APRIL 27, 1963 771 Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd. oppositors marks in determining the point of confusion;1 (2) the likelihood of confusion may be determined by a comparison of the marks involved and a consideration of the goods to which they are attached;2 and (3) the court will view the marks with respect to the goods to which they are applied, and from its own observation arrive at a conclusion as to the likelihood of confusion.3 It is true that between petitioners trademark ALACTA and respondents ALASKA there are similarities in spelling, appearance and sound for both are composed of six letters of three syllables each and each syllable has the same vowel, but in determining if they are confusingly similar a comparison of said words is not the only determinant factor. The trademarks in their entirety as they appear in the respective labels 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. Having this view in mind, we believe that while there are similarities in the two marks there are

also differences or dissimilarities which are glaring and striking to the eye as the former. Thus we find the following dissimilarities in the two marks: (a) The sizes of the containers of the goods of petitioner differ from those of respondent. The goods of petitioner come in onepound container while those of respondent come in three sizes, to wit: 14-ounce tin of full condensed full cream milk; 14-1/2ounce tin of evaporated milk; and 6-ounce tin of evaporated milk. (b) The colors too differ. One of petitioners containers has one single background color, to wit: light blue; the other has two background colors, pink and white. _______________ 1 Architectural Catalog Co. v. F.W. Dodge Corp., 136 F. 2d 1008, 30 C.P.A., Patents, 1215. 2 Kroger Grocery & Banking Co. v. Blue Earth Canning Co., Cust & Pat. Appl. 88 F. 2d 725. 3 337 C.J.S. 476. 772 772 SUPREME COURT REPORTS ANNOTATED Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd. The containers of respondents goods have two color bands,

yellowish white and red. (c) Petitioners mark ALACTA has only the first letter capitalized and is written in black. Respondents mark ALASKA has all the letters capitalized written in white except that of the condensed full cream milk which is in red. Again, coming to the goods covered by the trademarks in question, we also notice the following dissimilarities: In the petitioners certificate of registration, it appears that the same covers Pharmaceutical Preparations which Supply Nutritional Needs which fall under Class 6 of the official classification as Medicines and Pharmaceutical Preparations, thus indicating that petitioners products are not foods or ingredients of foods but rather medicinal and pharmaceutical preparations that are to be used as prescribed by physicians. On the other hand, respondents goods cover milk, milk products, dairy products and infants foods as set forth in its application for registration which fall under an entirely different class, or under Class 47 which refers to Foods and Ingredients of Foods, and for use of these products there is no need or requirement of a medical prescription. In view of the above dissimilarities, the Director of the Patent Office overruled petitioners opposition in the following wise: Considering the substantial difference in the marks as displayed on the respective labels of the parties and considering the

distinctiveness of the mark of applicant, acquired from its extensive sales, it is concluded that the applicants mark does not resemble opposers mark as to be likely when applied to the goods of the parties to cause confusion or mistake or to deceive purchasers. We have examined the two trademarks as they appear in the labels attached to the containers which both petitioner and respondent display for distribution and sale and we are impressed more by the dissimilarities than by the similarities appearing therein in the same manner as the Director of the Patent Office, and because of this impression we are persuaded that said Director was justified in overruling petitioners opposition. Hence, we 773 VOL. 7, APRIL 27, 1963 773 Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd. are not prepared to say that said Director has erred in overruling said opposition. WHEREFORE, the decision appealed from is affirmed, with costs against petitioner. No. L-17901. October 29, 1965.

OPERATORS, INCORPORATED, petitioner, vs. THE DIRECTOR OF PATENTS, ET AL., respondents. Trademarks; Right to register based on ownership.Where the applicant was not the owner of the trademark being applied for, he had no right to apply for registration of the same., The right to register trademarks, tradenames and service marks is based on ownership. Same; Power of patent office to consider questions not raised by the Parties.An application for registration under the Patent Law is not an ordinary litigious controversy between private parties. Public interest is involved and all questions as to whether or not the law is satisfied may be considered by the Patent Office or by the Court even though not specifically raised by either of the parties. Same; Infringement of trademarks, how determined.The question of infringement of trademarks is to be determined by the test of dominancy. The dissimilarity in size, form and color of the label and the place where applied are not conclusive. Duplication or exact imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (Co Tiong Sa vs. Director of Patents, 95 Phil. 1, citing cases). On the other issue, we find no cogent reason to disagree with

the Director of Patents that "considering the similarities in appearance and sound between the marks AMBISCO and NABISCO, the nature and similarity of the products of the parties together with the fact that opposer's NABISCO has been used in commerce in the Philippines for more than fifty five (55) years before 150 150 SUPREME COURT REPORTS ANNOTATED Operators, Inc. vs. Director of Patents AMBISCO was adopted by applicant, confusion of purchasers is likely. In the case of Co Tiong vs. Director of Patents, 95 Phil. 1, this Court said: "x x x. If the competing trademark contains the main or essential or dominant features of another, and confusion and 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. (G. Heilman Brewing Co. vs. Independent Brewing, Co., 191 F. 489, 495, citing Eagle White Lead Co. vs. Pflugh [CC] 180 Fed. 579). x x x. "x x x. The ordinary customer does not scrutinize the details of the label; he forgets or overlooks these, but retains a general

impression, or a central figure, or a dominant characteristic. The reason for the above has been explained in the following manner: ' "x x x. This rule has a basis in experience, The average person usually will not, and often cannot take in at a casual glance all, or even a large part of the details of what he looks at. What part or parts of two trademarks which are alleged to be similar does the average ordinary buyer see when he looks at them? What features of them are remembered by the average buyer? We do not really hear all that is spoken in our hearing. Far from all we see or hear casually is retained sufficiently clearly or in sufficient detail for us to get a lasting impression of it which we can remember when we encounter the mark again. The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of the help of our eyes and must depend entirely on the ear. x x x x ' "The question of infringement is to be determined by the test of dominancy. The dissimilarity in size, form and color of the label and the place where applied are not conclusive. If the competing label contains the trademark of another, and confusion or deception is likely to result, infringement takes place, regardless of the fact that the accessories are dissimilar. Duplication or exact imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate." (G. Heilman

Brewing Co. vs. Independent Brewing Co., 191 F. 489., 495, citing Eagle White Lead Co vs. Pflugh (C.C.), 180 F. 579.' " Thus "Celdura" and "Corduara" were held to be confusingly similar in sound when applied to merchandise 151 VOL. 15, OCTOBER 29, 1965 151 Purakan Plantation Co. vs. Domingo of the same descriptive properties (Celanese Corp. of America vs. Du Pont, 154 F. 2nd 146, 148); and "Lusolin" was considered as an infringement of the trademark "Sapolin" for the same reason (Sapolin Co. vs. Balmaceda, et al., 67 Phil. 705). On the whole we find no reversible error in the decision appealed from and therefore affirm the same, with costs. Bengzon, C.J., Bautista Angelo, Concepcion, Regala. Bengzon, J.P., and Zaldivar, JJ., concur. VOL. 16, MARCH 31, 1966 495 Etepha vs. Director of Patents, et al. No. L-20635. March 31, 1966. ETEPHA, A.G., petitioner, vs. DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC, respondents.

Objects of trademarks.The objects of a trademark are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition. Same; Infringement of trademarks; Colorable imitation explained.The validity of a cause for infringement is predicated upon colorable imitation. The phrase colorable imita-tion denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other. (87 C.J.S. 287.) Same; Word Tussin in combination with another word or phrase may be used as a trademark.Tussin is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the goods; it is open for appropriation by anyone. It is accordingly barred from registration as a trademark. But while Tussin by itself cannot thus be used exclusively to identify ones goods, it may properly become the subject of a trademark by combination with another word or phrase. (Annotations, Lawyers Reports, Annotated, 1918 A, p. 966.) Same; How similarity and dissimilarity of trademarks is determined.A practical approach to the problem of similarity or

dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of prospective buyer. The trademark complained of should be compared and contrasted with the purchasers memory (not in juxtaposition) of the trademark said to be infringed. (87 C.J.S. 288-291.) Some such factors as sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning, spelling, and pronunciation of words used and the setting in which the words appears may be considered. (87 C.J.S. 291-292.) For, indeed, trademark infringement is a form of unfair competition. (Clarke vs. Manila Candy Co., 36 Phil. 100, 106; Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4.) Same; When there is confusion between trademarks. Confusion is likely between trademarks only if their overall presentations in any of the particulars of sound, appearance, or 496 496 SUPREME COURT REPORTS ANNOTATED Etepha vs. Director of Patents, et al. meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source.

Same; Pertussin and Atussin are different.Considering the two labels in questionPertussin and Atussin.as they appear on the respective labels, these words are presented to the public in different styles of writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude the mind of that illuminating similarity so essential for a trademark infringement case to prosper. Moreover, the two words do not sound alike when pronounced. There is not much phonetic similarity between the two. In Pertussin the pronunciation of the prefix Per, whether correct or incorrect, includes a combination of three letters P, e and r; whereas, in Atussin the whole words starts with the single letter A added to the suffix tussin. Appeals to the ear are dissimilar. And this, because in a word-combination, the part that comes first is the most pronounced. Same; In the solution of trademark infringement problem, the class of persons who buy the product should be considered.In the solution of a trademark infringement problem, regard too should be given to the class of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition (87 C.J.S. 295). The medicinal preparations, clothed with the trademarks in question, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like

which may be freely obtained by anyone, anytime, anywhere. Petitioners and respondents products are to be dispensed upon medical prescription. An intending buyer must have to go first to a licensed doctor of medicine; he receives instructions as to what to purchase; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote. It is possible that buyers might be able to obtain Pertussin or Atussin without prescription. When this happens, then the buyer must be one thoroughly familiar with what he intends to get, else he would not have the temerity to ask for a medicinespecifically needed to cure a given ailment. For a person who purchases with open eyes is hardly the man to be deceived. No. L-21587. May 19, 1966. BRISTOL MYERS COMPANY, petitioner, vs. THE DIRECTOR OF PATENTS and UNITED AMERICAN PHARMACEUTICALS, INC., respondents. Trademarks; Test to determine confusing similarity.In determining whether two trademarks are confusingly similar, the test is not simply to take their words and compare the spelling and pronunciation of said words. Rather it is to consider the two

marks in their entirety, as they appear in the respective 129 VOL. 17, MAY 19, 1966 129 Bristol Myers Co. vs. Director of Patents, et al. labels, in relation to the goods to which they are attached. (Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., L-17501, April 27, 1963). Same; Trademarks having the same suffix and similar sounding prefixes but with strikingly different backgrounds; Case at bar. The trademarks in question are not apt to confuse prospective customers. For though the words BIOFERIN" and BUFFERIN" have the same suffix and similar-sounding prefixes, they appear in their respective labels with strikingly different backgrounds and surroundings, as to color, size and design. Furthermore, the product covered by BIOFERIN" is expressly stated as dispensable only upon doctors prescription, while that of BUFFERIN" does not require the same. The chances of being confused into purchasing one for the other are therefore all the more rendered negligible.

George W. Luft Co., Inc. vs. Ngo Guan No. L-21915. December 17, 1966. THE GEORGE W. LUFT COMPANY, INC., petitioner, vs. NGO GUAN and DIRECTOR OF PATENTS, respondents,
Trademarks and tradename; Effect of oppositor's failure to present its trademark in evidence.One of the factors essential in determining whether two trademarks are confusingly similar is whether or not there is a general similarity in their appearance. This may be known by means of a physical examination and comparison thereof. Where the oppositor to the registration of a trademark did not introduce in evidence its own trademark, such omission suggests that the appearance thereof is not similar to that of the applicant. Same; Word "Tango" may be registered as a trademark for pomade. The word "Tango" has a well-established meaning, for it describes a particular dance that is well-known in the Philippines. A manufacturer -can register the trademark
945

VOL. 18, DECEMBER 17, 1966 945 George W. Luft Co., Inc. vs. Ngo Guan "Tango" for hair pomade and use it on a label showing a man and woman dancing. Such registration cannot be validly objected to by another manufacturer that uses the trademark "Tango" for specified chemicals, medical and pharmaceutical preparations, namely; lipstick, crme rouge, compact rouge, cleansing cream, day cream, night cream, massage cream, face lotion, astringent, face powder, powder compacts, cosmetics for lashes, brows, and hair, hair pencils, nail polish, perfumes, and toilet waters.

Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft No. L-19906. April 30, 1969. STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant, vs. FARBENPABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING & TRADING Co., INC., defendantsappellants.
Trademarks and tradenames; Actual use prerequisite to acquisition of right.A rule widely accepted and firmly entrenched because it has come down through the.years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. Same; Adoption alone would not give exclusive right; Value of registration.Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the traders right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. Same; Certificate of registration should state particular goods for which it is registered and date of use.Section 11 of the Trademark Law requires that the certificate of registration state the particular goods x x x

for which it is registered. This is controlling. Under section 11 aforesaid, likewise to be entered in the certif icate of registration is the date of the first use in commerce or business. SPI may not claim first use of the trademarks prior .to the registrations thereof on any product other than medicines.
1215

VOL. 27, APRIL 30, 1969 1215 Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft Same; Director of Patent; Examination of application; Purpose. Section 7 of the same Trademark Act directs that upon the f iling of the application and the payment of the required fee, the Director [of Patents] shall cause an examination of the application"for registration of the trademark"to be made, and, if on such examination it shall appear that the applicant is entitled to registration, the Director x x x shall cause the mark x x x to be published in the Official Gazette. This examination is necessary in order that the Director of Patents may be satisfied that the application conforms to the requirement of actual use in commerce of the trademark in sections 2 and 2-A of the Trademark Law; and that the statement in said applicationas to the first use thereof and the goods x x x in connection with which the mark x x x is used (section 5)is true. Same; Registration in United States not registration in the Philippines.The United States is not the Philippines. Registration in the United States is not registration in the Philippines. At the time of the United States registration in 1927, the Philippines had its own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks owned by persons domiciled in the United States. What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement Plaintiff itself concedes that the principle of terrioriality of the Trademark Law has been recognized in the Philippines. Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the same or different products. Same; Effect of failure to seasonably object the use of trademark. Defendants ask to delist plaintiffs BAYER trademarks for medicines from the Principal Register, claiming- right thereto for said use. Said trademarks had been registered since 1939 by plaintiffs predecessor, the Bayer Co., Inc.

Defendants claim is stale; it suffer from the defect of non-use. While it is conceded that FBAs predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, no definite evidence there is that defendants or their predecessors traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its objection. Lack of protest thereto connoted acquiescence. And this, notwithstanding the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use ,the marks, but it was much
1216

121 SUPREME COURT REPORTS ANNOTATED 6 Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft later, i.e., in 1958and on chemicals and insecticidesnot on medicines. FBA only bestirred itself and challenged plaintiffs right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit. The net result is that plaintiff may hold on to its BAYER trademarks for medicines. And defendants may continue using the same trademarks for insecticides and other chemicals, not medicines.

Acoje Mining Co., Inc. vs. Director of Patents No. L-28744. April 29, 1971. ACOJE MINING CO., INC., petitioner-applicant, vs. THE DIRECTOR OF PATENTS, respondent.
Trademarks and tradename; Registrability of trademarks; Test to determine registerability.The determinative factor in a contest involving registration of trade mark is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. In short, to constitute an infringement of an existing trade-mark patent and warrant a denial of an application for registration, the law does not require that the competing trademarks must be so identical as to produce actual error or mistake; it would be sufficient, for purposes of the law, that the similarity between the two labels is such that there is a possibility or likelihood of the purchaser of the older brand mistaking the newer brand for it.

Can it be said then that petitioners application would be likely

to cause confusion or mistake on the part of the buying public? The answer should be in the negative. It does not defy common sense to assert that a purchaser would be cognizant of the product he is buying. There is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademark LOTUS. Even on the rare occasions that a mistake does occur, it can easily be rectified. Moreover, there is no denying that the possibility of confusion is remote considering the difference in the type used, the coloring, the petitioners trademark being in yellow and red while that of the Philippine Refining Company being in green and yellow, and the much smaller size of petitioners trademark. When regard is had for the principle that the two trademarks
_______________ L-26557, Feb. 18, 1970, 31 SCRA 544. 5 Ibid, pp. 547-548.
4

483

VOL. 38, APRIL 29, 1971 483 Acoje Mining Co., Inc. vs. Director of Patents in their entirety as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable that respondent Director ought to have reached a different conclusion. Petitioner has successfully made out a case for registration.6 WHEREFORE, the decision of respondent Director of Patents of January 31, 1968 is reversed and petitioners application for registration of its trademark LOTUS granted. Without costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Villamor and Makasiar, JJ., concur. Barredo, J., did not take part. Decision reversed. Notes.Confusing similarity of trademarks.The foregoing decision may be compared with Lim Hoa vs. Director of Patents, 100 Phil. 214, where, in holding that the applicants trademark, consisting of two roosters in an attitude of combat with the word

Bantam printed above them, is conf usingly and deceptively similar to the oppositors trademark, which depicts a hen with the word Hen Brand and Marca Manok, the Court took special note of the fact that the food seasoning product, in connection with which both parties used their respective trademarks, is generally purchased by cooks and household help, sometimes illiterate, who are guided by pictorial representations and the sound of the word descriptive of said representation. The roosters appearing in the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food seasoning product for the kitchen, the brand of Manok or Marca Manok would most likely be uppermost in her mind and would
_______________ Cf. Bristol Myers Co. v. Director of Patents, L-21587, May 19, 1966, 17 SCRA 128. 484
6

48 SUPREME COURT REPORTS ANNOTATED 4 Acoje Mining Co., Inc. vs. Director of Patents influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two roosters. To her, they are all manok. Therein lies the confusion, even deception. The Court differentiated food seasoning product, a kitchen article of daily consumption, from articles or commodities of relatively great value, such as radio and television sets, air-conditioning units, machinery, etc., where the prospective buyer, generally head of the family or a businessman, before making the purchase, reads the pamphlets and all literature available, describing the article he is planning to buy and perhaps even makes comparisons with similar articles in the market. He is not likely to be deceived by similarity in the trademarks because he makes a more or less close study of the same and may even consult his friends about the relative merit

and performance of the article or machinery, as compared to others also for sale. Two other cases which specifically take into account the class and character of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition are Etepha vs. Director of Patents, L-20635. March 31, 1966, 16 SCRA 495, and Bristol Myers Co. vs. Director of Patents, L-21587, May 19, 1966, 17 SCRA 128, which both involved trademarks covering medical preparations. As stated in the first of these cases, medicinal preparations, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone, anywhere, anytime. Medicinal products are dispensed upon medical prescription. An intending buyer must first go to a licensed doctor of medicine; he receives instructions as to what to purchase; he reads the doctors prescription; he k nows what he is to buy. He is not of the incautious, unwary, unobservant or unsuspecting type; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. The common trade channel is the pharmacy or the drugstore. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote. Accordingly, the trademark Atussin was held not to be confusingly similar to Pertussin. The same is true, as
485

VOL. 38, APRIL 29, 1971 485 Yoy On vs. Republic held in the Bristol case, of Bufferin vis-a-vis Bioferin. Other trademarks which have been held not to be confusingly similar are Tango and Tangee (George W. Luft & Co. vs. Ngo Guan, L-21915, Dec. 17, 1966, 18 SCRA 944); and Alacta and Alaska (Mead Johnson & Co. vs. N. V. J. Van Drop., Ltd., L17801, April 27, 1963). Trademarks which have been held to be confusingly and deceptively similar are: Ambisco and Nabisco (Operators, Inc. vs. Director of Patents, L-17901, October 29, 1965); Salonpas

and Lionpas (Marvex Commercial Co., Inc. vs. Hawpia & Co., L-19297, Dec. 22, 1966, 18 SCRA 1178); and Floormann and Floormen (Sta. Ana vs. Maliwat, L-23023, August 31, 1968, 24 SCRA 1018). American Cyanamid Co. vs. Director of Patents No. L-23954. April 29, 1977.* AMERICAN CYANAMID COMPANY, petitioner, vs. THE DIRECTOR OF PATENTS and TIU CHIAN. respondents.
Patents; Trademarks and Tradenames; Factors considered in determining the existence of substantial difference between two labels.The problem therefore to be resolved is whether or not petitioner correctly claims that respondents trademark SULMETINE was copied from its trademark SULMET giving rise to a confusing similarity between the two in violation of Republic Act 166 otherwise known as the Trade-Mark Law . . . . An examination of the documentary evidence submitted by the parties confirms the findings of the Director of Patents that there are striking differences between the two labels, Exhibits B and C, which preclude the possibility of the purchasing public confusing one product with the other. Said labels are entirely different in size, background, colors, contents, and pictorial arrangement; in short, the general appearances of the labels bearing the respective trademarks are so distinct from each other that petitioner cannot assert that the dominant features, if any, of its trademark were used or appropriated in respondents own . . . . Thus, looking at the two labels Exhibits B and C it is quite apparent that the source of the product is predominantly indicated thereby discounting petitioners assertion that the SULMETINE trademark is a plain copy of its own with intent to pass respondents article as coming from the same source as that of petitioners medicinal preparation. Same; Same; Purchasers of veterinary medicine are ordinarily more wary of the products they are buying.In this case of SULMET and SULMETINE, the product is for medicinal veterinary use and consequently, the purchaser will be more wary of the nature of the product he is buying. Contrary to the allegation of the petitioner herein, the source or manufacturer of the article will be a most important factor in the mind of the purchaser in selecting the article he will buy and a preparation manufactured by a well-known foreign company such as the American Cyanamid Company, New York, enjoys a decided advantage over one which is locally

produced and manufactured by an unknown entity such as Henrys Laboratories. Same; Same; The word SULMET is distinguishable from the word SULMETINE.Similarly, in the case before us, as correctly
________________
*

FIRST DIVISION 569

VOL. 76, APRIL 29, 1977 569 American Cyanamid Co. vs. Director of Patents stated by the Director of Patents, the word SULMET is derived from a combination of the syllables SUL which is derived from Sulfa and MET from methyl both of which are chemical compounds present in the article manufactured by the contending parties, and the addition of the syllable INE in respondents label is sufficient to distinguish respondents product or trademark from that of petitioner. Same; Same; No one can claim a monopoly in the preparation of a medicinal product. The field is open for manufacture of medicinal preparations from the same veterinary purposes.We cannot agree with petitioner that the trademarks are used on identical goods because as already indicated earlier, petitioners SULMET label, Exhibit B, is used on a drinking water solution while that of respondent labels tablets. That both products are for identical use may be admitted to the extent that respondents tablets are indicated for the treatment, control, and prevention in chicken of infectious coryza (also known as colds, rhinities and roup) and for the prevention of cecal and intestinal coccidiosis which is also indicated in petitioners SULMET label. However, no one including petitioner can claim a monopoly in the preparation of a medicinal product for the use indicated above. The field is open for the manufacture of medicinal preparations for the same veterinary purposes. What the law prohibits is that one manufacturer labels his product in a manner strikingly identical with or similar to that of another manufacturer as to deceive or confuse the buying public into believing that the two preparations are one and come from the same source. In the case however of SULMET and SULMETINE it is satisfactorily shown from the evidence of the parties that while their products may be for a similar use, their presentation to the purchasing public come in totally different forms.

Same; Same; Administrative law; Director of Patents may obligate hearing of cases to hearing officers.In its fifth assignment of error, petitioner questions the delegation by the Director of Patents of his authority to hear and receive the evidence in this case to a Hearing Officer and alleges that respondent Director had no jurisdiction to render the decision appealed from. This matter has now been put to rest in American Tobacco Company, et al. vs. Director of Patents, et al., L-26803, decided on October 14, 1975 which involved the authority of the Director of Patents to designate a ranking official of the Patents Office to hear Inter Partes Proceedings in the registration of trademarks and tradenames under Republic Act 166. This Court through Justice Felix Antonio held inter alia: . . .Thus, it is well settled that while the power to decide resides solely in the administrative agency vested by law, this does not preclude a delegation of the power to hold a hearing on the basis of which the decision of the administrative agency will be made.

ictorias Milling Co., Inc. vs. Ong Su No. L-28499. September 30, 1977.* VICTORIAS MILLING COMPANY, INC., petitioner, vs. ONG SU AND THE HONORABLE TIBURCIO S. EVALLE, IN HIS CAPACITY AS DIRECTOR OF PATENTS, respondents.
Patents; Trademarks and Tradenames; Common geometrical shapes, such as diamonds, are ordinarily not regarded as indicia of the origin of goods, unless they have acquired a secondary meaning.The contention of petitioner that the diamond design in its trademark is an index of origin has no merit. The petitioner has not shown that the design portion of the mark has been so used that purchasers recognize the design, standing alone, as indicating goods coming from the registrant. As correctly stated by the Director of Patents, common geometric shapes such as diamonds ordinarily are not regarded as indicia of origin for goods to which the marks are applied unless they have acquired a secondary meaning. And there is no evidence that the diamond design in the trade mark of the petitioner has acquired a secondary meaning with respect to its sugar business. The work Victorias in what identifies the sugar contained in t he bag as the product of the petitioner. Indeed, the petitioner has advertised its sugar in bags marked victorias with ova, hexagon and other designs. Same; Same; There is no substantial similarity between the words Valentine and Victorias.It seems clear that the words Valentine and Victorias and the names and places of business of Victorias Milling

Company, Inc. and Ong Su are the dominant features of the trademarks in question. The petitioner has not established such a substantial similarity between the two trademarks in question as to warrant the cancellation of the trademark valentine of the respondent Ong Su. Same; Same; Unfair competition; Director of Patente has no
______________
*

FIRST DIVISION. 208

20 8

SUPREME COURT REPORTS ANNOTATED

Victorias Milling Co., Inc. vs. Ong Su jurisdiction over the issue of unfair competition.The Director of Patents correctly ruled that he has no jurisdiction over the issue of unfair competition. Under Section 27 of the Trade Mark Law, Republic Act No. 166, all actions for unfair competition shall be brought before the proper Court of First Instance. Same; Same; No similarity between trademark of petitioner and respondent exists; case at bar.The words Victorias and Valentine are not similar in spelling and do not have a similar sound when pronounced. Even the diamond designs are different. The diamond design of the trade mark Valentine has protruding lines at the corners. Even an illiterate person can see the difference between the two diamond designs. Same; Same; There is no evidence that respondent obtained registration of Valentine trademark for sugar by means of fraud be registered it ahead of petitioner.There is no evidence that the respondent Ong Su had obtained the registration of his trademark Valentine and design by means of fraud. The said trade mark was registered in the Philippines Patent Office before the petitioner registered its trademark. Same; Same; Evidence; Licenses and permits indicating two names may be admitted in evidence where one and the same person was shown to be using them.The record and evidence show that Ong Su had also used his business the name Mariano Ang. Hence the
209

VOL. 79, SEPTEMBER 30, 1977 Victorias Milling Co., Inc. vs. Ong Su

209

licenses and permits in the name of Ong Su and/or Mariano Ang were correctly admitted as evidence.

La Chemise Lacoste, S.A. vs. Fernandez Nos. L-63796-97. May 21, 1984.* LA CHEMISE LACOSTE, S. A., petitioner, vs. HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents. Nos. L-65659. May 21, 1984.* GOBINDRAM HEMANDAS SUJANANI, petitioner, vs. HON ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.
Unfair Competition; Trademarks and Tradenames; Corporation Law; Petitioner is not doing business in the Philippines.Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own
_________________
*

FIRST DIVISION. 374

37 4

SUPREME COURT REPORTS ANNOTATED

La Chemise Lacoste, S.A. vs. Fernandez name and/or its own account and not in the name or for the account of the petitioner. Same; Same; Same; A foreign corporation not doing business in the Philippines needs no license to sue in the Philippines for trademark violations.But even assuming the truth of the private respondents allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition.

Same; Same; Same; Criminal Procedure; Where a violation of our unfair trade lanes which provide a penal sanction is alleged, lack of capacity to sue of injured foreign corporation becomes immaterial. More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a letter-complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured party although there is a private right violated. Petitioners capacity to sue would become, therefore, of not much significance in the main case. We cannot allow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue. Same; Same; Same; Same; International Law; The Philippines being a party to the Paris Convention for the Protection of Industrial Property, the right of a foreign corporation to file suit in our courts to protect its trademark is to be enforced.In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international commit375

VOL. 129, MAY 21, 1984 375 La Chemise Lacoste, S.A. vs. Fernandez ment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so. Same; Same; Same; Same; Same; Foreign nationals are, by treaty, entitled to the same protection as Filipino citizens against unfair competition.By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of countries of the Union an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Same; Same; Same; Same; Patents Office; Director of Patents should obey directive of Minister of Trade against registration of internationally known brands in favor of persons other than their original owners or users.The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed. nfair Competition, Trademarks and Tradenames; A certificate of registration in the supplemental register is not prima facie evidence of validity of a registration; Quashal of search warrant not justified.A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the registrants exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515). Same; Same; Same; Same.Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or
377

VOL. 129, MAY 21, 1984 377 La Chemise Lacoste, S.A. vs. Fernandez has appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. Same; Same; Same; Pendency of application for registration in the

Patent Office not a prejudicial question to the issuance of search warrant on a charge of unfair competition.By the same token, the argument that the application was premature in view of the pending case before the Patent Office is likewise without legal basis. The proceedings pending before the Patent Office involving IPC No. 1658 do not partake of the nature of a prejudicial question which must first be definitely resolved. Same; Same; Same; Administrative Law; Patent Office; The Minister of Trade has the power to direct the Patent Office not to register certain trademarks except to its original users and to cancel those registered in violation of its directive.The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste S.A. the owner of the disputed trademark and crocodile or alligator device. Same; Same; Same; Same; Same.Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to protect in favor of its owners. It would be to exalt form over substance to say that under the circumstances, due process requires that a hearing should be held before the application is acted upon. Same; Same; Same; Petitioner is the owner of the trademarks at bar. We have carefully gone over the records of all the cases filed in
378

37 8

SUPREME COURT REPORTS ANNOTATED

La Chemise Lacoste, S.A. vs. Fernandez this Court and find more than enough evidence to sustain a finding that the petitioner is the owner of the trademarks LACOSTE, CHEMISE LACOSTE, the crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic. Same; Same; Same; Right of owner of a trademark cannot be preempted by fact that another first secure its registration in the Supplemental Register.

The records show that the goodwill and reputation of the petitioners products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.

Gabriel vs. Perez No. L-24075. January 31, 1974.* CRISANTA Y. GABRIEL, petitioner, vs. DR.JOSE R. PEREZ and HONORABLE TIBURCIO EVALLE as Director of Patents, respondents.
Trademarks Findings of facts of Director of Patents conclusive on Supreme Court.It is well-settled that we are precluded from making an inquiry as the finding of facts of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us. x x x The rule is that findings of facts by the Director of Patents are conclusive on the Supreme Court provided that they are supported by substantial evidence.
_________________
*

FIRST DIVISION. 407

VOL. 55, JANUARY 31,1974 407 Gabriel vs. Perez Same; Contracts; Agreement giving distributor ownership of packages docs not necessarily grant her exclusive use of trademark.The fact that par. 6 of the distributorship agreement provides that the petitioner has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and manner of packing the same did not necessarily grant her the right to the exclusive use of the trademark. It merely empowers the petitioner as exclusive distributor, to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. Same; Same; Same.The exclusive distributor does not acquire any proprietary interest in the principals trademark. Same; Purpose of a trademark.The objects of a trademark are 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, and to prevent fraud and imposition. 52 Am. Jur., p. 50, citing cases. x x x In the instant case, the trademark WONDER has long been identified a nd associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Same; Fact that distributor spent substantial sums to promote product covered by trademark and hired the artist who designed the trademark not sufficient to vest ownership of the trademark.The Director of Patents correctly held that: Petitioners act in defraying substantial expense s in the promotion of the respondents goods and the printing of the packages are the necessary or essential consequences of par. 6 of the (distributorship) agreement because, anyway, those activities are normal in the field of sale and distribution, as it would redound to her own benefit as distributor, and those acts are incumbent upon her to do. x x x Same; Unfair competition; Law frowns upon disregard of rudiments of fair dealing.As stated in Lim Kiah vs. Kaynee Company: xxx The decision of the Director of Patents is not only sound in law but also commendable for its consonance with the appropriate ethical standard which by no means should be excluded from the business world as alien, if not a hostile, force. While in the fierce competitive jungle which at times constitutes the arena of commercial transactions, shrewdness and ingenuity are at a premium, the law is by no means called upon to yield invariably its nod of approval to schemes frowned upon by the concept of fairness. Here, petitioner who engaged in manufac408

40 8

SUPREME COURT REPORTS ANNOTATED

Gabriel vs. Perez turing and selling the same kind of products would rely on a trademark, which undeniably was previously registered abroad and which theretofore had been used and advertised extensively by one of the leading department stores in the Philippines. (25 SCRA 490)

In this instant case, the trademark WONDER has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would

thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in her favor to be used on her bleaching soap, which is of the same class as
418

41 SUPREME COURT REPORTS ANNOTATED 8 Gabriel vs. Perez that of respondent (bleaching and beauty soap) [see pp. 222, 265276, Vol. I, rec; also Exh. 9, p. 105, Vol. III, rec.]. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (petitioner) is still that manufactured by respondent. IV Petitioner would also anchor her claim of exclusive ownership of the trademark in question on the fact that she defrayed substantial expenses in the promotion of respondents soap as covered by the trademark WONDER and the printing of the packages which she further claimed to have been designed thru her efforts as she was the one who hired the services of an artist who created the design of the said packages and trademark. Such claim was disposed correctly by respondent Director of Patents, thus:
Petitioners act in defraying substantial expenses in the promotion of the Respondents goods and the printing of the packages are the necessary or essential consequences of Paragraph 6 of the agreement because, anyway, those activities are normal in the field of sale and distribution, as it would redound to her own benefit as distributor, and those acts are incumbent upon her to do. While it may be argued that sale by the Petitioner may be regarded as trademark use by her, nevertheless it should also be regarded that such sale is a consequence of the Exclusive Distributorship Agreement and it inured to the benefit of the Respondent because it was his trademark that was being used. But this does not result in the Respondents surrender in her favor of the right to register the trademark in her own name. What would

happen if the first five years period terminates and the Respondent decides not to continue with the agreement under Paragraph 1 thereof? What trademark would he use if he himself assumes the distribution thereof or if he contracts with another entity or person for exclusive distributorship? (P. 17, Vol. IV, rec.).

It is true that she has been dealing with the product Wonder Soap even before the execution of the Exclusive Distributorship Agreement an September 1, 1959, evidenced by her agreement with Grace Trading Co., Inc. dated June 23, 1959 for the printing of boxes-containers for the Wonder Soap and the literature accompanying the same (Exhs.
419

VOL. 55, JANUARY 31, 1974 419 Gabriel vs. Perez Q and W, pp. 58, 68, Vol. III, rec.), as well as by another contract dated July 22, 1959 with the Philippine Broadcasting Corporation for spot announcement of the product Wonder Soap showing her as the sponsor (Exh. I-1 or 5-A, p. 18, Vol. III, rec.). But this was because Manserco, Inc. which handled first the distribution of the product Wonder Soap from January, 1959 to July, 1959, employed her (petitioner) to help precisely in the marketing and distribution of the said product, she being the sister of Mariano Yangga who was then the general manager of said Manserco, Inc., as testified to by Mr. Augusto Cesar Espiritu, who, as earlier adverted to, was the organizer and one of the incorporators of the Manserco, Inc. (pp. 480-481, Vol. III, rec.). V From the records, it further appears that pursuant to the Exclusive Distributorship Agreement between petitioner and respondent, the latter manufactured WONDER soap and delivered them to the former who in turn handled the distribution thereof. This continued for sometime until January, 1961, when the arrangement was stopped because as claimed and alleged by herein respondent, he discovered that petitioner began manufacturing her own soap and placed them in the boxes which contained his name and

trademark, and for which reason respondent Dr. Perez filed an unfair competition case against her (petitioner) [see pp. 29-31, Vol. I, rec; pp. 379-380, Vol. II, rec.] with the Court of First Instance of Bulacan, which issued a writ of preliminary injunction against her. These claims of respondent were never denied, much less refuted by petitioner in her rebuttal testimony. Earlier in her direct testimony, petitioner stated that her occupation was merchant and manufacturer of bleaching soap (p. 222, Vol. II, rec.) and on crossexamination she stated that she manufactured Marvel and Dahlia Bleaching Beauty Soap as well as CY. GABRIEL WONDER BEAUTY SOAP, although she claimed to have manufactured the same only from February, 1961 to September, 1961 (pp. 265-270, Vol. II, rec.). Her use of the mark Wonder on the soap manufactured by her is patently shown by Exhibit 9 consisting of a cake of soap
420

42 SUPREME COURT REPORTS ANNOTATED 0 Gabriel vs. Perez with the inscription C.Y. GABRIEL WONDER SPECIAL and an accompanying literature wherein appear, among others, the following words: C.Y. Gabriel WONDER MEDICATED Beauty Soap, Manufactured by: C.Y. GA-BRIEL COSMETIC LABORATORY Converse Rubber Corporation vs. Universal Rubber Products, Inc. No. L-27906. January 8, 1987.* CONVERSE RUBBER CORPORATION, petitioner vs UNIVERSAL RUBBER PRODUCTS, INC. and TIBURCIO S. EVALLE, DIRECTOR OF PATENTS, respondents.
Trademarks; Tradenames; Tradename definedA trade name is any individual name or surname, firm name, device or word used by manufacturers, industrialists, merchants and others to identify their businesses, vocations or occupations. As the trade name refers to the

busmessanditsgoodwiUx x x the trademark refers to the goods. Same; Same; There is a basic similarity between the tradenames Universal Converse and Device and Converse Rubber Corporation as in both names Converse is the dominant ward.From a cursory appreciation of the petitioners corporate name CONVERSE RUBBER CORPORATION," it is evident that the word CONVERSE" is the dominant word which identifies petitioner from where corporations engaged in similar business. The respondents. having known that the word CONVERSE" belongs to
_______________
*

SECOND DIVISION. 155

VOL. 147, JANUARY 8, 1987 155 Converse Rubber Corporation vs. Universal Rubber Products, Inc. and is being used by petitioner, has no right to appropriate the same for use on its products which are similar to those being produced by petitioner. Same; Same; Corporations; Tradename may not be similar to a corporate name.A corporation is entitled to the cancellation of a mark that is confusingly similar to its corporate name. Appropriation by another of the dominant part of a corporate name is an infringement. Same; Same; Converse Rubber Corp. has already earned a business reputation in this country which should beprotected.The testimony of petitioners witness, who is a legitimate trader as well as the invoices evidencing sales of petitioners products in the Philippines, give credence to petitioners claim that it has earned a business reputation and goodwill in the country. Thus, contrary to the dissemination of the Director of Patents, the word CONVERSE" has grown to be identified with petitioners products and has acquired a second meaning within the context of trademark and tradename laws. Same; Same; Same.The sales invoices provide the best proof that there were actual sales of petitioners products in the country and that there was actual use for a protracted period of petitioners trademark or part thereof through these sales. Same; Same; Same.The sales of 12 to 20 pairs a month of petitioners rubber shoes cannot be considered insignificant, considering that they appear to be of very expensive quality, which not too many basketball players can

afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public. Same; Same; Same.It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. Same; Same; Same; Predominant factor in determining simHarity of tradename.The determinative factor in ascertaining whether
156

15 6

SUPREME COURT REPORTS ANNOTATED

Converse Rubber Corporation us. Universal Rubber Products, Inc. or not marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether use of such mark would likely cause confusion or mistake on the part of the buying public. The risk of damage is not limited to a possible confusion of goods but also includes confusion of reputation if the public could reasonably assume that the goods of the parties originated from the same source.'' Same; Same; Same; Actions; Foreign corporation not doing business in the Phil may sue here even if not licensed.That a foreign corporation has a right to maintain an action in the forum even if it is not licensed to do business and is not actually doing business on its own therein has been enunciated many times by this court. Same; Same; Same; Actions.An unlicensed, unregistered foreign corporation which has never done any business in the Philippines, but is widely and favorably known in the Philippines through the use of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the organization of a corporation whose sole purpose is to deal and trade in the same goods as those of the f oreign corporation. Same; Same; Same; International Law; Actions; The Philippines is a party to the treaty for the Protection of Industrial Property.Articles of the Convention of the Union of Paris for the Protection of Industrial Property to which the Philippines is a party to provides that a trade name [corporate name] shall be protected in all the countries of the Union without the

obligation of filing or registration, whether or not it forms part of the trademark. This law is reiterated in Sec. 37 of RA No. 166.

Philippine Refining Co., Inc. vs. Ng Sam No. L-26676. July 30, 1982.* PHILIPPINE REFINING CO., INC., petitioner, vs. NG SAM and THE DIRECTOR OF PATENTS, respondents.
Trademarks and Tradenames; Concept of Trademark protection. A rudimentary precept in trademark protection is that the right to a trademark is a limited one, in the sense that others may use the same mark on unrelated goods. Thus, as pronounced by the United States Supreme Court in the case of American Foundries vs. Robertson, the mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. Same; Restricted right over a trademarkthat some trademark may be used by another on unrelated goodsis reflected in our Trademark Law. Such restricted right over a trademark is likewise reflected in our Trademark Law. Under Section 4(d) of the law, registration of a trademark which so resembles another already registered or in use should be denied, where to allow such registration could likely result in confusion, mistake or deception to the consumers. Conversely, where no confusion is likely to arise, as in this case, registration of a similar or even identical mark may be allowed. Same; CAMIA is descriptive of a whole genus of garden plants. The term CAMIA is descriptive of a whole genus of garde n plants with fragrant white flowers. Some people call the CAMIA the white ginger plant because of its tuberous roots, while children refer to it as the butterfly flower because of its shape. Being a generic and common term, its appropriation as a trademark, albeit in a fanciful manner in that it bears no relation to the product it identifies, is valid. However, the degree of exclusiveness accorded to each user is closely restricted.
_______________
*

SECOND DIVISION. 473

VOL. 115, JULY 30, 1982 473 Philippine Refining Co., Inc. vs. Ng Sam Same; Purpose of a trademark.A trademark is designed to identify the user. But it should be so distinctive and sufficiently original as to enable those who come into contact with it to recognize instantly the identity of the

user. It must be affirmative and definite, significant and distinctive, capable to indicate origin. Same; CAMIA as a trademark is far from being distinctive of goods of petitioner.It is evident that CAMIA as a trademark is far from being distinctive. By itself, it does not identify petitioner as the manufacturer or producer of the goods upon which said mark is used, as contra-distinguished to trademarks derived from coined words such as Rolex, Kodak or Kotex. It has been held that if a mark is so commonplace that it cannot be readily distinguished from others, then it is apparent that it cannot identify a particular business; and he who first adopted it cannot be injured by any subsequent appropriation or imitation by others, and the public will not be deceived. Same; Same.The trademark CAMIA is used by petitioner on a wide range of products: lard, butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds. Respondent desires to use the same on his product, ham. While ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they 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. Same; CAMIA used by a manufacturer for lard, butter, cooking oil, soap, and the like, can be used as a trademark by another for its ham products, ham not being a daily food fare of the average consumer. The observation 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 or origin of the product of the other. Ham is not a daily food fare for the average consumer. One purchasing ham would exercise a more cautious inspection of what he buys on account of its price. Seldom, if ever, is the purchase of said food product delegated to household helps, except perhaps to those who, like the cooks, are expected to know their business. Besides, there can be no likelihood for the consumer of respondents ham to confuse its source as anyone but respondent. The facsimile of the label attached by him on his product, his business name SAMS HAM AND BACON FACTORY
474

47 4

SUPREME COURT REPORTS ANNOTATED Philippine Refining Co., Inc. vs. Ng Sam

written in bold white letters against a reddish orange background, is certain to catch the eye of the class of consumers to which he caters. Same; Same.In addition, the goods of petitioners are basically derived from vegetable oil and animal fats, while the product of respondent is processed from pigs legs. A consumer would not reasonably assume that petitioner has so diversified its business as to include the product of respondent.

Faberge, Incorporated vs. Intermediate Appellate Court G.R. No. 71189.November 4, 1992.* FABERGE, INCORPORATED, petitioner, vs. THE INTERMEDIATE APPELLATE COURT and CO BENG KAY, respondents.
Commercial Law; Trademarks; 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 and of a different description. 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 petitioners 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. In as much as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner can not and should not be allowed to feign that private respondent had invaded petitioners 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 Lam (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.
_______________
*

THIRD DIVISION. 317

VOL.215,NOVEMBER4,1992 317 Faberge, Incorporated vs. Intermediate Appellate Court Same; Same; The protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration.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. Same; Same; Judging from the physical attributes of petitioners and private respondents products, there can be no doubt that confusio n or the likelihood of deception to the average purchaser is unlikely since the goods are non-competing and unrelated.Judging from the physical attributes of petitioners and private respondents products, there can be no doubt that confusion or the likelihood of deception to the average purchaser is unlikely since the goods are non-competing and unrelated. Same; Same; A purchaser who is out in the market for the purpose of buying respondents BRUTE brief would definitely be not mistaken or misled into buying BRUT after shave lotion or deodorant as categorically opined in the decision of the Director of Patents relative to the inter-partes case. The glaring discrepancies between the two products had been amply portrayed to such an extent that indeed, a p urchaser who is out in the market for the purpose of buying respondents BRUTE brief would definitely be not mistaken or misled into buying BRUT after shave lotion or deodorant as categorically opined in the decision of the Director of Patents relative to the inter-partes case. Same; Same; Court 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. It would appear that as a consequence of this discourse, there still remains hanging in mid-air the unanswered puzzle as to why an aspiring commercial enterprise, given the infinite choices available to it of names for the intended product, would select a trademark or tradename which somewhat resembles

an existing emblem that had established goodwill. Our opinion hereinbefore expressed could even open the floodgates to similar incursions in the future when We 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.

Lyceum of the Philippines, Inc. vs. Court of Appeals G.R. No. 101897. March 5, 1993.* LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., respondents.
Corporation Law; Names; Fact that other schools use "Lyceum" as part of their school's name is not a deceptive use thereof relative to Lyceum of the Philippines.We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. Same; Same; Words and Phrases; "Lyceum" is a generic name. Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching." In time, the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While the Latin word "lyceum" has been

incorporated into the English language, the word is also found in Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno Masbate), "Liceo de Masbate," "Liceo de Albay." "Lyceum" is in fact
__________________
*

THIRD DIVISION. 611

VOL. 219, MARCH 5, 1993 611 Lyceum of the Philippines, Inc. vs. Court of Appeals as generic in character as the word "university." In the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however, "Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not unnatural to use this word to designate an entity which is organized and operating as an educational institution. Same; Same; Same; Trademarks; "Secondary meaning," defined.In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated in the following terms: "x x x a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." Same; Same; Same; Same; Lyceum of the Philippines has not gained exclusive use of "Lyceum" by long passage of time.We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term

"Lyceum" seventeen (17) years before the petitioner registered its own corporate name with the SEC and began using the word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that institution would have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution.

Pro Line Sports Center, Inc. vs. Court of Appeals G.R. No. 118192. October 23, 1997.* PRO LINE SPORTS CENTER, INC., and QUESTOR CORPORATION, petitioners, vs. COURT OF APPEALS, UNIVERSAL ATHLETICS INDUSTRIAL PRODUCTS, INC., and MONICO SEHWANI, respondents.
Actions; Malicious Prosecution; The two essential elements of malicious prosecution are absence of probable cause and legal malice on the part of the defendant.PRO LINE and QUESTOR cannot be adjudged liable for damages for the alleged unfounded suit. The complainants were unable to prove two (2) essential elements of the crime of malicious prosecution, namely, absence of probable cause and legal malice on the part of petitioners. Same; Same; Criminal Procedure; Words and Phrases; Probable Cause, Defined.UNIVERSAL failed to show that the filing of Crim. Case No. 45284 was bereft of probable cause. Probable cause is the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. In the case before us, then Minister of Justice Ricardo C. Puno found probable cause when he reversed the Provincial Fiscal who initially dismissed the complaint and directed him instead to file the corresponding Information for unfair competition against private respondents herein. Same; Same; Same; Same; Unfair Competition; Trademarks and Tradenames; That a corporation other than the certified owner of the trademark is engaged in the unauthorized manufacture of products bearing the same trademark engenders a reasonable belief that a criminal offense for unfair competition is being committed.The existence of probable cause for unfair competition by UNIVERSAL is derivable from the facts and circumstances of the case. The affidavit of Graciano Lacanaria, a former employee of UNIVERSAL, attesting to the illegal sale and manufacture of Spalding balls and seized Spalding products and instruments from UNIVERSALs factory was sufficient prima facie evidence to warrant the

prosecution of private respondents. That a corporation other than the certified

________________
*

FIRST DIVISION. 163

VOL. 281, OCTOBER 23, 1997 163 Pro Line Sports Center, Inc. vs. Court of Appeals owner of the trademark is engaged in the unauthorized manufacture of products bearing the same trademark engenders a reasonable belief that a criminal offense for unfair competition is being committed. Same; Same; A resort to judicial processes is not per se evidence of ill will upon which a claim for damages may be based; Malice is an inexcusable intent to injure, oppress, vex, annoy or humiliate.Petitioners PRO LINE and QUESTOR could not have been moved by legal malice in instituting the criminal complaint for unfair competition which led to the filing of the Information against Sehwani. Malice is an inexcusable intent to injure, oppress, vex, annoy or humiliate. We cannot conclude that petitioners were impelled solely by a desire to inflict needless and unjustified vexation and injury on UNIVERSALs business interests. A resort to judicial processes is not per se evidence of ill will upon which a claim for damages may be based. A contrary rule would discourage peaceful recourse to the courts of justice and induce resort to methods less than legal, and perhaps even violent. Same; Same; One who makes use of his own legal right does no injury, and if damage results from a persons exercising his legal rights, it is damnum absque injuria.We are more disposed, under the circumstances, to hold that PRO LINE as the authorized agent of QUESTOR exercised sound judgment in taking the necessary legal steps to safeguard the interest of its principal with respect to the trademark in question. If the process resulted in the closure and padlocking of UNIVERSALs factory and the cessation of its business operations, these were unavoidable consequences of petitioners valid and lawful exercise of their right. One who makes use of his own legal right does no injury. Qui jure suo utitur nullum damnum facit. If damage results from a persons exercising his legal rights, it is damnum absque injuria. Same; Same; The expenses and annoyance of litigation form part of the social burden of living in a society which seeks to attain social control

through law.Admittedly, UNIVERSAL incurred expenses and other costs in defending itself from the accusation. But, as Chief Justice Fernando would put it, the expenses and annoyance of litigation form part of the social burden of living in a society which seeks to attain social control through law. Thus we see no cogent reason for the award of damages, exorbitant as it may
164

16 4

SUPREME COURT REPORTS ANNOTATED

Pro Line Sports Center, Inc. vs. Court of Appeals seem, in favor of UNIVERSAL. To do so would be to arbitrarily impose a penalty on petitioners right to litigate. Actions; Unfair Competition; To hold that the act of selling is an indispensable element of the crime of unfair competition is illogical because if the law punishes the seller of imitation goods, then with more reason should the law penalize the manufacturer.Arguably, respondents act may constitute unfair competition even if the element of selling has not been proved. To hold that the act of selling is an indispensable element of the crime of unfair competition is illogical because if the law punishes the seller of imitation goods, then with more reason should the law penalize the manufacturer. In U.S. v. Manuel, the Court ruled that the test of unfair competition is whether certain goods have been intentionally clothed with an appearance which is likely to deceive the ordinary purchasers exercising ordinary care. In this case, it was observed by the Minister of Justice that the manufacture of the Spalding balls was obviously done to deceive would be buyers. The projected sale would have pushed through were it not for the timely seizure of the goods made by the NBI. That there was intent to sell or distribute the product to the public cannot also be disputed given the number of goods manufactured and the nature of the machinery and other equipment installed in the factory. Same; Counterclaims; A counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiffs.We nonetheless affirm the dismissal of petitioners counterclaim for damages. A counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiffs. It is in itself a distinct and independent cause of action, so that when properly stated as such, the defendant becomes, in respect to the matter stated by him, an actor, and there are two simultaneous actions pending between the same parties, where each is at the same time both a plaintiff and defendant. A counterclaim stands on the same footing and is to

be tested by the same rules, as if it were an independent action. Same; Same; Malicious Prosecution; A counterclaim for damages in an action for malicious prosecution is barred by res judicata where there is a judgment of dismissal in the criminal case which involved the criminal and civil aspects of the case.Petitioners counterclaim for damages based on the illegal and unauthorized manufacture of Spalding balls certainly constitutes an independ165

VOL. 281, OCTOBER 23, 1997 165 Pro Line Sports Center, Inc. vs. Court of Appeals ent cause of action which can be the subject of a separate complaint for damages against UNIVERSAL. However, this separate civil action cannot anymore be pursued as it is already barred by res judicata, the judgment in the criminal case (against Sehwani) involving both the criminal and civil aspects of the case for unfair competition. To recall, petitioners PRO LINE and QUESTOR, upon whose initiative the criminal action for unfair competition against respondent UNIVERSAL was filed, did not institute a separate civil action for damages nor reserve their right to do so. Thus the civil aspect for damages was deemed instituted in the criminal case. No better manifestation of the intent of petitioners to recover damages in the criminal case can be expressed than their active participation in the prosecution of the civil aspect of the criminal case through the intervention of their private prosecutor. Obviously, such intervention could only be for the purpose of recovering damages or indemnity because the offended party is not entitled to represent the People of the Philippines in the prosecution of a public offense.

Societe Des Produits Nestl, S.A. vs. Court of Appeals G.R. No. 112012. April 4, 2001.* SOCIETE DES PRODUITS NESTL, S.A. and NESTL PHILIPPINES, INC., petitioners, vs. COURT OF APPEALS and CFC CORPORATION, respondents.
Trademarks and Tradenames; Words and Phrases; Trademark, Defined.A trademark has been generally defined as any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others.

Same; Same; Tests to Determine Colorable Imitation; Dominancy Test, and Holistic Test, Explained; Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the other.Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive ordinary
________________
*

FIRST DIVISION. 208

20 8

SUPREME COURT REPORTS ANNOTATED

Societe Des Produits Nestl, S.A. vs. Court of Appeals persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the other. In determining if colorable imitation exists, jurisprudence has developed two kinds of tests the Dominancy Test and the Holistic Test. The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. Same; Same; Same; Same; In infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deducedeach case must be decided on its own merits.The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard, Inc. v. Court of Appeals, we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own

unique set of facts. Indeed, the complexities attendant to an accurate assessment of likelihood of confusion require that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined. Same; Same; Same; Same; Totality Rule, Explained.In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents; Mead Johnson & Co. v. NVJ Van Dorf Ltd.; and American Cyanamid Co. v. Director of Patents. The totality rule states that the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must 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 on both labels.
209

VOL. 356, APRIL 4, 2001 209 Societe Des Produits Nestl, S.A. vs. Court of Appeals Same; Same; Same; Same; In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities.In the case at bar, other than the fact that both Nestles and CFCs products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC Of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable. Same; Same; Same; Same; The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item.The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. This Court cannot agree with

the above reasoning. If the ordinary purchaser is undiscerningly rash in buying such common and inexpensive household products as instant coffee, and would therefore be less inclined to closely examine specific details of similarities and dissimilarities between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFCs trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestles uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. Same; Same; Same; Same; The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are
210

21 0

SUPREME COURT REPORTS ANNOTATED

Societe Des Produits Nestl, S.A. vs. Court of Appeals encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. Same; Same; Same; Same; Generic Terms, and Descriptive Terms, Explained; The word MASTER is neither a generic nor a descriptive term, and as such, said term can not be invalidated as a trademark and, therefore, may be legally protected.In addition, the word MASTER is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic terms are those which constitute the common descriptive name of an article or substance, or comprise the genus of which the particular product is a species, or are commonly used as the name or description of a kind of goods, or imply reference to every member of a genus and the exclusion of individuating characters, or ref er to the basic nature of the wares or services provided rather than to the more idiosyncratic

characteristics of a particular product, and are not legally protectable. On the other hand, a term is descriptive and therefore invalid as a trademark if, as understood in its normal and natural sense, it forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is, or if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods, or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. Same; Same; Same; Same; Suggestive Terms, Explained.Rather, the term MASTER is a suggestive term brought about by the advertising scheme of Nestle. Suggestive terms are those which, in the phraseology of one court, require imagination, thought and perception to reach a conclusion as to the nature of the goods. Such terms, which subtly connote something about the product, are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding some light upon certain characteristics of the goods or services i n dispute, they nevertheless involve an element of incongruity, figurativeness, or imaginative effort on the part of the observer. Same; Same; Same; Same; The term MASTER has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestle.The term MASTER, therefore, has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestl. As such, the use by
211

VOL. 356, APRIL 4, 2001 211 Societe Des Produits Nestl, S.A. vs. Court of Appeals CFC of the term MASTER in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or mistake or even to deceive the ordinary purchasers.

Pearl & Dean (Phil.), Incorporated vs. Shoemart, Incorporated G.R. No. 148222. August 15, 2003.* PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, INCORPORATED and NORTH EDSA MARKETING, INCORPORATED, respondents.
Intellectual Property; Copyrights; Patents; Being a mere statutory

grant, the rights are limited to what the statute confers; It can cover only the works falling within the statutory enumeration or description .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. Accordingly, it can cover only the works falling within the statutory enumeration or description.
_______________
*

THIRD DIVISION. 232

23 2

SUPREME COURT REPORTS ANNOTATED

Pearl & Dean (Phil.), Incorporated vs. Shoemart, Incorporated Same; Same; Same; The 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.During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an engin eering or marketing invention. 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, 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. Same; Same; Same; 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.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 , 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. Same; Same; Same; To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement.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. Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint. Same; Same; Same; Patent law has a three-fold purpose.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.
233

VOL. 409, AUGUST 15, 2003 233 Pearl & Dean (Phil.), Incorporated vs. Shoemart, Incorporated Same; Same; Same; 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 .Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court, 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. Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals. Same; Same; Same; Unfair Competition; There can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks.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 trade name 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. In this case, there was no evidence that P & Ds use of Poster Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners expert witnesses himself had testified that Poster Ads was too generic a name. So it was difficult to identify it with any company, honestly speaking.

246 Corporation vs. Daway facts: The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction3 before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark Rolex in its business name Rolex Music Lounge as well as in its newspaper advertisements asRolex Music Lounge, KTV. Disco & Party Club. In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark Rolex considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not a HELD: In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial

courts denial of petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. Under the old Trademark Law15 where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different
_______________ G.R. No. 94733, 17 February 1993, 219 SCRA 69. 14 Municipality of Bian Laguna v. Court of Appeals, supra, pp. 75-76. 15 Republic Act No. 166.
13

321

VOL. 416, NOVEMBER 20, 2003 321 246 Corporation vs. Daway goods.16 This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads:
Sec. 123. Registrability.123.1. A mark cannot be registered if it: xxx xxx xxx (f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided, further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied)

A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the wellknown mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit:
1. 1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks, Service Marks,

Trade Names and Marked or Stamped Containers,17 in determining whether a mark is well known, the following criteria or any combination thereof may be taken into account: 1. (a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; 2. (b) the market share in the Philippines and in other countries, of the goods and/or services to which the mark applies; 3. (c) the degree of the inherent or acquired distinction of the mark; 4. (d) the quality-image or reputation acquired by the mark;
_______________
16 Esso Standard Eastern, Inc. v. Court of Appeals, 201 Phil. 803; 116 SCRA 336 (1982); Hickok Manufacturing Co., Inc. v. Court of Appeals, 201 Phil. 853; 116 SCRA 387 (1982); Faberge, Inc. v. Intermediate Appellate Court, G.R. No. 71189, 4 November 1992, 215 SCRA 316. 17 Amended by Office Order No. 17 dated 1 December 1998.

322

32 2

SUPREME COURT REPORTS ANNOTATED

246 Corporation vs. Daway 1. (e) the extent to which the mark has been registered in the world; 2. (f) the exclusivity of the registration attained by the mark in the world; 3. (g) the extent to which the mark has been used in the world; 4. (h) the exclusivity of use attained by the mark in the world; 5. (i) the commercial value attributed to the mark in the world; 6. (j) the record of successful protection of the rights in the mark; 7. (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and 8. (l) the presence of absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. 1. 2. The use of the well-known mark on the entirely unrelated goods or services would indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the

mark. 2. 3. The interests of the owner of the well-known mark are likely to be damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user.18

Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents busin ess involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same.
_______________ Ruben E. Agpalo, The Law on Trademark Infringement and Unfair Competition, 2000 Edition, pp. 168-170. 323
18

VOL. 416, NOVEMBER 20, 2003 323 246 Corporation vs. Daway The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta.

Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp.

Intellectual Property Code (R.A. 8293); Trademark Infringement; The essential element of infringement under R.A. 8293 is that the infringing mark is likely to cause confusion.The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed teststhe Dominancy Test and the Holistic or Totality Test. Same; Same; The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public.The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. Same; Same; The Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.The Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features appearing on both labels so that the
450

45 0

SUPREME COURT REPORTS ANNOTATED

Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. observer may draw conclusion on whether one is confusingly similar to the other. Same; Trademarks; The registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market.The registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific

segments of the market. The purchasing public might be mistaken in thinking that petitioner had ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with petitioners brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes.

A perusal of the motions submitted by petitioner and petitionerintervenor would show that the primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement. After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision. The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically, Section 155 of R.A. No. 8293 states:
Remedies; Infringement.Any person who shall, without the consent of the owner of the registered mark:
_______________ 13 Rollo, p. 1079. 14 Id., at pp. 1047-1048. 455

VOL. 646, MARCH 28, 2011 455 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in

connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed teststhe Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving
_______________ 15 Emphasis supplied. 456

45 SUPREME COURT REPORTS ANNOTATED 6 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. little weight to factors like prices, quality, sales outlets, and market segments.16 In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other.17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent.18
_______________ 16 Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 531; McDonalds Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 106; McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434; 437 SCRA 10, 32 (2004). 17 Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 357. 18 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra note 16, at 428, citing Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 137 Phil. 838, 852; 27 SCRA 1214, 1227 (1969). 457

VOL. 646, MARCH 28, 2011 457 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized S by respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO. While it is undisputed that petitioners stylized S is within an oval design, to this Courts mind, the dominant feature of the trademark is the stylized S, as it is precisely the stylized S which catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized S, the same being the dominant feature of petitioners

trademark, already constitutes infringement under the Dominancy Test. This Court cannot agree with the observation of the CA that the use of the letter S could hardly be considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by stating that the letter S has been used in so many existing trademarks, the most popular of which is the trademark S enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent had used a stylized S, which is the same stylized S which petitioner has a registered trademark for. The letter S used in the Superman logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA of the letter S used in the Superman trademark with petitioners stylized S is not appropriate to the case at bar. Furthermore, respondent did not simply use the letter S, but it appears to this Court that based on the font and the size of the lettering, the stylized S utilized by respondent is the very same stylized S used by petitioner; a stylized S which is unique and distinguishes petitioners trademark. Indubitably, the likelihood of confusion is present as purchasers will associate the respondents use of the stylized S as having been authorized by petitioner or that respondents product is connected with petitioners business.
458

45 SUPREME COURT REPORTS ANNOTATED 8 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed petitioners trademark. For its part, the RTC noted the following supposed dissimilarities between the shoes, to wit:
1. The mark S found in Strong Shoes is not enclosed in an oval design.

2. The word Strong is conspicuously placed at the backside and insoles. 3. The hang tags and labels attached to the shoes bears the word Strong for respondent and Skechers U.S.A. for private complainant; 4. Strong shoes are modestly priced compared to the costs of Skechers Shoes.19

While there may be dissimilarities between the appearances of the shoes, to this Courts mind such dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily observed by simply comparing petitioners Energy20 model and respondents Strong21 rubber shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and wavelike pattern of the midsole and outer sole of respondents shoes are very similar to petitioners shoes, if not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated designs in practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the back and six in front. On the side of respondents shoes, near the upper part, appears the stylized S, placed in the exact location as that of the stylized S on petitioners shoes. On top of the tongue of both shoes appears the stylized S in practically the same location and size. Moreover, at the back of petitioners shoes, near the heel
_______________ 19 Rollo, p. 174. 20 See Rollo, pp. 498-500, 572-574. 21 Id. 459

VOL. 646, MARCH 28, 2011 459 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. counter, appears Skechers Sport Trail written in white lettering. However, on respondents shoes appears Strong Sport Trail noticeably written in the same white lettering, font size, direction and orientation as that of petitioners shoes. On top of the heel collar of petitioners shoes are two grayish-white semi-transparent circles. Not surprisingly, respondents shoes also have two grayish-

white semi-transparent circles in the exact same location. Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it is indubitable that respondents products will cause confusion and mistake in the eyes of the public. Respondents shoes may not be an exact replica of petitioners shoes, but the features and overall design are so similar and alike that confusion is highly likely. In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc.,22 this Court, in a case for unfair competition, had opined that even if not all the details are identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit:
From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their respective brands, of course. We fully agree with the trial court that the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two products are exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish Custombuilt from Chuck Taylor. These elements are more than sufficient to serve as
_______________ 22 186 Phil. 85; 97 SCRA 158 (1980). 460

46 0

SUPREME COURT REPORTS ANNOTATED

Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. basis for a charge of unfair competition. Even if not all the details just mentioned were identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt

could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held liable. x x x23

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market.26 The purchasing public might be mistaken in thinking that petitioner had ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with petitioners brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes.
_______________ 23 Id., at pp. 94-95; p. 168-169. 24 Supra note 16. 25 Id., at p. 432. 26 Dermaline, Inc v. Myra Pharmaceuticals, Inc., G.R. No. 190065, August 16, 2010, 628 SCRA 356. 461

VOL. 646, MARCH 28, 2011 461 Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Corp. Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods.27 While respondents shoes contain some dissimilarities with petitioners shoes, this Court cannot close its eye to the fact that for all intents and purpose, respondent had deliberately attempted to copy petitioners mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of infringement do not normally copy but only make colorable changes.28 The most successful form of copying is to employ enough points of

similarity to confuse the public, with enough points of difference to confuse the courts.29 VOL. 540, DECEMBER 13, 2007 215 Air Philippines Corporation vs. Pennswell, Inc. G.R. No. 172835. December 13, 2007.* AIR PHILIPPINES CORPORATION, petitioner, PENNSWELL, INC., respondent.

vs.

Intellectual Property Law; Trade Secrets; Words and Phrases; A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it, which definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value.A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it. The definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value. A trade secret may consist of any formula, pattern, device, or compilation of information that: (1) is us ed in ones business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information. Generally, a trade secret is a process or device intended for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or catalogue or specialized customer list. It is indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of the trade secret by one who obtained the information in confidence or through a confidential relationship. American jurisprudence has utilized the following factors to determine if an information is a trade secret, to wit: (1) the extent to which the information is known outside of the employers business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and to competitors; (5) the amount of effort or money expended by the company in developing the informa_______________

THIRD DIVISION. 216

21 6

SUPREME COURT REPORTS ANNOTATED

Air Philippines Corporation vs. Pennswell, Inc. tion; and (6) the extent to which the information could be easily or readily obtained through an independent source. Same; Same; Any determination by management as to the confidential nature of technologies, processes, formulae, or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny; The parameters in the determination of trade secrets are such substantial factual basis that can withstand judicial scrutiny.In Cocoland Development Corporation v. National Labor Relations Commission, 259 SCRA 51 (1996), the issue was the legality of an employees termination on the ground of unauthorized disclosure of trade secrets. The Court laid down the rule that any determination by management as to the confidential nature of technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court rejected the employers naked contention that its own determination as to what constitutes a trade secret should be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of. Hence, in Cocoland, the parameters in the determination of trade secrets were set to be such substantial factual basis that can withstand judicial scrutiny. Actions; Pleadings and Practice; Modes of Discovery; Production or Inspection of Documents; The production or inspection of documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good cause therefor before the court in which an action is pending.We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect documents or things upon a showing of good cause before the court in which an action is pending. Its entire provision reads: SECTION 1. Motion for production or inspection order.Upon motion of any party showing good cause therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of

the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody or control; or (b)
217

VOL. 540, DECEMBER 13, 2007 217 Air Philippines Corporation vs. Pennswell, Inc. order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just. A more than cursory glance at the above text would show that the production or inspection of documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good cause therefor before the court in which an action is pending. The court may order any party: a) to produce and permit the inspection and copying or photographing of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, which are not privileged; which constitute or contain evidence material to any matter involved in the action; and which are in his possession, custody or control; or b) to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. Same; Same; Same; Same; Privileged Matters; Rule 27 of the Rules of Court sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that may be produced and inspected should not be privilegednot be privileged against disclosure; On the ground of public policy, the rules providing for production and inspection of privileged matters, that is, books and papers which, because of their confidential and privileged character, could not be received in evidence.Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that may be produced and inspected should not be privileged. The documents must not be privileged against disclosure. On the ground of public policy, the rules providing for production and inspection of books and papers do not authorize the production or inspection of privileged matter; that is, books and papers which, because of their confidential and privileged

character, could not be received in evidence. Such a condition is in addition to the requisite that the items be specifically described, and must constitute or contain evidence material to any matter involved in the action and which are in the partys possession, custody or control.
218

21 8

SUPREME COURT REPORTS ANNOTATED

Air Philippines Corporation vs. Pennswell, Inc. Same; Same; Same; Same; Same; Privileged Communication; Types of Disqualification by Reason of Privileged Communication; There are other privileged matters that are not mentioned by Rule 130, among which are the following: (a) editors may not be compelled to disclose the source of published news, (b) voters may not be compelled to disclose for whom they voted, (c) trade secrets, (d) information contained in tax census returns, and (d) bank deposits.Section 24 of Rule 130 draws the types of disqualification by reason of privileged communication, to wit: (a) communication between husband and wife; (b) communication between attorney and client; (c) communication between physician and patient; (d) communication between priest and penitent; and (e) public officers and public interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them are the following: (a) editors may not be compelled to disclose the source of published news; (b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank deposits. Intellectual Property Law; Trade Secrets; That trade secrets are of a privileged nature is beyond quibblethe protection that this jurisdiction affords to trade secrets is evident in our laws .That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A, as amended; and (2) cases for rehabilitation transferred from the Securities and Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, expressly provides that the court may issue an order to protect trade secrets or other confidential research, development, or commercial information belonging to the debtor. Moreover, the Securities Regulation Code is explicit that the Securities and Exchange Commission is not required or authorized to require the revelation of trade secrets or processes in any application, report or

document filed with the Commission. This confidentiality is made paramount as a limitation to the right of any member of the general public, upon request, to have access to all information filed with the Commission.
219

VOL. 540, DECEMBER 13, 2007 219 Air Philippines Corporation vs. Pennswell, Inc. Same; Same; Intellectual and industrial property rights are not simple property cases; Without limiting such industrial property rights to trademarks and trade names, the Supreme Court has ruled that all agreements concerning intellectual property are intimately connected with economic development; The protection of industrial secrets is inextricably linked to the advancement of our economy and fosters healthy competition in trade; Jurisprudence has consistently acknowledged the private character of trade secretsthere is a privilege not to disclose ones trade secrets .In accordance with our statutory laws, this Court has declared that intellectual and industrial property rights cases are not simple property cases. Without limiting such industrial property rights to trademarks and trade names, this Court has ruled that all agreements concerning intellectual property are intimately connected with economic development. The protection of industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. It speeds up transfer of technology and industrialization, and thereby bring about social and economic progress. Verily, the protection of industrial secrets is inextricably linked to the advancement of our economy and fosters healthy competition in trade. Jurisprudence has consistently acknowledged the private character of trade secrets. There is a privilege not to disclose ones trade secrets. Foremost, this Court has declared that trade secrets and banking transactions are among the recognized restrictions to the right of the people to information as embodied in the Constitution. We said that the drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory disclosure. Same; Same; Consumer Act of the Philippines (R.A. No. 7394); Consumer Products, Defined; Words and Phrases; While it is true that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the law does not apply to one engaged in manufacturing specialized lubricants since these are not consumer products,

i.e., products intended for personal, family, household or agricultural purposes; Consumer products, as it is defined in Article 4(q), R.A. No. 7394, refers to goods, services and
220

22 0

SUPREME COURT REPORTS ANNOTATED

Air Philippines Corporation vs. Pennswell, Inc. credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices.In the case at bar, petitioner cannot rely on Section 77 of Republic Act 7394, or the Consumer Act of the Philippines, in order to compel respondent to reveal the chemical components of its products. While it is true that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the law does not apply to respondent. Respondents specialized lubricantsnamely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and AntiSeize Com-poundare not consumer products. Consumer products, as it is defined in Article 4(q), refers to goods, services and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices. This is not the nature of respondents products. Its products are not intended for personal, family, household or agricultural purposes. Rather, they are for industrial use, specifically for the use of aircraft propellers and engines. Same; Same; Special Law on Counterfeit Drugs (R.A. No. 8203); The special lubricants produced by respondent are outside the scope of R.A. No. 8203they do not come within the purview of a drug which, as defined therein, refers to any chemical compound or biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in man and animals.Petitioners argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires the disclosure of the active ingredients of a drug is also on faulty ground. Respondents products are outside the scope of the cited law. They do not come within the purview of a drug which, as defined therein, refers to any chemical compound or biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in man or animals. Again, such are not the characteristics of respondents products.

Same; Same; Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990 (R.A. No. 6969); Section 12 of R.A. No. 6969 deems as confidential matters, which may not be made public, those that would divulge trade secrets, including production or sales figures or methods, production or processes unique to such manufac221

VOL. 540, DECEMBER 13, 2007 221 Air Philippines Corporation vs. Pennswell, Inc. turer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor the right to confidentiality is recognized by said Act as primordial .We do not find merit or applicability in petitioners invocation of Section 12 of the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or information concerning chemical substances and mixtures, including safety data submitted, and data on emission or discharge into the environment. To reiterate, Section 12 of said Act deems as confidential matters, which may not be made public, those that would divulge trade secrets, including production or sales figures or methods; production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. It is true that under the same Act, the Department of Environment and Natural Resources may release information; however, the clear import of the law is that said authority is limited by the right to confidentiality of the manufacturer, processor or distributor, which information may be released only to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. The right to confidentiality is recognized by said Act as primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in the case at bar. Same; Same; Same; Trade secrets should receive greater protection from discovery, because they derive economic value from being generally unknown and not readily ascertainable by the public; The party seeking disclosure of trade secrets should show a compelling reason for the courts to lift the veil of confidentiality which shields the other partys trade secrets . The privilege is not absolute; the trial court may compel disclosure where it is indispensable for doing justice. We do not, however, find reason to except respondents trade secrets from the application of the rule on privilege. The revelation of respondents trade secrets serves no better purpose to the

disposition of the main case pending with the RTC, which is on the collection of a sum of money. As can be gleaned from the facts, petitioner received respondents goods in trade in the normal course of business. To be sure, there are defenses under the laws of contracts and sales available to petitioner. On the other hand, the greater interest of justice
222

22 2

SUPREME COURT REPORTS ANNOTATED

Air Philippines Corporation vs. Pennswell, Inc. ought to favor respondent as the holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule in favor of the greater interest of respondent. Trade secrets should receive greater protection from discovery, because they derive economic value from being generally unknown and not readily ascertainable by the public. To the mind of this Court, petitioner was not able to show a compelling reason for us to lift the veil of confidentiality which shields respondents trade secrets.
G.R. No. 169974. April 20, 2010.*

SUPERIOR COMMERCIAL ENTERPRISES, INC., petitioner, vs. KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., respondents.
Mercantile Law; Trademarks; Trademark Infringement, Defined. Section 22 of Republic Act No. 166, as amended (RA 166), the law applicable to this case, defines trademark infringement as follows: Section 22. Infringement, what constitutes.Any person who [1] shall use, 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 on 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 [2] 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, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Civil Procedure; Trademarks; Trademark Infringement; Parties;

Section 22 of Republic Act (RA) No. 166 states that only a registrant of a mark can file a case for infringement; The cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final.Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant under the provisions of RA 166 terminates when the judgment or order of cancellation has become final, viz.: Section 19. Cancellation of registration.If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until
_______________ * SECOND DIVISION. 532

53 2

SUPREME COURT REPORTS ANNOTATED

Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.] Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final. Mercantile Law; Trademarks; Trademark Infringement; Elements that must be proven to establish trademark infringement.To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. Same; Same; Same; Unfair Competition, Defined.From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair

competition are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor.
533

VOL. 618, APRIL 20, 2010 533 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. Same; Same; Same; Same; There can be trademark infringement without unfair competition.In McDonalds Corporation v. L.C. Big Mak Burger, Inc., 437 SCRA 10 (2004), we held that there can be trademark infringement without unfair competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner.

On the Issue of Trademark Infringement We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decisionrendered after the CA decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) - states:
As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently established the fraudulent registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew fully well that it did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines. While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superior however

breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to Superior its (Kunnans) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any incumbency when requested by the latter. In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in
549

VOL. 618, APRIL 20, 2010 549 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not the rightful owner of the subject marks. WHEREFORE, the foregoing considered, the petition is DISMISSED.

The CA decided that the registration of the KENNEX and PRO KENNEX trademarks should be cancelled because SUPERIOR was not the owner of, and could not in the first place have validly registered these trademarks. Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks. Section 22 of Republic Act No. 166, as amended (RA 166),36 the law applicable to this case, defines trademark infringement as follows:
Section 22. Infringement, what constitutes.Any person who [1] shall use, 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 on 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 [2] 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, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied]
_______________ 36 An Act To Provide For the Registration and Protection of Trademarks, Trade-Names, and Service-Marks, Defining Unfair Competition and False Marking And Providing Remedies Against The Same, And For Other Purposes. 550

55 SUPREME COURT REPORTS ANNOTATED 0 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant under the provisions of RA 16637 terminates when the judgment or order of cancellation has become final, viz:
Section 19. Cancellation of registration.If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final.38 In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect of SUPERIORs case has been rendered moot and academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any cause of action for trademark infringement since the cancellation of registra-

_______________ 37 Section 20 of RA 166 considers the trademark registration certificate as prima facie evidence of the validity of the registration, the registrants ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of Patents and as specified in the certificate, subject to the conditions and limitations stated therein. See Mighty Corporation v. E. & J. Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 495. 38 See Heirs of Crisanta Y. Gabriel-Almoradie v. Court of Appeals, G.R. No. 91385, January 4, 1994, 229 SCRA 15, 32-33. 551

VOL. 618, APRIL 20, 2010 551 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. tion of a trademark deprived it of protection from infringement from the moment judgment or order of cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration.39 With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIORs case for trademark infringement lost its legal basis and no longer presented a valid cause of action. Even assuming that SUPERIORs case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the cancellation of the registration of the disputed trademarks, SUPERIORas a mere distributor and not the ownercannot assert any protection from trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the

fiduciary relationship does not terminate before application for registration is filed.40 Thus, the CA in the Registration Cancellation Case correctly held:
As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be based on ownership. When the applicant is not the owner
_______________ 39 Western Equipment & Supply Co. v. Reyes, 51 Phil. 115 (1927). 40 Gabriel v. Perez, G.R. No. L-24075, January 31, 1974, 55 SCRA 406. 552

55 2

SUPREME COURT REPORTS ANNOTATED

Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law, only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. An exclusive distributor does not acquire any proprietary interest in the principals trademark and cannot register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIORs present case for trademark infringement. The doctrine of res judicata embraces two (2) concepts: the first is bar by prior judgment under paragraph (b) of Rule 39, Section 47, and the second is conclusiveness of judgment under paragraph (c) thereof. In the present case, the second conceptconclusiveness of judgmentapplies. Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit.41 Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if

the latter suit may involve a different cause of action.42 This second branch of the
_______________ 41 Rules of Court, Section 47(c), Rule 39Effect of judgments or final orders.The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows: xxxx (c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. See also Gutierrez v. Court of Appeals, 193 SCRA 437 (1991). 42 Tan v. Court of Appeals, G.R. No. 142401, August 20, 2001, 363 SCRA 444. 553

VOL. 618, APRIL 20, 2010 553 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. principle of res judicata bars the re-litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action.43 Because the Registration Cancellation Case and the present case involve the same parties, litigating with respect to and disputing the same trademarks, we are bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case. To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in

likelihood of confusion.44 Based on these elements, we find it immediately obvious that the second elementthe plaintiffs ownership of the markwas what the Registration Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on, the issue of ownership.45 In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the
_______________ 43 Mata v. Court of Appeals, 376 Phil. 525; 318 SCRA 416 (1999). 44 McDonalds Corporation v. L.C. Big Mak Burger, Inc., G. R. No. 143993, August 18, 2004, 437 SCRA 10. 45 Supra note 31. 554

55 SUPREME COURT REPORTS ANNOTATED 4 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. ruling the CA arrived at in the present petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of the issue of ownershipalthough the current CA ruling is legally correct and can stand on its own meritsbecomes a pointless academic discussion. On the Issue of Unfair Competition Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint, SUPERIOR alleged that:46
17. In January 1993, the plaintiff learned that the defendant Kunnan

Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark PRO-KENNEX. For this reason, on January 20, 1993, the plaintiff, through counsel, wrote the defendant Sports Concept and Distributors Inc. advising said defendant that the trademark PROKENNEX was registered and owned by the plaintiff herein. 18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO-KENNEX which trademarks are owned by and registered in the name of plaintiff herein as alleged hereinabove. xxxx 27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with
_______________ 46 Original Records, pp. 5-8. 555

VOL. 618, APRIL 20, 2010 555 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. the commercial activities of plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiffs business and the defendants acts are likely to discredit the commercial activities and future growth of plaintiffs business.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition 47 are (1) confusing similarity in the general appear_______________ 47 Under Section 29 of RA 166, 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. Unfair competition include the

following acts: a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. [Emphasis supplied.] 556

55 SUPREME COURT REPORTS ANNOTATED 6 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. ance of the goods; and (2) intent to deceive the public and defraud a competitor.48 Jurisprudence also formulated the following true test of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist.49 In the present case, no evidence exists showing that KUNNAN ever attempted to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to

KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the manufacturer of the goods sold. In McDonalds Corporation v. L.C. Big Mak Burger, Inc.,50 we held that there can be trademark infringement without unfair competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at issue. Furthermore, KUNNANs January 29, 1993 notice by its terms prevents the public from being deceived that the goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the
_______________ 48 Supra note 42. 49 Coca-Cola Bottlers, Inc.v. Quintin J. Gomez, G.R. No. 154491, November 14, 2008, 571 SCRA 18. 50 G.R. No. 143993, August 18, 2004, 437 SCRA 10. 557

VOL. 618, APRIL 20, 2010 557 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. trademarks KENNEX and PRO KENNEX. This notice states in full:51
NOTICE AND WARNING Kunnan Enterprises Ltd. is the owner and first user of the internationallyrenowned trademarks KENNEX and PRO KENNEX for sportswear and sporting goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO KENNEX trademarks. Kunnan Enterprises Ltd. further informs the public that it had terminated

its Distributorship Agreement with Superior Commercial Enterprises, Inc. on December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and sporting goods and equipment manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX. xxxx In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.]

Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIORs name, the latter is left with no effective right to make a claim. In other words, with the CAs final ruling in the Registration Cancellation Case, SUPERIORs case no longer presents a valid cause of action.
_______________ 51 Original Records, p. 14. 558

55 SUPREME COURT REPORTS ANNOTATED 8 Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd. For this reason, the unfair competition aspect of the SUPERIORs case likewise falls.

G.R. No. 172276.

August 9, 2010.*

SOCIETE DES PRODUITS NESTLE, S.A., petitioner, vs. MARTIN T. DY, JR., respondent.
Intellectual Property Code of the Philippines; Trademarks; Trademark

Infringement; The element of likelihood of confusion is the gravamen of trademark infringement; Two types of confusion in trademark infringement: confusion of goods and confusion of business; two types of confusion distinguished.Among the elements, the element of likelihood of confusion is the gravamen of trademark in-fringement. There are two types of confusion in trademark infringe--ment: confusion of goods and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214 (1969), the Court distinguished the two types of confusion: Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other. In which case, defendants goods are then bought as the plaintiffs, and the poorer quality of the former reflects adversely on the plaintiffs reputation. The other is the confusion of business: Here though the goods of the parties are different, the defendants product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist.
_______________ * SECOND DIVISION. 224

22 4

SUPREME COURT REPORTS ANNOTATED Societe Des Produits Nestle, S.A. vs. Dy, Jr.

Same; Same; Same; Two Tests to Determine Likelihood of Confusion; the Dominancy test and Holistic Test.There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the com-peting trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers. The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels. Same; Same; Same; Dominancy test is applicable in the present case.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has consistently applied the dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that PCO-GENOLS is confusingly similar to PYCNOGENOL. Same; Same; Same; Court finds that NANNY is confusingly similar to NAN.Applying the dominancy test in the present case, the Court finds that NANNY is confusingly similar to NAN. NAN is the prevalent feature of Nestles line of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRENAN, NAN-H.A., NAN-1, and NAN-2. Clearly, NANNY contains the prevalent feature NAN. The first three letters of NANNY are exactly the same as the letters of NAN. When NAN and NANNY are pronounced, the aural effect is confusingly similar. Same; Same; Same; In determining the issue of confusing similarity, the Court takes into account the AURAL effect of the letters contained in the marks.In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks. In Marvex Commercial Company, Inc. v. Petra Hawpia & Company, 18 SCRA 1178 (1966), the Court held: It is our considered view that the trademarks SALONPAS and LIONPAS are confusingly similar in sound. Both these words have
225

VOL. 627, AUGUST 9, 2010 225 Societe Des Produits Nestle, S.A. vs. Dy, Jr. the same suffix, PAS, which is used to denote a plaster that adheres to the body with curative powers. PAS, being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase. Same; Same; Same; The scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners.The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners.

Same; Same; Same; Factors in Determining whether Goods are Related. In Mighty Corporation v. E. & J. Gallo Winery, 434 SCRA 473 (2004), the Court held that, 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. In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.

The Courts Ruling The petition is meritorious. Section 22 of Republic Act (R.A.) No. 166, as amended, states:
Infringement, what constitutes.Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on 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 trade-name 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, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Section 155 of R.A. No. 8293 states:

Remedies; Infringement.Any person who shall, without the consent of the owner of the registered mark:
_______________ 11 Id., at pp. 48-50. 12 Id., at pp. 227-291. 233

VOL. 627, AUGUST 9, 2010 Societe Des Produits Nestle, S.A. vs. Dy, Jr.

233

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

In Prosource International, Inc. v. Horphag Research Management SA,13 the Court laid down the elements of infringement under R.A. Nos. 166 and 8293:
In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2A, 9-A, and 20 thereof, the following constitute the elements of trademark infringement: (a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;] (b) [It] 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
_______________ 13 G.R. No. 180073, 25 November 2009, 605 SCRA 523. 234

23

SUPREME COURT REPORTS ANNOTATED

4 Societe Des Produits Nestle, S.A. vs. Dy, Jr. reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;] (c) [T]he trademark is used for identical or similar goods[;] and (d) [S]uch act is done without the consent of the trademark registrant or assignee. On the other hand, the elements of infringement under R.A. No. 8293 are as follows: (1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; (2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name 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; (4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the idenity of such business; and (5) It is without the consent of the trademark or trade name owner or the assignee thereof.14

Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement.15 There are two types of confusion in trademark infringement: confusion of
_______________ 14 Id., at pp. 529-530. 15 Id., at p. 531. 235

VOL. 627, AUGUST 9, 2010 235 Societe Des Produits Nestle, S.A. vs. Dy, Jr. goods and confusion of business.16 In Sterling Products

Inter-national, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,17 the Court distinguished the two types of confusion:
Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other. In which case, defendants goods are then bought as the plaintiffs, and the poorer quality of the former reflects adversel y on the plaintiffs reputation. The other is the confusion of business: Here though the goods of the parties are different, the defendants product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist.18

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trade-mark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers.19 The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels.20
_______________ 16 McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 428; 437 SCRA 10, 27 (2004). 17 137 Phil. 838; 27 SCRA 1214 (1969). 18 Id., at p. 852; p. 1227. 19 Prosource Internaitonal, Inc. v. Horphag Research Management SA, supra note 13 at p. 531. 20 Id., at pp. 531-532. 236

23 SUPREME COURT REPORTS ANNOTATED 6 Societe Des Produits Nestle, S.A. vs. Dy, Jr.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of each particular case. In McDonalds Corporation v. MacJoy Fastfood Corporation,21 the Court held:
In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.22

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has consistently applied the dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that PCO-GENOLS is confusingly similar to PYCNOGENOL. The Court held:
The trial and appellate courts applied the Dominancy Test in determining whether there was a confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court found, and the CA affirmed, that: Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which on evidence, appears to be merely descriptive and furnish no indication of the origin of the article and hence, open for trademark registration by the plaintiff through combination with another word or phrase such as PYCNOGENOL, Exhibits A to A-3. Furthermore, although the letters Y between P and C, N between O and C and S after L are missing in the [petitioners] mark PCO-GENOLS, nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to mention that they are both described by their manufacturers as a food supplement
_______________ 21 G.R. No. 166115, 2 February 2007, 514 SCRA 95. 22 Id., at p. 107. 237

VOL. 627, AUGUST 9, 2010 237 Societe Des Produits Nestle, S.A. vs. Dy, Jr. and thus, identified as such by their public consumers. And although there were dissimilarities in the trademark due to the type of letters used as well as the size, color and design employed on their individual packages/bottles, still the close relationship of the competing products name is sounds as they were pronounced, clearly indicates that purchasers could be misled into believing that they are the same and/or originates from a common source and manufacturer. We find no cogent reason to depart from such conclusion. This is not the first time the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held: The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass -Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities [sic], as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same.23

In McDonalds Corporation v. MacJoy Fastfood Corporation , the Court applied the dominancy test in holding that MACJOY is confusingly similar to MCDONALDS. The Court held:
_______________ 23 Supra note 13 at pp. 532-533. 238

23 SUPREME COURT REPORTS ANNOTATED 8 Societe Des Produits Nestle, S.A. vs. Dy, Jr.
While we agree with the CAs detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks. xxxx Applying the dominancy test to the instant case, the Court finds that herein petitioners MCDONALDS and respondents MACJOY marks are are (sic) confusingly similar with each other that an ordinary purchaser can conclude an association or relation between the marks. To begin with, both marks use the corporate M design logo and the prefixes Mc and/or Mac as dominant features. x x x For sure, it is the prefix Mc, and abbreviation of Mac, which visually and aurally catches the attention of the consuming public. Verily, the word MACJOY attracts attention the same way as did McDonalds, MacFries, McSpaghetti, McDo, Big Mac and the rest of the MCDONALDS marks which all use the prefixes Mc and/or Mac. Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondents trademark application for the MACJOY & DEVICE trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioners trademark registration for the MCDONALDS marks in the Philippines covers goods which are similar if not identical to those covered by the respondents application.24

In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test in holding that BIG MAK is confusingly similar to BIG MAC. The Court held:
This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features
_______________ 24 Supra note 21 at pp. 107-109.

239

VOL. 627, AUGUST 9, 2010 239 Societe Des Produits Nestle, S.A. vs. Dy, Jr. in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual im-pres-sions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments. Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled: x x x It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and 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. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC), 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; x x x) xxxx The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the colorable imitation of a registered mark x x x or a dominant feature thereof. Applying the dominancy test, the Court finds that respondents use of the Big Mak mark results in likelihood of confusion. First, Big Mak sounds exactly the same as Big Mac. Second, the first word in Big Mak is exactly the same as the first word in Big Mac. Third, the first two letters in Mak are the same as the first two letters in Mac. Fourth, the last letter Mak while a k sounds the same as c when the word Mak is pronounced. Fifth, in Filipino,
240

24

SUPREME COURT REPORTS ANNOTATED

0 Societe Des Produits Nestle, S.A. vs. Dy, Jr. the letter k replaces c in spelling, thus Caloocan is spelled Kalookan.25

In Societe Des Produits Nestle, S.A v. Court of Appeals ,26 the Court applied the dominancy test in holding that FLAVOR MASTER is confusingly similar to MASTER ROAST and MASTER BLEND. The Court held:
While this Court agrees with the Court of Appeals detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the ele-mentary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that: From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposers mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. x x x In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposers goods.
_______________ 25 Supra note 16 at pp. 433-435; pp. 32-33. 26 408 Phil. 307; 356 SCRA 207 (2001). 241

VOL. 627, AUGUST 9, 2010 Societe Des Produits Nestle, S.A. vs. Dy, Jr.

241

x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposers advertising schemes is carried over when the same is incorporated into respondent-applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (exh. 4) ones attention is easily attracted to the word MASTER, rather than to the dissi-mi-larities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched.27

Applying the dominancy test in the present case, the Court finds that NANNY is confusingly similar to NAN. NAN is the prevalent feature of Nestles line of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly, NANNY contains the prevalent feature NAN. The first three letters of NANNY are exactly the same as the letters of NAN. When NAN and NANNY are pronounced, the aural effect is confusingly similar. In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks. 28 In Marvex Commercial Company, Inc. v. Petra Hawpia & Company,29 the Court held:
It is our considered view that the trademarks SALONPAS and LIONPAS are confusingly similar in sound. Both these words have the same suffix, PAS, which is used to denote a plaster that adheres to the body with curative powers. PAS, being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L20635, March 31, 1966) and may
_______________ 27 Id., at pp. 324-325; pp. 221-222. 28 Prosource International, Inc. v. Horphag Research Management SA, supra note 13 at p. 532; McDonalds Corporation v. L.C. Mak Burger Inc., supra note 16 at p. 435; p. 33. 29 125 Phil. 295; 18 SCRA 1178 (1966). 242

24

SUPREME COURT REPORTS ANNOTATED

2 Societe Des Produits Nestle, S.A. vs. Dy, Jr. properly become the subject of a trademark by combination with another word or phrase. xxxx The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419421, cities [sic], as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same.30

The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners. Section 138 of R.A. No. 8293 states:
Certificates of Registration.A certificate of registration of a mark shall be prima facie evidence of validity of the registration, the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. (Emphasis supplied)
_______________ 30 Id., at pp. 301-303; pp. 1182-1183. 243

VOL. 627, AUGUST 9, 2010 243 Societe Des Produits Nestle, S.A. vs. Dy, Jr. In Mighty Corporation v. E. & J. Gallo Winery ,31 the Court held that, 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.32 In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.33 NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and NAN are displayed in the same section of stores the milk section. The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is intended for infants while NANNY is intended for children past their infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the registered owner of the NAN mark, Nestle should be free to use its mark on similar products, in different segments of the market, and at different price levels. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection afforded to registered trademark owners extends to market areas that are the normal expansion of business:
x x x
_______________ 31 478 Phil. 615; 434 SCRA 473 (2004). 32 Id., at p. 661; p. 509. 33 Id., at pp. 662-663; pp. 510-511. 244

24 4

SUPREME COURT REPORTS ANNOTATED

Societe Des Produits Nestle, S.A. vs. Dy, Jr. Even respondents use of the Big Mak mark on non -hamburger food

products cannot excuse their infringement of petitioners registered mark, otherwise registered marks will lose their protection under the law. The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).34 (Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730 and REINSTATE the 18 September 1998 Decision of the Regional Trial Court, Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.
G.R. No. 190065. August 16, 2010.*

DERMALINE, INC., petitioner, PHARMACEUTICALS, INC., respondent.

vs.

MYRA

Intellectual Property Code; Trademarks and Trade Names; Words and Phrases; A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others.A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others. Inarguably, it is an intellectual property deserving protection by law. In trademark controversies, each case must be scrutinized according to its

peculiar circumstances, such that jurisprudential precedents should only be made to apply if they are specifically in point. Same; Same; In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test; The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception the important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is accustomed to buy,
_______________ * SECOND DIVISION. 357

VOL. 628, AUGUST 16, 2010 357 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. and therefore to some extent familiar with, the goods in question; The test of dominancy is now explicitly incorporated into law in Section 155.1 of Republic Act No. 8293.In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception. It is applied when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question. Given greater consideration are the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets, and market segments. The test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293. Same; Same; The Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in determining confusing similarity.On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in determining confusing similarity. The scrutinizing eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels so that a

conclusion may be drawn as to whether one is confusingly similar to the other. Same; Same; Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz: (1) confusion of goods (product confusion), and, (2) confusion of business (source or origin confusion).Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark
358

35 8

SUPREME COURT REPORTS ANNOTATED

Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent. Same; Same; While there are no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for registration, usually what are taken into account are signs, color, design, peculiar shape or name, or some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.In rejecting the application of Dermaline for the registration of its mark DERMALINE DERMALINE, INC., the IPO applied the Dominancy Test. It declared that both confusion of goods and service and confusion of business or of origin were apparent in both trademarks. It also noted that, per Bureau Decision No. 2007-179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark DERMALINE of Dermaline under Classification 5. The IPO also upheld Myras right under Section 138 of R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the validity of the registration, the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods and those that are related thereto specified in the certificate. We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for registration; usually, what are taken

into account are signs, color, design, peculiar shape or name, or some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer. Same; Same; The registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market.Dermalines stance that its product belongs to a separate and different classification from Myras products with the registered trademark does not eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications pertain to treatments for the skin. Indeed, the regis359

VOL. 628, AUGUST 16, 2010 359 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. tered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court is cognizant that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Same; Same; Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark. The public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying pharmaceutical topical applications for the skin to health and beauty services. Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill. Same; Same; Administrative Law; Intellectual Property Office (IPO); The findings of the Intellectual Property Office (IPO), upheld on appeal by the same office, and further sustained by the Court of Appeals, bear great

weight and deserves respect from the Supreme Court.The issue on protection of intellectual property, such as trademarks, is factual in nature. The findings of the IPO, upheld on appeal by the same office, and further sustained by the CA, bear great weight and deserves respect from this Court. Moreover, the decision of the IPO had already attained finality when Dermaline failed to timely file its appeal with the IPO Office of the Director General.

Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order dated April 17, 2009 and the rejection of Dermalines application for registration of trademark. The CA likewise denied Dermalines motion for reconsideration; hence, this petition raising the issue of whether the CA erred in upholding the IPOs rejection of Dermalines application for registration of trademark. The petition is without merit. A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others.15 Inarguably, it is an intellectual property deserv_______________ 12 Id., at p. 26. 13 Id., at pp. 52-53. 14 Id., at pp. 34-35. 15 Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 528; McDonalds Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 107. 365

VOL. 628, AUGUST 16, 2010 365 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. ing protection by law. In trademark controversies, each case must be scrutinized according to its peculiar circumstances, such that jurisprudential precedents should only be made to apply if they are specifically in point.16 As Myra correctly posits, as a registered trademark owner, it

has the right under Section 147 of R.A. No. 8293 to prevent third parties from using a trademark, or similar signs or containers for goods or services, without its consent, identical or similar to its registered trademark, where such use would result in a likelihood of confusion. In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception.17 It is applied when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question.18 Given greater consideration are the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality,
_______________ 16 Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 356. 17 Amigo Manufacturing, Inc. v. Cluett Peabody Co., Inc., 406 Phil. 905, 918; 354 SCRA 434, 446 (2001). 18 Philip Morris, Inc. v. Fortune Tobacco Corporation, supra at 359, citing Dy Buncio v. Tan Tiao Bok, 42 Phil 190, 196-197 (1921). 366

36 SUPREME COURT REPORTS ANNOTATED 6 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. sales outlets, and market segments.19 The test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides
155.1. Use in commerce any reproduction, counterfeit, copy, or

colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; (emphasis supplied)

On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in determining confusing similarity. The scrutinizing eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels so that a conclusion may be drawn as to whether one is confusingly similar to the other.20 Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that
_______________ 19 McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434; 437 SCRA 10, 32 (2004). 20 Mighty Corporation v. E. & J. Gallo Winery, 478 Phil. 615, 659; 434 SCRA 473, 507 (2004). 367

VOL. 628, AUGUST 16, 2010 367 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. there is some connection between the two parties, though inexistent.21 In rejecting the application of Dermaline for the registration of its mark DERMALINE DERMALINE, INC., the IPO applied the Dominancy Test. It declared that both confusion of goods and

service and confusion of business or of origin were apparent in both trademarks. It also noted that, per Bureau Decision No. 2007179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark DERMALINE of Dermaline under Classification 5. The IPO also upheld Myras right under Section 138 of R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the validity of the registration, the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with t he goods and those that are related thereto specified in the certificate. We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.22 Dermalines insistence that its applied trademark DERMALINE DERMALINE, INC. had differences too striking to be mistaken from Myras DERMALIN cannot, therefore, be sustained. While it is true that the two marks are presented differentlyDermalines mark is written with the first
_______________ 21 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra at p. 428; p. 27, citing Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 137 Phil. 838, 852; 27 SCRA 1214, 1227 (1969). 22 Rollo, p. 47. 367

VOL. 628, AUGUST 16, 2010 367 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. DERMALINE in script going diagonally upwards from left to right, with an upper case D followed by the rest of the letters in lower case, and the portion DERMALINE, INC. is written in upper case letters, below and smaller than the long-hand portion; while Myras mark DERMALIN is written in an upright font,

with a capital D and followed by lower case lettersthe likelihood of confusion is still apparent. This is because they are almost spelled in the same way, except for Dermalines mark which ends with the letter E, and they are pronounced practically in the same manner in three (3) syllables, with the ending letter E in Dermalines mark pronounced silently. Thus, when an ordinary purchaser, for example, hears an advertisement of Dermalines applied trademark over the radio, chances are he will associate it with Myras registered mark. Further, Dermalines stance that its product belongs to a separate and different classification from Myras products with the registered trademark does not eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications pertain to treatments for the skin. Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court is cognizant that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, we have held
Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trademark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53
369

VOL. 628, AUGUST 16, 2010 369 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).23 (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying pharmaceutical topical applications for the skin to health and beauty services. Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill.24 Besides, the issue on protection of intellectual property, such as trademarks, is factual in nature. The findings of the IPO, upheld on appeal by the same office, and further sustained by the CA, bear great weight and deserves respect from this Court. Moreover, the decision of the IPO had already attained finality when Dermaline failed to timely file its appeal with the IPO Office of the Director General.
_______________ 23 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra at p. 432; p. 31, citing Sta. Ana v. Maliwat, et al., 133 Phil. 1006, 1013; 24 SCRA 1018, 1025 (1968). 24 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra at 406, citing Faberge Incorporated v. Intermediate Appellate Court, G.R. No. 71189, November 4, 1992, 215 SCRA 316, 320 and Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapania, 108 Phil. 833, 836. 370

37 SUPREME COURT REPORTS ANNOTATED 0 Dermaline, Inc. vs. Myra Pharmaceuticals, Inc. WHEREFORE, the petition is DENIED. The Decision dated

August 7, 2009 and the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 108627 are AFFIRMED. Costs against petitioner. SO ORDERED. Carpio (Chairperson), Peralta, Abad and Mendoza, JJ., concur. Petition denied, judgment and resolution affirmed. Notes.To disallow a small distiller the use of recycled bottles would necessarily deprive it a share of the market which a big and established distillery seeks to monopolizein the countrys march toward economic development and independence, it is essential that a balance protecting small industries and large scale businesses be maintained. (Distilleria Washington, Inc. vs. La Tondea Distillers, Inc., 280 SCRA 116 [1997]) The Supreme Court takes judicial notice of the standard practice today that the cost of the container is included in the selling price of the product such that the buyer of liquor or any such product from any store is not required to return the bottle nor is the liquor placed in a plastic container that possession of the bottle is retained by the store. (Twin Ace Holdings Corporation vs. Court of Appeals, 280 SCRA 884 [1997]) o0o
G.R. No. 183404. October 13, 2010.*

BERRIS AGRICULTURAL CO., INC., petitioner, vs. NORVY ABYADANG, respondent.

Mercantile Law; Law on Trademarks; Words and Phrases; Definition of a Mark; Collective Mark and Trademark.R.A. No. 8293 defines a mark as 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. It also defines a collective mark as any visible sign designated as such in the application for registration and capable of distinguishing the origin or any other common characteristic, including the quality of

_______________ *** Additional member in lieu of Associate Justice Antonio T. Carpio per Special Order No. 897 dated September 28, 2010. **** Additional member in lieu of Associate Justice Roberto A. Abad per Special Order No. 905 dated October 5, 2010. ***** Additional member in lieu of Associate Justice Diosdado M. Peralta per Special Order No. 904 dated October 5, 2010. * SECOND DIVISION. 197

VOL. 633, OCTOBER 13, 2010 197 Berris Agricultural co., Inc. vs. Abyadang goods or services of different enterprises which use the sign under the control of the registered owner of the collective mark. On the other hand, R.A. No. 166 defines a trademark as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by another. A trademark, being a special property, is afforded protection by law. But for one to enjoy this legal protection, legal protection ownership of the trademark should rightly be established. Same; Same; The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor of the goods made available to the purchasing public.The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor of the goods made available to the purchasing public. Section 122 of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. R.A. No. 8293, however, requires the applicant for registration or the registrant to file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the filing of the application for registration; otherwise, the application shall be refused or the mark shall be removed from the register. Same; Same; Two tests in determining similarity and likelihood of confusionthe Dominancy Test and the Holistic or Totality Test.In determining similarity and likelihood of confusion, jurisprudence has developed teststhe Dominancy Test and the Holistic or Totality Test. The

Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market
198

19 8

SUPREME COURT REPORTS ANNOTATED

Berris Agricultural co., Inc. vs. Abyadang segments. In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other. Remedial Law; Administrative Agencies; Administrative agencies, such as the Intellectual Property Office (IPO), by reason of their special knowledge and expertise over matters falling under their jurisdiction are in a better position to pass judgment thereon; Their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant.The protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.

Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks. We rule in favor of Berris. Berris was able to establish that it was using its mark D-10 80 WP since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003,40 and which stated that it had an attachment as Annex B sales invoices and official receipts of goods bearing the
_______________ 35 CA Rollo, p. 205. 36 Sec. 9. Registration and Licensing.No pesticides, fertilizer, or other agricultural chemical shall be exported, imported, manufactured, formulated, stored, distributed, sold or offered for sale, transported, delivered for transportation or used unless it has been duly registered with the FPA or covered by a numbered provisional permit issued by FPA for use in accordance with the conditions as stipulated in the permit. Separate registrations shall be required for each active ingredient and its possible formulations in the case of pesticides or for each fertilizer grade in the case of fertilizer. 37 Creating the Fertilizer and Pesticide Authority and Abolishing The Fertilizer Industry Authority. 38 CA Rollo, p. 204. 39 Id., at pp. 70-71. 40 Id., at p. 14. 208

20 SUPREME COURT REPORTS ANNOTATED 8 Berris Agricultural co., Inc. vs. Abyadang mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the certificate.41 What is more, the DAU is buttressed by the

Certification dated April 21, 200642 issued by the Bureau of Trademarks that Berris mark is still valid and existing. Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Berris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark D-10 80 WP earlier than its FPA registration in 2004. Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide D-10 80 WP within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first
_______________ 41 Gutierrez v. Mendoza-Plaza, G.R. No. 185477, December 4, 2009, 607 SCRA 807, 816-817; Calma v. Santos, G.R. No. 161027, June 22, 2009, 590 SCRA 359, 371. 42 CA Rollo, pp. 64, 66. 209

VOL. 633, OCTOBER 13, 2010 209 Berris Agricultural co., Inc. vs. Abyadang traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU. Therefore, Berris, as prior user and prior registrant, is the owner of the mark D-10 80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides
Sec. 147. Rights Conferred.

147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use.

Now, we confront the question, Is Abyadangs mark NS D -10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former? We answer in the affirmative. According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or cause confusion.
210

21 SUPREME COURT REPORTS ANNOTATED 0 Berris Agricultural co., Inc. vs. Abyadang In determining similarity and likelihood of confusion, jurisprudence has developed teststhe Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be

registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.43 In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other.44 Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective packages, one cannot but notice that both have a common component which is D-10. On Berris package, the D-10 is written with a bigger font than the 80 WP. Admittedly, the D-10 is the dominant feature of the mark. The D-10, being at the beginning of the mark, is what is most remembered of it. Although, it appears in Berris certificate of registration in
_______________ 43 Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 531; McDonalds Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 106; McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434; 437 SCRA 10, 32 (2004). 44 Id.; Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 357. 211

VOL. 633, OCTOBER 13, 2010 211 Berris Agricultural co., Inc. vs. Abyadang the same font size as the 80 WP, its dominancy in the D -10 80 WP mark stands since the difference in the form does not alter its distinctive character.45 Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D-10 PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to occur. Undeniably, both

marks pertain to the same type of goodsfungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of D-10, as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present. This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM FUNGICIDE written underneath. Considering these striking similarities, predominantly the D10, the buyers of both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could be an upgraded formulation of the D-10 80 WP. Moreover, notwithstanding the finding of the IPPDG that the D-10 is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for
_______________ 45 R.A. No. 8293, Sec. 152.2. Sec. 152.2. The use of the mark in a form different from the form in which it is registered, which does not alter its distinctive character, shall not be a ground for cancellation or removal of the mark and shall not diminish the protection granted to the mark. 212

21 SUPREME COURT REPORTS ANNOTATED 2 Berris Agricultural co., Inc. vs. Abyadang which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted, 46 and considering its challenge by Abyadang with respect to the

meaning he has given to it, what remains is the fact that Berris is the owner of the mark D-10 80 WP, inclusive of its dominant feature D-10, as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadangs application for registration of the mark NS D-10 PLUS. Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods.47 On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.48
_______________ 46 Agpalo, supra note 25, citing Philippine Refining Co., Inc. v. Ng Sam, 115 SCRA 472, 476 (1982); Romero v. Maiden Form Brassiere, 10 SCRA 556, 561 (1964); and Masso Hermanos, S.A. v. Director of Patents, 94 Phil. 136, 138-139 (1953). 47 McDonalds Corporation v. MacJoy Fastfood Corporation, supra note 43, at p. 114, citing Faberge Inc. v. Intermediate Appellate Court, 215 SCRA 316, 320 (1992); and Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapania, 108 Phil. 833, 836 (1960). 48 Amigo Manufacturing, Inc. v. Cluett Peabody Co., Inc., 406 Phil. 905, 916; 354 SCRA 434, 445 (2001). 213

VOL. 633, OCTOBER 13, 2010 213 Berris Agricultural co., Inc. vs. Abyadang

Inasmuch as the ownership of the mark D-10 80 WP fittingly belongs to Berris, and because the same should not have been cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation.
G.R. No. 185917. June 1, 2011.*

FREDCO MANUFACTURING CORPORATION, petitioner, vs. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), respondents.
Trademarks; Before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration; Harvard Universitys Registration of the name Harvard is based on home registration which is allowed under Section 37 of R.A. No. 166.Under Section 2 of Republic Act No. 166, as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark Harvard Veritas Shield Symbol before its application for registration of the mark Harvard with the then Philippine Patents Office. However, Harvard Universitys registration of the name Harvard is based on home registration which is allowed under Section 37 of R.A. No. 166. Same; What Fredco has done in using the mark Harvard and the words Cambridge, Massachusetts, USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill
_______________ * SECOND DIVISION. 233

VOL. 650, JUNE 1, 2011 233 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) of Harvard University without the latters consent.Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act, the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by others. What Fredco has done in using the

mark Harvard and the words Cambridge, Massachusetts, USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill of Harvard University without the latters consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c) of R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of the mark Harvard because the registration was obtained in violation of Section 4 of R.A. No. 166. Same; Paris Convention; The Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine Nationals.This Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals. Same; Same; Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name Harvard even without registration of such trade name in the Philippines.Harvard is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name Harvard even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name Harvard without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark Harvard, that its products or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latters consent.
234

23 4

SUPREME COURT REPORTS ANNOTATED Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University)

Same; Same; The essential requirement under article 6bis of the Paris Convention 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.In Mirpuri, 318 SCRA 516 (1999), the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the trademark to be protected must be well -known in the country where protection is sought. The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use. The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the courts. Same; Same; Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines.Section 123.1(e) of R.A. No. 8293 now categorically states that a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here, cannot be registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Same; Same; While under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule.Since any combination of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule.

The Issue The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO. The Ruling of this Court The petition has no merit. There is no dispute that the mark Harvard used by Fredco is the same as the mark Harvard in the Harvard Veritas Shield Symbol of Harvard University. It is also not disputed that Harvard

University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark Harvard in commerce since 1872. It is also established that Harvard University has been using the marks Harvard and Harvard Veritas Shield Symbol for Class 25 goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name and mark Harvard in at least 50 countries. On the other hand, Fredcos predecessor-in-interest, New York Garments, started using the mark Harvard in the Philippines on ly in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to register the mark Harvard, which application was approved in 1988. Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks. Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered, it must
_______________ 14 An Act to Provide for the Registration and Protection of Trade-Marks, Trade-Names and Service-Marks, Defining Unfair Competition and False Markings and Providing Remedies Against the Same, and For Other Purposes. 243

VOL. 650, JUNE 1, 2011 243 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark Harvard Veritas Shield Symbol before its application for registration of the mark Harvard with the then Philippine Patents Office. However, Harvard Universitys registration of the name Harvard is based on home registration

which is allowed under Section 37 of R.A. No. 166.15 As pointed out by Harvard University in its Comment:
Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark sought to be registered has already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have used the mark or trade name in this country.16

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard Universitys registration is based on home registration for the mark Harvard Veritas Shield for Class 25.17 In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 [m]arks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x x, which does not require
_______________ 15 Decision of the Bureau of Legal Affairs, Rollo, p. 154; Decision of the Director General, Rollo, p. 122. 16 Id., at p. 157. 17 Id., at p. 122. 18 Intellectual Property Code. 244

24 SUPREME COURT REPORTS ANNOTATED 4 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) actual prior use of the mark in the Philippines. Since the mark Harvard Veritas Shield Symbol is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the Philippines has been cured by Section 239.2.19 In addition, Fredcos registration was already cancelled on

30 July 1998 when it failed to file the required affidavit of use/nonuse for the fifth anniversary of the marks registration. Hence, at the time of Fredcos filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the mark Harvard. There are two compelling reasons why Fredcos petition must fail. First, Fredcos registration of the mark Harvard and its identification of origin as Cambridge, Massachusetts falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark Harvard and is also located in Cambridge, Massachusetts. This can easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line:
_______________ 19 Harvard University filed Affidavits of Use for the 5th and 10th Anniversaries of Registration No. 56561. Decision of the Director General, Rollo, p. 132. 245

VOL. 650, JUNE 1, 2011 245 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) Fredcos registration of the mark Harvard should not have been allowed because Section 4(a) of R.A. No. 166 prohibits the registration of a mark which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x. Section 4(a) of R.A. No. 166 provides:
Section 4. Registration of trade-marks, trade-names and servicemarks on the principal register.There is hereby established a register of trade-mark, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:

(a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b) x x x (emphasis supplied)

Fredcos use of the mark Harvard, coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false connection with Harvard University. On this ground alone, Fredcos registration of the mark Harvard should have been disallowed. Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO why it used the mark Harvard on its oblong logo with the words Cambridge, Massachusetts, Established in 1936, and USA. Fredco now claims before this Court that it used these words to evoke a lifestyle or suggest a desirable aura of petitioners clothing lines. Fredcos belated justification merely confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and popularity of Harvard
246

24 SUPREME COURT REPORTS ANNOTATED 6 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) University, and thus appropriating part of Harvard Universitys goodwill without the latters consent. Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from commercial exploitation of their

goodwill by others.21 What Fredco has done in using the mark Harvard and the words Cambridge, Massachusetts, USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill of Harvard University without the latters consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c)22 of R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of the mark Harvard because the registration was obtained in violation of Section 4 of R.A. No. 166. Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state:
_______________ 20 Roger E. Schechter and John R. Thomas, Intellectual Property: The Law of Copyrights, Patents and Trademarks (2003), p. 603. 21 Id., at p. 263. 22 Section 17(c) of R.A. No. 166, as amended, provides: Grounds for cancellation.Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds: (a) x x x xxxx (c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof; x x x. (Emphasis supplied) 247

VOL. 650, JUNE 1, 2011 247 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University)
ARTICLE 6bis (i) 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, imitation or translation, liable to create confusion or a mark considered by the competent authority of the country as being already the mark of a person entitled to the benefits of the present 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. ARTICLE 8 A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark. (Emphasis supplied)

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals.23 Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:
Section 37. Rights of foreign registrants.Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as
_______________ 23 See La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., 214 Phil. 332; 129 SCRA 373 (1984). 248

24 8

SUPREME COURT REPORTS ANNOTATED

Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. xxxx

Trade-names of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks.24 x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected without the obligation of filing or registration. Harvard is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name Harvard even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name Harvard without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark Harvard, that its produ cts or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latters consent. Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several cases.25 On 20 No_______________ 24 The original version of R.A. No. 166 already contains this provision. 25 Mirpuri v. Court of Appeals, 376 Phil. 628; 318 SCRA 516 (1999); Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermedi249

VOL. 650, JUNE 1, 2011 249 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) vember 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing the Director of Patents to reject,

pursuant to the Paris Convention, all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners.36 The Memorandum states:
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.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines obligations under the Paris Convention, thus:
_______________ ate Appellate Court, 241 Phil. 1029; 158 SCRA 233 (1988); La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23. 26 Mirpuri v. Court of Appeals, id. 27 Id., at pp. 656-657; p. 544. 250

25 SUPREME COURT REPORTS ANNOTATED 0 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University)

1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration; (d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.
251

VOL. 650, JUNE 1, 2011 251 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) x x x x38 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the trademark to be protected must be well-known in the country where protection is sought.39 The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use.30 The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the courts.31 To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be registered or used in the Philippines.32 All that is required is that the mark is well-known internationally and in the Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33
The fact that respondents marks are neither registered nor used in the Philippines is of no moment. The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if
_______________ 28 Id., at pp. 658-659; pp. 545-546. Also cited in La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23. 29 Id., at p. 656; p. 543. 30 Id. 31 Id. 32 Sehwani, Incorporated v. In-N-Out Burger, Inc., G.R. No. 171053, 15 October 2007, 536 SCRA 225. 33 Id. 252

25 2

SUPREME COURT REPORTS ANNOTATED Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University)

the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides: (3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark: (i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State: (ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or (iii) that the mark is well known by the public at large in the Member State.34 (Italics in the original decision; boldface supplied)

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here, cannot be registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides:
Rule 102. Criteria for determining whether a mark is well-known.In determining whether a mark is well-known, the following criteria or any combination thereof may be taken into account: (a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;
_______________ 34 Id., at p. 240. 253

VOL. 650, JUNE 1, 2011 253 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) (b) the market share, in the Philippines and in other countries, of the

goods and/or services to which the mark applies; (c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark; (e) the extent to which the mark has been registered in the world; (f) the exclusivity of registration attained by the mark in the world; (g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world; (i) the commercial value attributed to the mark in the world; (j) the record of successful protection of the rights in the mark; (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied)

Since any combination of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally wellknown marks are the exceptions to this rule. In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that:
Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as the new college, the institution was named Harvard College on 13 March
254

25 4

SUPREME COURT REPORTS ANNOTATED

Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) 1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a university rather than college occurred in the new Massachusetts

Constitution of 1780. Records also show that the first use of the name HARVARD was in 1638 for educational services, policy courses of instructions and training at the university level. It has a Charter. Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the Appellants use thereof was decades, even centuries, ahead of the Appellees. More importantly, the name HARVARD was the name of a person whose deeds were considered to be a cornerstone of the university. The Appellants logos, emblems or symbols are owned by Harvard University. The name HARVARD and the logos, emblems or symbols are endemic and cannot be separated from the institution.35

Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate. The mark Harvard College was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks Harvard and Harvard Ve ri tas Shield Symbol were first used in commerce in the United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant
_______________ 35 Rollo, pp. 129-130. 255

VOL. 650, JUNE 1, 2011 255 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard University) jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996, the mark Harvard was registered on December 9, 1997 and the mark Harvard Ve ri tas Shield

Symbol was registered on September 30, 1997.36

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled that the mark Harvard is a well-known mark. This Decision, which cites among others the numerous trademark registrations of Harvard University in various countries, has become final and executory. There is no question then, and this Court so declares, that Harvard is a well-known name and mark not only in the United States but also internationally, including the Philippines. The mark Harvard is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark Harvard in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark which may disparage or
_______________ 36 Id., at pp. 112-113. 37 Id., at pp. 1251-1263. Penned by Bureau of Legal Affairs Director Estrellita Beltran-Abelardo. 38 IPC No. 14-2008-00107; Decision No. 2008-232. 256

25 SUPREME COURT REPORTS ANNOTATED 6 Fredco Manufacturing Corporation vs. President and Fellows of Harvard College (Harvard

University) falsely suggest a connection with persons, living or dead, institutions, beliefs x x x. WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 103394. SO ORDERED. Nachura, Peralta, Abad and Mendoza, JJ., concur. Petition denied, judgment and resolution affirmed. Note.An applicants declaration in his Comment and Memorandum before the Supreme Court that he has not filed the Declaration of Actual Use (DAU) as mandated by pertinent provisions of R.A. No. 8293 is a judicial admission that he has effectively abandoned or withdrawn any right or interest in his trademark. (Mattel, Inc. vs. Francisco, 560 SCRA 504 [2008])
G.R. No. 169440. November 23, 2011.*

GEMMA ONG a.k.a. MARIA TERESA GEMMA CATA-CUTAN, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent. Gemma is guilty of violating Section 155 in relation to Section 170 of Re- public Act No. 8293 Gemma was charged and convicted of violating Section 155 in relation to Section 170 of Republic Act No. 8293, or the Intellectual Property Code of the Philippines.
Section 155. Remedies; Infringement.Any person who shall, without the consent of the owner of the registered mark: 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered

mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material. (Sec. 22, R.A. No 166a) Section 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1. (Arts. 188 and 189, Revised Penal Code.) (Emphases supplied.)
119

VOL. 661, NOVEMBER 23, 2011 119 Ong vs. People A mark 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.37 In McDonalds Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc.,38 this Court held:
To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.

A mark is valid if it is distinctive and not barred from registration. Once registered, not only the marks validity, but also the registrants ownership of the mark is prima facie presumed.39 The prosecution was able to establish that the trademark Marlboro was not only valid for being neither generic nor descriptive, it was also exclusively owned by PMPI, as evidenced by the certificates of registration issued by the Intellectual Property

Office of the Department of Trade and Industry.40 Anent the element of confusion, both the RTC and the Court of Appeals have correctly held that the counterfeit cigarettes seized from Gemmas possession were intended to confuse and deceive the public as to the origin of the cigarettes intended to be sold, as they not only bore PMPIs mark, but they were also packaged almost exactly as PMPIs products.41
UNFAIR COMPETITION

Solid Triangle Sales Corporation vs. The Sheriff of RTC QC, Br. 93 G.R. No. 144309. November 23, 2001.
Intellectual Property Code; Unfair Competition; There is no unfair competition under Section 168 of the Intellectual Property Code where a person did not pass off the subject goods as that of another.We disagree with petitioners and find that the evidence presented before the trial court does not prove unfair competition under Section 168 of the Intellectual Property Code. Sanly Corporation did not pass off the subject goods as that of another. Indeed, it admits that the goods are genuine Mitsubishi photographic paper, which it purchased from a supplier in Hong Kong. Petitioners also allege that private respondents made it appear that they were
494

49 SUPREME COURT REPORTS ANNOTATED 4 Solid Triangle Sales Corporation vs. The Sheriff of RTC QC, Br. 93 duly authorized to sell or distribute Mitsubishi Photo Paper in the Philippines. Assuming that this act constitutes a crime, there is no proof to establish such an allegation.

We now turn to the question of whether the facts, as presented before the trial court, constitute an offense. Private respondents are alleged to have committed unfair competition in violation of Section 168 of the Intellectual Property

Code, which states:

SEC. 168. Unfair Competition, Rights, Regulation and Remedies.168.1 A person who has identified in the mind of the public goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. 168.2 Any person who shall employ deception or any other means contrary to good faith by which he shall pass 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 shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
_______________
17

Id., at 303-304. 507

VOL. 370, NOVEMBER 23, 2001 507 Solid Triangle Sales Corporation vs. The Sheriff of RTC QC, Br. 93
168.3 In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition: 2. (a) Any person, who is selling his goods and gives 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 lie purpose; 3. (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the service of another who has identified such services in the mind of the public; or 4. (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature

calculated to discredit the goods, business or services of another. 168.4 The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis.

The same law, in Section 170, provides the penalty for violation of Section 168:
SEC. 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (50,000) to Two hundred thousand pesos (200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1.

Petitioners submit that the importation of even genuine goods can constitute a crime under the Intellectual Property Code so long as fraud or deceit is present. The intent to deceive in this case, according to petitioners, is patent from the following undisputed facts: 5. (a) Before marketing its product, the respondents totally obliterated and erased the Emulsion Number and Type that was printed on the
508

50 SUPREME COURT REPORTS ANNOTATED 8 Solid Triangle Sales Corporation vs. The Sheriff of RTC QC, Br. 93 9. box/carton of the product because of which the source of the goods can no longer be traced. 10. (b) Respondents even covered the boxes with newspapers to conceal true identity. 11. (c) Being also engaged in the sale of photo equipments [sic] and having had the occasion of participating in the same exhibit with petitioner Solid Triangle several times already, respondents certainly knew that petitioner Solid Triangle is the sole and exclusive importer and distributor of Mitsubishi Photo Paper. 12. (d) Two agents of the EIIB were also able to confirm from a salesgirl of respondents that substantial quantity of stocks of

Mitsubishi Photo Paper are available at respondents store and that the products are genuine, as they are duly authorized to sell and distribute it to interested customers. 13. (e) No better proof of unfair competition is the seizure of the goods, 451 boxes of Mitsubishi photographic color paper.18 Petitioners further expound: 3. 47. We may categorize the acts of the respondents as underground sales and marketing of genuine goods, undermining the property rights of petitioner Solid Triangle. The Court of Appeals itself recognized the rights of a dealer. The acts of the respondents were made to appropriate unjustly the goodwill of petitioner Solid Triangle, and goodwill is protected by the law on unfair competition. 4. 48. Petitioner Solid Triangle has established a trade or business in which it had acquired goodwill and reputation that will be protected, and so, to permit respondents to continue importing and distributing Mitsubishi Photo Paper, would be to countenance the unlawful appropriation of the benefit of a goodwill which petitioner Solid Triangle has acquired and permit the respondent to grab the reputation or goodwill of the business of another. 5. 49. x x x petitioners have a valid cause to complain against respondents for the criminal violation of the Intellectual Property Law when the latter made it appear that they were duly authorized to sell or distribute Mitsubishi Photo Paper in the Philippines, when in truth and in fact they were not, and when they were hiding their importation from the petition_______________
18

Id., at 43-44. 509

VOL. 370, NOVEMBER 23, 2001 509 Solid Triangle Sales Corporation vs. The Sheriff of RTC QC, Br. 93 1. ers by such acts as removing the Emulsion Number and Type

and covering the boxes with old newspapers.19 We disagree with petitioners and find that the evidence presented before the trial court does not prove unfair competition under Section 168 of the Intellectual Property Code. Sanly Corporation did not pass off the subject goods as that of another. Indeed, it admits that the goods are genuine Mitsubishi photographic paper, which it purchased from a supplier in Hong Kong.20 Petitioners also allege that private respondents made it appear that they were duly authorized to sell or distribute Mitsubishi Photo Paper in the Philippines. Assuming that this act constitutes a crime, there is no proof to establish such an allegation.
Compania General de Tabacos de Filipinas vs. Sevandal

In an Order dated April 30, 1996, the Office of Legal Affairs of the DTI ruled that there was no similarity in the general appearance of the products of the parties and that consumers would not be misled. In the same order, the DTI partially granted petitioners prayer for the issuance of a writ of preliminary injunction. The pertinent portions of the DTI Order state:
DETERMINATION OF SIMILARITY IN GENERAL APPEARANCE AND LIKELIHOOD OF CONFUSION; PRODUCT COMPARISON; USUAL PURCHASER x x x [L]et us now determine if there is similarity in general appearance between Tabacalera products and Respondents products, such that it will likely mislead, confuse or deceive the usual purchasers of cigars into buying Respondents products thinking that what they are buying are the Tabacalera products they intended to buy. The competing products should be viewed in their totality. But certain features, have to be excluded first. That is what the Supreme Court did in determining similarity between SAN MIGUEL PALE PILSEN (of San Miguel Corporation) and BEER PALE PILSEN (of Asia Brewery, Inc.) in the case of Asia Brewery, Inc. vs. C.A. and San Miguel Corp. (G.R. No. 103543, prom. July 5, 1993, 224 SCRA 437). In said case, the Supreme Court found that the two competing beer products have certain features in common. Therefore, the two competing products are similar as far as those features are concerned. But the Supreme Court excluded said features.

Apparently the Court wanted to distinguish between similarity as a matter of fact and similarity as a matter of law, the latter having a limited scope
_______________ 15 Id., at pp. 91-92. 600

60 SUPREME COURT REPORTS ANNOTATED 0 Compania General de Tabacos de Filipinas vs. Sevandal considering the many exclusions that have to be made. Hereunder are the said features and the reasons cited by the Supreme Court for their exclusion: COMMON REASONS FOR EXCLUSION FEATURES 1. The It is a standard type of bottle and container is therefore lacks exclusivity. It is of steinie functional or common use. It is bottle. universally used. 2. The color It is a functional feature. Its function is of the to prevent the transmission of light into bottle is the said bottle and thus protect the beer amber. inside the bottle. 3. The This phrase is a generic one even if phrase pale included in their trademarks. pilsen is carried in their respective trademar k. 4. The It is a metrication and standardization bottle has a requirement of the defunct Metric capacity System Board (now a function of the of 320 Bureau of Product Standards, DTI). ML and is printed on the label. 5. The It is the most economical to use on the color of label and easiest to bake in the furnace. the words Hence, a functional feature.

and design on the label is white. 6. It is the usual configuration of labels. Rectangular shape of the label. 7. The It is commonly and universally used. bottles shape is round with a neck.
In the same case of Supreme Court stated the following, citing Callman, Unfair Competition, Trademarks and Monopolies:
601

VOL. 593, JULY 23, 2009 601 Compania General de Tabacos de Filipinas vs. Sevandal
Protection against imitation should be properly confined to nonfunctional features. Even if purely functional elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first user cannot claim secondary meaning protection. Nor can the first user predicate his claim in reliance of any such unpatented functional feature, even at large expenditure of money. Following the Supreme Courts way of determining similarity, OLA will exclude the features which arise from industry practices of cigar manufacturers worldwide, features commonly used by cigar manufacturers, standard features, functional features, features arising from labeling rights and obligations, and generic words and phrases. All of these features have been listed and/or discussed above. Now this needs clarification. When we say that we are excluding the logo because it is a functional and universal feature, what we mean to say is that, the fact that both products bear a logo (and therefore they are similar in that respect), will be excluded; but the design, words, drawings of the respective logo of the contending parties will be considered. This clarification is also true for the other excluded features. Before we view the products in their totality, we will first compare the products as to their respective details. The competing products of the Parties consist of around thirty-two (32) wooden boxes. We note the following glaring

differences/distinctions: 1. As to the logo engraved on the top and/or back of the cover of the box: TABACALERAS: Tabacalera uses two variants of their logo, one for the ordinary plywood boxes and another for the narra boxes. The logo on the ordinary plywood box is as follows: There are word/phrases thereon, namely: 1st linethe brand TABACALERA (in big letters); 2nd linethe representation THE FINEST CIGARS SINCE 1881; 3rd linethe representation HAND MADE 100% TOBACCO; 4th linethe address MANILA, PHILIPPINES; 5th linethe code A-4-2.
602

60 SUPREME COURT REPORTS ANNOTATED 2 Compania General de Tabacos de Filipinas vs. Sevandal
Between the 2nd line and 3rd line is inscribed the crest and coat of arms of Tabacalera which consists of a shield placed vertically, and divided into 4 parts with inscriptions/drawings in each part. Within the center of the shield is an oval vertically placed with drawings in it. The crest consists of the uppermost part of a watchtower used in ancient times in watching for enemies coming. As regards the logo on the narra boxes, it is oblong or egg-shaped, in two parallel lines interrupted at its sides with semi-oblong two parallel lines and inscripted within such latter parallel lines on the left side is 100% TABACO and on the right side HECHO A MANO. On the lower portion between the oblong lines are the words COMPANIA GENERAL DE TABACOS DE FILIPINAS-MANILA, PHILIPPINES, A-4-2. Within the center of the smaller oblong is inscribed the crest and coat (described already above). At each side of the crest/ coat are tobacco leaves tied together. On top of the crest is the corporate name LA FLOR DE LA ISABELA and this makes the logo confusing because it does not explain the respective role of the two firms mentioned in the logo, such as which one is the manufacturer, the distributor, the licensor, licensee, and trademarks owner. RESPONDENTS: A bar curved into a U-shape. It is flanked at the bottom and on its sides with tobacco leaves curved into a U also and joined together as in a laurel. Engraved at the center of said bar is the coat consists of a

shield, on top of which is the crest consists of a princes crown with a cross on top. The shield is divided at its center by a line drawn horizontally with small circles marked at intervals. At the upper portion of said dividing line is a rooster (adopted by Mr. Ripoll from the coat of arms of his clanExh. 48) and the lower portion contains three tobacco leaves (representing Mr. Ripolls 3 sons) joined into one. Encircling the crest and coat is the corporate name TABAQUERIA DE FILIPINAS, INC. as well as the brand FLOR DE MANILA. Immediately below the leaves shaped as in a laurel is the phrase HECHO A MANO 100% TOBACO.
603

VOL. 593, JULY 23, 2009 603 Compania General de Tabacos de Filipinas vs. Sevandal
2. As to the brand of the product: TABACALERAS: The brand TABACALERA is printed in big white Roman letters with black shadows on a red rectangular background, and the latter is set over a gold and red rectangular background with a design which appears to be an inverted letter Z leaning to the right side, and said Z is used repeatedly forming a chain that surrounds the said red background. Said Z also fills the left and right sides of the label. The same brand and markings appear on three sides of the box. The back side bears the Government Warning that cigar smoking is dangerous to health. The brand FLOR DE MANILA is not used on Tabacaleras products except on a cardboard pack of cigars, which is just slightly bigger than a pack of 100 mm cigarettes. (Exh. DD). RESPONDENTS: The brand FLOR DE MANILA is printed in red letters with black shadows on a white rectangular background, and the latter is set over a gold rectangular background filled with a red design that looks like the letter P with its head touching the ground. These brand and markings appear on two sides of the box. The other two sides are occupied by the seal of guaranty and by the said Government Warning. Both Complainants and Respondents have no trademark registration yet of the brand Flor de Manila. 3. As to markings on edges of ordinary plywood box: TABACALERAS: The phrase FLOR FINA is printed in red Roman letters over a white rectangular background, and the latter is set over a red background with 2 parallel gold lines and the above-mentioned Z design in gold used

repeatedly forming a straight chain. A tiny company logo colored blue and yellow is marked at intervals. RESPONDENTS: The phrase TABACO FINO is printed in red letters with strokes that resemble those in Chinese letters, on a white rec604

60 SUPREME COURT REPORTS ANNOTATED 4 Compania General de Tabacos de Filipinas vs. Sevandal tangular background, and the latter is set over a gold background with red designs that look like ornate letters X and J. A tiny company logo is marked at intervals.
4. As to seal of guaranty. TABACALERAS: Colored green and white; with the phrase REPUBLIC OF THE PHILIPPINES in big letters and the phrase sello de garantia de la Flor de la Isabela, Inc.; pasted horizontally at the middle of the left portion of the cigar box if viewed from its top. RESPONDENTS: Colored gold and red; with the phrase in big letters sello de garantia; bears in big print the company logo; pasted vertically at the middle of the left portion of the cigar box if viewed from its top. 5. As to predominant colors: TABACALERAS: Red, gold, and green, in that order. Has blue and yellow. RESPONDENTS: Gold and red, in that order. No green, blue and yellow. 6. Other differences/distinctions Tabacalera products have the following features: a. The corporate name LA FLOR DE LA ISABELA (engraved on the narra wood boxes; also printed on the seal of guaranty). b. The brand TABACALERA surrounded by said Z design. c. The representation THE FINEST CIGARS SINCE 1881. d. The address MANILA, PHILIPPINES. e. The code A-4-2. f. The phrase REPUBLIC OF THE PHILIPPINES in the seal of guaranty. Below said phrase is a mountain which resembles the mountain printed in the old Philippine money. This appears to be a misrepresentation that the

605

VOL. 593, JULY 23, 2009 605 Compania General de Tabacos de Filipinas vs. Sevandal Philippine government is a co-guarantor in the seal of guaranty. This seal of guaranty was possibly copied from the seal of guaranty of Cuban-made boxes of cigars. But in Cuba, the government really guarantees the cigars made in Cuba because cigars are one of the main exports of that country. In the Philippines, the government does not guaranty cigars made in the Philippines.
g. The phrase FLOR FINA with the said Z design.\ These seven (7) features are NOT found in Respondents products. One of the rules in adjudicating unfair competition cases was laid down by the Supreme Court in the case of Del Monte Corp. vs. C.A. et al. (181 SCRA 410) as follows: We note that respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the condition under which it is usually purchased. Among those, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought after deliberate, comparative and analytical investigation. But mass products, low priced articles as in wide use, and the matters of everyday purchase requiring frequent replacement are bought by the causal consumer without great care. Certainly, not everybody buys cigars. Very few people buy cigars for they are expensive, have health implications, and its smoke annoys non-smokers. It is really not the sari-sari store variety. OLA takes judicial notice that even big department stores and malls do not ordinarily sell cigars. The usual purchasers of cigars are older people not necessarily an elder or professional, besides those cigar aficionados and cigar lovers, who are able and willing to pay and are capable of discerning the products they buy. Definitely the impulse
606

60 SUPREME COURT REPORTS ANNOTATED 6 Compania General de Tabacos de Filipinas vs. Sevandal buyers (those who make a very quick decision (e.g., 6 seconds) to buy a certain product) are not the usual purchasers of cigars.
The ordinary purchasers must be thought of as having, and credited with, at least a modicum of intelligence to be able to see the obvious differences between the two trademarks in question. (Fruit of the Loom, Inc. vs. C.A., 133 SCRA 405). From this Supreme Court decision we can say that if the buyer can see the obvious differences between two trademarks, there is more reason for him to see the obvious differences of the whole of the two products themselves even if sold at a glance. Viewing briefly the competing products in their totality, the two are readily distinguished by their respective brand as appearing in the box: TABACALERA is the brand of the Tabacalera products while FLOR DE MANILA is the brand of Respondents products. In fact, per Certification of BIR dated March 15, 1994, Flor de Manila is the brand registered by the Respondents with said bureau (Annex B, Answer). The Complainants allege in the Complaint (Par. 1.12) that Respondents are using the word TABAQUERIA as the brand of their products. This allegation is belied by an inspection of the boxes of Respondentsnone of them shows that the word TABAQUERIA was detached from the firm name TABAQUERIA DE FILIPINAS, INC. and used separately as a brand. Also readily distinguishing the two products are their respective distinctive logo: Tabacaleras logo is quite big and ornate while Respondents logo is quite small and simple. Their respective seal of guaranty are also conspicuous. Tabacaleras seal of guaranty is colored green and white and pasted horizontally while that of Respondents is colored gold and red and pasted vertically. The other glaring differences between the two, which we have listed above, are revealed at once upon a brief look at the competing products. Confusion becomes more remote when we consider the usual buyers of cigars. We have already discussed that above. They know their brand and they will not be confused by the various words, marks, and designs on the products. This is specially true for purchasers who have been using Tabacalera products for a long time (Tabacalera products have been available since 1881 [per logo of Tabacalera] or 1917 [per Complaint]), and therefore know very well their favorite brand.
607

VOL. 593, JULY 23, 2009

607

Compania General de Tabacos de Filipinas vs. Sevandal

If they switch to Respondents products, it is not because they are deceived and confused but because they find Respondents products to their taste. We should also consider that cigars are expensive. Hereunder are sample prices of Respondents products (Exhs. EEE and III): a. Chest Coronas Largas 25 P/ 619.75 b. Corona 50 739.75 c. Corona Largas 50 959.75 d. Corona Humidor De Luxe 50 1,749.75 Tabacalera products are priced higher. The point we are driving at is that with these high prices (which are like prices of writs watches, electric fans, tape recorders, and other electrical/electronic appliances), the usual purchasers will be cautious in buying and he will give the product he is buying that examination that corresponds to the amount of money that he will part with. Therefore, there is definitely no similarity in the general appearance of the competing products and hence there is no likelihood that purchasers will be [misled], deceived and confused into buying Respondents products thinking that they are buying the Tabacalera products that they intended to buy. Complainants allege in their Complaint that they have been using the trademark (brand) FLOR DE MANILA for their products since 1992. However, Complainants presented only a pack of cigars made by La Flor de la Isabela, Inc., with the brand Flor de Manila, colored white and gray, and the size is just slightly bigger than a pack of 100 mm. cigarettes. (Exh. DD). Buyers cannot possibly make the mistake of buying Respondents wooden boxes of cigars thinking that what they are buying is this carton pack of cigars of La Flor de la Isabela, Inc. xxxx In view of all the foregoing, the injunction prayed for cannot be granted in toto but only partially, i.e., with respect to the barrel type of container, the existence of which has to be explained and justified further by Respondents, and certain features in the packaging which
608

60 SUPREME COURT REPORTS ANNOTATED 8 Compania General de Tabacos de Filipinas vs. Sevandal are confusingly similar to the containers/packaging Complainants products x x x.16 (Emphasis supplied.)

of

The DTI disposed of the complaint this way:

WHEREFORE: 1. Respondents are hereby enjoined and restrained from further manufacturing and using the wooden barrel type of container as container for their cigars (typified by Exh. DDD-1). However, current stocks thereof, which are in their finishedproduct state, now in possession of Respondents distributors or retailers may be sold/disposed of in the ordinary course of business, but those still in the possession of Respondents shall be transferred to the box containers. 2. In connection with the label used on the sides of the boxes (which contain the dominant colors gold and red), Respondents are ordered to: a. change either the gold or the red with another color (not blue); or b .maintain the said gold and red color combination but add another dominant color (not blue). This injunction no. 2 covers only products yet to be manufactured and not products which are already in the possession of Respondents distributors/retailers. This injunction is for the purpose only of making said label of Respondents very distinct. 3. In connection with the narra wood boxes, Respondents are ordered to make distinctive and conspicuous etchings/engravings on the top and/or sides of the said bozes. The etchings/engravings thereon (which are stripe/s) shall be transferred to other exterior parts of the boxes or done away with. This injunction no. 3 covers only products yet to be manufactured and not products which are already in their finished-product state and already in the possession of Respondents distributors/retailers. This injunct ion is for the purpose only of making said narra wood boxes of Respon_______________ 16 Id., at pp. 109-115, 119. 609

VOL. 593, JULY 23, 2009 609 Compania General de Tabacos de Filipinas vs. Sevandal dents very distinct, hence, the present boxes can no longer be used by Respondents unless the above-stated changes thereon, as herein ordered, are complied with. xxxx SO ORDERED.17

On June 10, 1996, petitioners filed a Motion for Reconsideration dated June 4, 199618 of the above Order contending that: (1) the DTI erroneously passed upon the entire

merits of the case where the only pending issue for resolution is the issuance of a preliminary injunction; (2) the findings of facts of the Order are not in accordance with the evidence presented by the parties; and (3) the DTI misapplied the law and jurisprudence applicable on the issues in the instant case. The Motion was denied by the DTI in an Order dated December 10, 1996.19 Petitioners claim that as a result of private respondents fraudulent and malicious entry into the market, Petitioners sales dropped by twenty-five [percent] (25%).34 Petitioners further aver that the writ of preliminary injunction is necessary as the general appearance of private respondents products is confusingly similar to that of petitioners products. Petitioners claim that this has resulted in a marked drop in their sales. Thus, petitioners argue that unless private respondents use similar marks, packaging, and labeling as that of petitio ners products, they will continue to suffer damages.35 Petitioners postulations are bereft of merit. Petitioners failed to present one iota of evidence in support of their allegations. They failed to present evidence that indeed their sales dropped by an alleged 25% and that such losses resulted from the alleged infringement by private respondents. Without presenting evidence to prove their allegations, petitioners arguments cannot be given any merit.
G.R. No. 164324. August 14, 2009.*

TANDUAY DISTILLERS, INC., petitioner, vs. GINEBRA SAN MIGUEL, INC., respondent.
Trademarks and Trade Names; Unfair Competition; Where there is a cloud of doubt over San Miguels exclusive right relating to the word Ginebra, such issue should be resolved after a full-blown trial.The issue that must be resolved by the trial court is whether a word like Ginebra can acquire a secondary meaning for gin products so as to prohibit the use of the word Ginebra by other gin manufacturers or sellers. This boils down to whether the word Ginebra is a generic mark that is

incapable of appropriation by gin manufacturers. In Asia Brewery, Inc. v. Court of Appeals (224 SCRA 437 [1993]), the Court ruled that pale pilsen are generic words, pale being the actual name of the color and pilsen being the type of beer, a light bohemian beer with a strong hops flavor that originated in Pilsen City in Czechoslovakia and became famous in the Middle Ages, and hence incapable of appropriation by any beer manufacturer. Moreover, Section 123.1(h) of the IP Code states that a mark cannot be registered if it consists exclusively of signs that are generic for the goods or services that they seek to identify. In this case, a cloud of doubt exists over San Miguels exclusive right relating to the word Ginebra. San Miguels claim to the exclusive use of the word Ginebra is clearly still in dispute because of Tanduays claim that it has, as others have, also registered the word Ginebra for its gin products. This issue can be resolved only after a full-blown trial.
116

11 6

SUPREME COURT REPORTS ANNOTATED

Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. Same; Same; Same; Same; The grant of a writ of preliminary injunction despite the lack of a clear and unmistakable right of the party seeking it constitutes grave abuse of discretion amounting to lack of jurisdiction.In Ong Ching Kian Chuan v. Court of Appeals (363 SCRA 145 [2001]), we held that in the absence of proof of a legal right and the injury sustained by the movant, the trial courts order granting the issuance of an injunctive writ will be set aside, for having been issued with grave abuse of discretion. We find that San Miguels right to injunctive relief has not been clearly and unmistakably demonstrated. The right to the exclusive use of the word Ginebra has yet to be determined in the main case. The trial courts grant of the writ of preliminary injunction in favor of San Miguel, despite the lack of a clear and unmistakable right on its part, constitutes grave abuse of discretion amounting to lack of jurisdiction. Without the submission of proof that the damage is irreparable and incapable of pecuniary estimation, a partys claim cannot be the basis for a valid writ of preliminary injunction.Based on the affidavits and market survey report submitted during the injunction hearings, San Miguel has failed to prove the probability of irreparable injury which it will stand to suffer if the sale of Ginebra Kapitan is not enjoined. San Miguel has not presented proof of damages incapable of pecuniary estimation. At most, San Miguel only claims that it has invested hundreds of millions over a period of

170 years to establish goodwill and reputation now being enjoyed by the Ginebra San Miguel mark such that the full extent of the damage cannot be measured with reasonable accuracy. Without the submission of proof that the damage is irreparable and incapable of pecuniary estimation, San Miguels claim cannot be the basis for a valid writ of preliminary injunction.

The CA upheld the trial courts ruling that San Miguel has sufficiently established its right to prior use and registration of the word Ginebra as a dominant feature of its trademark. The CA ruled that based on San Miguels extensive, continuous, and substantially exclusive use of the word Ginebra, it has become distinctive of San Miguels gin products; thus, a clear and unmistakable right was shown. We hold that the CA committed a reversible error. The issue in the main case is San Miguels right to the exclusive use of the mark Ginebra. The two trademarks Ginebra San Miguel and Ginebra Kapitan apparently differ when taken as a whole, but according to San Miguel, Tanduay appropriates the word Ginebra which is a dominant feature of San Miguels mark. It is not evident whether San Miguel has the right to prevent other business entities from using the word Ginebra. It is not settled (1) whether Ginebra is indeed the dominant feature of the trademarks, (2) whether it is a generic word that as a matter of law cannot be appropriated, or (3) whether it is merely a descriptive word that may be appropriated based on the fact that it has acquired a secondary meaning. The issue that must be resolved by the trial court is whether a word like Ginebra can acquire a secondary meaning for gin products so as to prohibit the use of the word Ginebra by other gin manufacturers or sellers. This boils down to whether the word Ginebra is a generic mark that is incapable of appropriation by gin manufacturers. In Asia Brewery, Inc. v. Court of Appeals,53 the Court ruled that pale pilsen are generic words, pale being the actual
_______________

52 Id., at p. 253. 53 G.R. No. 103543, 5 July 1993, 224 SCRA 437, 448. 134

13 SUPREME COURT REPORTS ANNOTATED 4 Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. name of the color and pilsen being the type of beer, a light bohemian beer with a strong hops flavor that originated in Pilsen City in Czechoslovakia and became famous in the Middle Ages, and hence incapable of appropriation by any beer manufacturer. 54 Moreover, Section 123.1(h) of the IP Code states that a mark cannot be registered if it consists exclusively of signs that are generic for the goods or services that they seek to identify. In this case, a cloud of doubt exists over San Miguels exclusive right relating to the word Ginebra. San Miguels claim to the exclusive use of the word Ginebra is clearly still in dispute because of Tanduays claim that it has, as others have, also registered the word Ginebra for its gin products. This issue can be resolved only after a full-blown trial. In Ong Ching Kian Chuan v. Court of Appeals,55 we held that in the absence of proof of a legal right and the injury sustained by the movant, the trial courts order granting the issuance of an injunctive writ will be set aside, for having been issued with grave abuse of discretion. We find that San Miguels right to injunctive relief has not been clearly and unmistakably demonstrated. The right to the exclusive use of the word Ginebra has yet to be determined in the main case. The trial courts grant of the writ of preliminary injunction in favor of San Miguel, despite the lack of a clear and unmistakable right on its part, constitutes grave abuse of discretion amounting to lack of jurisdiction. Prejudging the Merits of the Case Tanduay alleges that the CA, in upholding the issuance of the

writ of preliminary injunction, has prejudged the merits of the case since nothing is left to be decided by the trial court except the amount of damages to be awarded to San Miguel.56
_______________ 54 Id., at p. 449. 55 415 Phil. 365, 374-375; 363 SCRA 145, 154 (2001). 56 Rollo, Vol. II, p. 1590. 135

VOL. 596, AUGUST 14, 2009 135 Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. San Miguel claims that neither the CA nor the trial court prejudged the merits of the case. San Miguel states that the CA did not rule on the ultimate correctness of the trial courts evaluation and appreciation of the evidence before it, but merely found that the assailed Orders of the trial court are supported by the evidence on record and that Tanduay was not denied due process.57 San Miguel argues that the CA only upheld the trial courts issuance of the TRO and writ of preliminary injunction upon a finding that there was sufficient evidence on record, as well as legal authorities, to warrant the trial courts preliminary findings of fact.58 The instructive ruling in Manila International Airport Authority v. Court of Appeals59 states:
Considering the far-reaching effects of a writ of preliminary injunction, the trial court should have exercised more prudence and judiciousness in its issuance of the injunction order. We remind trial courts that while generally the grant of a writ of preliminary injunction rests on the sound discretion of the court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion. The discretion of the court a quo to grant an injunctive writ must be exercised based on the grounds and in the manner provided by law. Thus, the Court declared in Garcia v. Burgos: It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where

courts of law cannot afford an adequate or commensurate remedy in damages. Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be
_______________ 57 Id., at p. 1497. 58 Id., at p. 1440. 59 445 Phil. 369, 383-384; 397 SCRA 348, 360-361 (2003), citing Gov. Garcia v. Hon. Burgos, 353 Phil. 740; 291 SCRA 546 (1998). 136

13 6

SUPREME COURT REPORTS ANNOTATED Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. granted only when the court is fully satisfied that the law permits it and the emergency demands it. (Emphasis in the original)

We believe that the issued writ of preliminary injunction, if allowed, disposes of the case on the merits as it effectively enjoins the use of the word Ginebra without the benefit of a full -blown trial. In Rivas v. Securities and Exchange Commission,60 we ruled that courts should avoid issuing a writ of preliminary injunction which would in effect dispose of the main case without trial. The issuance of the writ of preliminary injunction had the effect of granting the main prayer of the complaint such that there is practically nothing left for the trial court to try except the plaintiffs claim for damages. Irreparable Injury Tanduay points out that the supposed damages that San Miguel will suffer as a result of Tanduays infringement or unfair competition cannot be considered irreparable because the damages are susceptible of mathematical computation. Tanduay invokes Section 156.1 of the IP Code61 as the basis for the computation of damages.62 San Miguel avers that it stands to suffer irreparable injury if the manufacture and sale of Tanduays Ginebra Kapitan are not enjoined. San Miguel claims that the rough estimate

_______________ 60 G.R. No. 53772, 4 October 1990, 190 SCRA 295, 305. 61 Section 156.1. The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant. 62 Rollo, Vol. II, pp. 1584-1585. 137

VOL. 596, AUGUST 14, 2009 137 Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. 63 of the damages it would incur is simply a guide for the trial court in computing the appropriate docket fees. San Miguel asserts that the full extent of the damage it would suffer is difficult to measure with any reasonable accuracy because it has invested hundreds of millions over a period of 170 years to establish goodwill and reputation now being enjoyed by the Ginebra San Miguel mark. 64 San Miguel refutes Tanduays claim that the injury which San Miguel stands to suffer can be measured with reasonable accuracy as the legal formula to determine such injury is provided in Section 156.1 of the IP Code. San Miguel reasons that if Tanduays claim is upheld, then there would never be a proper occasion to issue a writ of preliminary injunction in relation to complaints for infringement and unfair competition, as the injury which the owner of the mark suffers, or stands to suffer, will always be susceptible of mathematical computation.65
_______________ 63 Rollo, Vol. I, p. 307. San Miguels prayer in the Complaint filed with the trial court includes: xxx f. ordering the Defendant to pay plaintiff: i) damages in either the amount equal to double all profits made out of the

sale and distribution of Ginebra Kapitan and/or of Defendants other gin products bearing the mark Ginebra, the reasonable profit which plaintiff would have made had defendant not violated its intellectual property rights, or a reasonable percentage determined by this Honorable Court based upon the gross sales of Defendants infringing and/or unfairly competing products, as well as other pecuniary loss, estimated to be at least P25,000,000.00. ii) exemplary damages in an amount not less than P75,000,000.00 iii) Attorneys fees and expenses of litigation in an amount not less than P1,000,000.00; and iv) Costs of suits. 64 Rollo, Vol. II, pp. 1490-1491. 65 Id., at p. 1494. 138

13 SUPREME COURT REPORTS ANNOTATED 8 Tanduay Distillers, Inc. vs. Ginebra San Miguel, Inc. In Levi Strauss & Co. v. Clinton Apparelle, Inc.,66 this Court upheld the appellate courts ruling that the damages Levi Strauss & Co. had suffered or continues to suffer may be compensated in terms of monetary consideration. This Court, quoting Government Service Insurance System v. Florendo,67 held:
x x x a writ of injunction should never issue when an action for damages would adequately compensate the injuries caused. The very foundation of the jurisdiction to issue the writ of injunction rests in the probability of irreparable injury, inadequacy of pecuniary compensation and the prevention of the multiplicity of suits, and where facts are not shown to bring the case within these conditions, the relief of injunction should be refused.

Based on the affidavits and market survey report submitted during the injunction hearings, San Miguel has failed to prove the probability of irreparable injury which it will stand to suffer if the sale of Ginebra Kapitan is not enjoined. San Miguel has not presented proof of damages incapable of pecuniary estimation. At most, San Miguel only claims that it has invested hundreds of millions over a period of 170 years to establish goodwill and reputation now being enjoyed by the Ginebra San Miguel mark such that the full extent of the damage cannot be measured with reasonable accuracy. Without the submission of proof that the

damage is irre-parable and incapable of pecuniary estimation, San Miguels claim cannot be the basis for a valid writ of preliminary injunction. COPYRIGHT: Godines vs. Court of Appeals The question now arises: Did petitioners product infringe
_____________
5 6

Rollo, pp. 31-32. Ronquillo v. Court of Appeals, G.R. No. 43346, March 20 1991 195 SCRA 343

433.

VOL. 226, SEPTEMBER 13, 1993 Godines vs. Court of Appeals upon the patent of private respondent?

343

Samples of the defendants floating power tiller have been produced and inspected by the court and compared with that of the turtle power tiller of the plaintiff (see Exhibits H to H-28). In appearance and form, both the floating power tillers of the defendant and the turtle power tiller of the plaintiff are virtually the same. Defendant admitted to the Court that two (2) of the power tillers inspected on March 12, 1984, were manufactured and sold by him (see TSN, March 12, 1984, p. 7). The three power tillers were placed alongside with each other. At the center was the turtle power tiller of plaintiff, and on both sides thereof were the floating power tillers of defendant (Exhibits H to H-2). Witness Rodrigo took photographs of the same power tillers (front, side, top and back views for purposes of comparison (see Exhibits H-4 to H-28). Viewed from any perspective or angle, the power tiller of the defendant is identical and similar to that of the turtle power tiller of plaintiff in form, configuration, design and appearance. The parts or components thereof are virtually the same. Both have the circularlyshaped vacuumatic housing float, a pair of paddy in front, a protective water covering, a transmission box housing the transmission gears, a handle which is V-shaped and inclined upwardly, attached to the side of the vacuumatic housing float and supported by the upstanding G.I.

pipes and an engine base at the top midportion of the vacuumatic housing float to which the engine drive may be attached. In operation,
_______________ Studiengesellschaft Kohle mbH v. Eastman Kodak Company, 616 F. 2d 1315, at 1324 (1980). 8 Ibid. 9 Johnson and Johnson v. W.L. Gore and Assoc. Inc., 436 F. Supp. 704 at 728 (1977).
7

344

34 4

SUPREME COURT REPORTS ANNOTATED

Godines vs. Court of Appeals the floating power tiller of the defendant operates also in similar manner as the turtle power tiller of plaintiff. This was admitted by the defendant himself in court that they are operating on the same principles. (TSN, August 19, 1987, p. 13)10

Moreover, it also observed that petitioner also called his power tiller as a floating power tiller. The patent issued by the Patent Office referred to a farm implement but more particularly to a turtle hand tractor having a vacuumatic housing float on which the engine drive is held in place, the operating handle, the harrow housing with its operating handle and the paddy wheel protective covering.11 It appears from the foregoing observation of the trial court that these claims of the patent and the features of the patented utility model were copied by petitioner. We are compelled to arrive at no other conclusion but that there was infringement. Petitioners argument that his power tillers were different from private respondents is that of a drowning man clutching at straws. Recognizing that the logical fallback position of one in the place of defendant is to aver that his product is different from the patented one, courts have adopted the doctrine of equivalents which recognizes that minor modifications in a patented invention are sufficient to put the item beyond the scope of literal infringement.12 Thus, according to this doctrine, (a)n infringement also occurs when a device appropriates a prior invention by incorporating its innovative concept and, albeit with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same

result.13 The reason for the doctrine of equivalents is that to permit the imitation of a patented invention which does not copy any literal detail would be to convert the protection of the patent grant into a hollow and useless thing. Such imitation would leave room forindeed encouragethe unscrupulous copyist to make
_______________ Rollo, p. 21. 11 Rollo, p. 12. 12 Studiengesellschaft Kohle mbH v. Eastman Kodak Company, supra. 13 Continental Oil Company v. Cole, 634 F. 2d 188 at 191 (1981).
10

345

VOL. 226, SEPTEMBER 13, 1993 345 Godines vs. Court of Appeals unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of the law.14 We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No. 165, as amended, providing, inter alia:
Section 37. Right of Patentees.A patentee shall have the exclusive right to make, use and sell the patented machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the territory of the Philippines for the terms of the patent; and such making, using, or selling by any person without the authorization of the patentee constitutes infringement of the patent. (Italics ours)

As far as the issue regarding unfair competition is concerned, suffice it to say that Republic Act No. 166, as amended, provides, inter alia:
Sec. 29. Unfair competition, rights and remedies.x x x. xxx xxx xxx In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are

contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers 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. x x x. x x x x x x x x x

Considering the foregoing, we find no reversible error in the decision of the Court of Appeals affirming with modification the decision of the trial court.
Columbia Pictures, Inc. vs. Court of Appeals Infringement; To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied.In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy.

The trial courts finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt. 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
184

18 SUPREME COURT REPORTS ANNOTATED 4 Columbia Pictures, Inc. vs. Court of Appeals the sole right to do which is conferred by statute on the owner of the copyright.78 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 what works he was indirectly copying, or 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 determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy.79 The question of whether there has been an actionable infringement of a literary, musical, or artistic work in motion pictures, radio or television being one of fact,80 it should properly be determined during the trial. That is the stage calling for conclusive or prepondering evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes. In disregarding private respondents argument that Search Warrant No. 87053 is a general warrant, the lower court observed that it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. x x x."81

_______________ 18 CJS, Copyright and Literary Property, Sec. 90, 212; 18 Am Jur 2d, Copyright and Literary Property, Sec. 106, 391392. 79 Ibid., id., Sec. 94, 217, 218. 80 Universal Pictures Co. v. Harold Lloyd Corp. (CA9 Cal), 162 F2d 354; Arnstein v. Porter (CA2 Ny), 154 F2d 464. 81 Original Record, 278; Rollo 47. 185
78

VOL. 261, AUGUST 28, 1996 185 Columbia Pictures, Inc. vs. Court of Appeals On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., instructs and enlightens:

82

A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of factnot of lawby which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec. 2, Rule 126, Revised Rules of Court). x x x. If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. x x x.

On private respondents averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said:
x x x. As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended.83

That there were several counts of the offense of copyright

infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search war_______________ L-32409, February 27, 1971, 37 SCRA 823. 83 Original Record, 279; Rollo, 47.
82

186

18 SUPREME COURT REPORTS ANNOTATED 6 Columbia Pictures, Inc. vs. Court of Appeals rant herein issued does not violate the one-specific-offense rule. It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the courts protective mantle in copyright infringement cases. As explained by the court below:
Defendants-movants contend that PD 49 as amended covers only producers, who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken. As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 had done away with the registration and deposit of cinematographic works and that even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights. He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages. The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect. xxx Defendants-movants maintain that complainant, and his witnesses led the

Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts are shown to exist, an action for infringement may be initiated.84
_______________
84

lbid., 275, 278; ibid., 44, 45. 187

VOL. 261, AUGUST 28, 1996 187 Columbia Pictures, Inc. vs. Court of Appeals Accordingly, the certifications85 from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever. Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to be deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such non-compliance merely limits the remedies available to him and subjects him to the corresponding sanction. The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works. This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified:

The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover damages in an infringement suit.86
_______________ Exhibit Nos. 1, 2, 3 and 4; Original Record, 174178. 86 Martin, T.C., op cit, Vol. 2, 366.
85

188

18 SUPREME COURT REPORTS ANNOTATED 8 Columbia Pictures, Inc. vs. Court of Appeals One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners copyrighted films immeasurably bolsters the lower courts initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community. WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the

lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87053 is hereby REINSTATED, and said court is DIRECTED to take and expeditiously proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents. Columbia Pictures, Inc. vs. Court of Appeals G.R. Nos. 96597-99. October 6, 1994.* We affirm the decisions of the Court of Appeals. This Court, in 20th Century Fox Film Corp. vs. Court of Appeals (164 SCRA 655) has already laid down the rule that a basic requirement for the validity of search warrants, in cases of
_______________ Rollo of G.R. No. 96597-99, p. 128. 6 Rollo of G.R. No. 96597-99, pp. 128-129.
5

373

VOL. 237, OCTOBER 6, 1994 373 Columbia Pictures, Inc. vs. Court of Appeals this nature, is the presentation of the master tapes of the copyrighted films from which pirated films are supposed to have been copied. We quote:
The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioners argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least

substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

We also fully concur with the Court of Appeals when, in resolving petitioners motion for reconsideration in CA-G.R. CV No. 2213335, it ratiocinated thusly:
It is not correct to say that the basic fact to be proven to establish probable cause in the instant cases is not the unauthorized transfer of a motion picture that has been recorded but the sale, lease, or distribution of pirated video tapes of copyrighted films. In applying for the search warrants the NBI charged violation of the entire provisions of Section 56 of P.D. No. 49 as amended by P.D. No. 1988. This included not only the sale, lease or distribution of pirated tapes but also the transfer or causing to be transferred of any sound recording or motion picture or other audio visual work. But even assuming, as appellants argue, that only the sale, lease, or distribution of pirated video tapes is involved, the fact remains
374

37 4

SUPREME COURT REPORTS ANNOTATED

Columbia Pictures, Inc. vs. Court of Appeals that there is need to establish probable cause that the tapes being sold, leased or distributed are pirated tapes, hence the issue reverts back to the question of whether there was unauthorized transfer, directly or indirectly, of a sound recording or motion picture or other audio visual work that has been recorded.7

With due respect to petitioners, the Court does not see a compelling reason to reexamine its previous position on the issue. Joaquin, Jr. vs. Drilon G.R. No. 108946. January 28, 1999.* Presentation of Master Tape Petitioners claim that respondent Secretary of Justice gravely

abused his discretion in ruling that the master videotape should have been presented in order to determine whether there was probable cause, for copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals,4 on which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the present case, the parties presented sufficient evidence which clearly establish linkages between the copyrighted show Rhoda and Me and the infringing TV show Its a Date. 5 The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedly selling or renting out pirated videotapes. The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape. Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of the trial court and ruled:6
The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioners argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale
________________ 164 SCRA 655 (1988). 5 Petition, p. 17; Rollo, p. 18. 6 Id., at 663-664.
4

234

23 4

SUPREME COURT REPORTS ANNOTATED Joaquin, Jr. vs. Drilon

and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant.

This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals7 in which it was held:
In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases . . . .8

In the case at bar, during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective televisions shows, on the basis of which the investigating prosecutor ruled:
As may [be] gleaned from the evidence on record, the substance of the television productions complainants RHODA AND ME and Zosas ITS A DATE is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of
______________
7 8

261 SCRA 144 (1996). Id., 173.

235

VOL. 302, JANUARY 28, 1999 235 Joaquin, Jr. vs. Drilon the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts.

That there is an infringement on the copyright of the show RHODA AND ME both in content and in the execution of the video presentation are established because respondents ITS A DATE is practically an exact copy of complainants RHODA AND ME because of substantial similarities as follows, to wit:

RHODA AND ME Set I a. Unmarried participant of one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of the other gender are on the other side of the divider. This arrangement is done to ensure that the searcher does not see the searchees. b. Searcher asks a question to be answered by each of the searchees. The purpose is to determine who among the searchees is the most compatible with the searcher. c. Searcher speculates on the match to the searchee. d. Selection is made by the use of compute (sic) methods, or by the way questions are answered, or similar methods.

ITS A DATE Set I a. same

b. same

c. same d. Selection is based on the answer of the Searchees . Set 2 same

Set 2 Same as above with the genders of the searcher and searchees interchanged. 9
______________
9

Petition, Annex G; Rollo, pp. 44-45.

236

23 SUPREME COURT REPORTS ANNOTATED 6 Joaquin, Jr. vs. Drilon Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape. To begin with, the format of a show is not copyrightable. Section 2 of P.D. No. 49,10 otherwise known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to copyright protection, to wit:
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: 5. (A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers; 6. (B) Periodicals, including pamphlets and newspapers; 7. (C) Lectures, sermons, addresses, dissertations prepared for oral delivery; 8. (D) Letters; 9. (E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in writing or otherwise; 10. (F) Musical compositions with, or without words; 11. (G) Works of drawing, painting, architecture, sculpture, engraving, lithography and other works of art; models or designs for works of art; 12. (H) Reproductions of a work of art; 13. (I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art; 14. (J) Maps, plans, sketches, and charts;
________________
10

Promulgated on November 14, 1972. 237

VOL. 302, JANUARY 28, 1999

237

Joaquin, Jr. vs. Drilon

6. (K) Drawings or plastic works of a scientific or technical character; 7. (L) Photographic works and works produced by a process analogous to photography; lantern slides; 8. (M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; 9. (N) Computer programs; 10. (O) Prints, pictorial illustrations advertising copies, labels, tags and box wraps; 11. (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; 12. (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; 13. (R) Other literary, scholarly, scientific and artistic works.

This provision is substantially the same as 172 of the INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES (R.A. No. 8293).11 The format or mechanics of a television
_________________ Effective on January 1, 1998. SEC. 172. Literary and Artistic Works.172.1. Literary and artistic works, hereinafter referred to as works, are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular: 14. (a) Books, pamphlets, articles and other writings; 15. (b) Periodicals and newspapers; 16. (c) Lectures, sermons, addresses, dissertations prepared for oral delivery whether or not reduced in writing or other material form; 17. (d) Letters; 18. (e) Dramatic or dramatico-musical compositions; choreographic works or entertainment in dumb shows; 19. (f) Musical compositions, with or without words; 238
11

23 SUPREME COURT REPORTS ANNOTATED 8

Joaquin, Jr. vs. Drilon show is not included in the list of protected works in 2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to cover them.
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 preexisting 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.12 Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling within the statutory enumeration or description.13 Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright except that which is both created and secured by act of Congress . . . .14
________________ 6. (g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other works of art; models or designs for works of art; 7. (h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design and other works of applied art; 8. (i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or science; 9. (j) Drawings or plastic works of a scientific or technical character; 10. (k) Photographic works including works produced by a process analogous to photography; lantern slides; 11. (l) Audiovisual works and cinematographic works, and works produced by a process analogous to cinematography or any process for making audio-visual recordings; 12. (m) Pictorial illustrations and advertisements; 13. (n) Computer programs; and 14. (o) Other literary, scholarly, scientific and artistic works. 12 18 C.J.S. 161 13 Id., at 165. 14 HORACE G. BALL, LAW OF COPYRIGHT AND LITERARY PROPERTY 45 (1944). 239

VOL. 302, JANUARY 28, 1999 Joaquin, Jr. vs. Drilon

239

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.15 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 BJPIs 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 BJPIs 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:
________________
15

NEIL BOORSTYN, COPYRIGHT LAW 25 (1981). 240

24 SUPREME COURT REPORTS ANNOTATED

0 Joaquin, Jr. vs. Drilon

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.16

Habana vs. Robles etitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writers right to fair use, in violation of Section 11 of Presidential Decree No. 49.18 We find the petition impressed with merit. The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the
____________________________ Decision, by Justice Artemio G. Tuquero, ponente, concurred in by J. Artemon D. Luna and J. Hector L. Hofilena, CA Rollo, p. 6. 16 CA Rollo, pp. 198-203. 17 Ibid., p. 236. 18 Rollo, Petition, p. 10. 522
15

52 SUPREME COURT REPORTS ANNOTATED 2 Habana vs. Robles protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows:

Sec. 177. Copy 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, abridgement, 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 copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work19

The law also provided for the limitations on copyright, thus:

Sec. 184.1 Limitations on copyright.Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: 15. (a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49]
____________________________
19

Intellectual Property Code of the Philippines (Republic Act No. 8293), p. 51. 523

VOL. 310, JULY 19, 1999 523 Habana vs. Robles 14. (b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49)x x x xxx xxx 15. (e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film,

if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if appearing in the work is mentioned;20 In the above quoted provisions, work has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific works.21 A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET. On page 404 of petitioners Book 1 of College English for Today, the authors wrote:
Items in dates and addresses: He died on Monday, April 15, 1975. Miss Reyes lives in 214 Taft Avenue, Manila22

On page 73 of respondents Book 1 Developing English Today, they wrote:

He died on Monday, April 25, 1975. Miss Reyes address is 214 Taft Avenue Manila23
____________________________
20

Intellectual Property Code of the Philippines, Republic Act No. 8293, pp. 55-

56. Sec. 172, Intellectual Property Code of the Philippines. Volume I, Original Record, Exh. S-1, p. 211. 23 Ibid., Exh. S-2, p. 215.
21 22

524

52 SUPREME COURT REPORTS ANNOTATED 4 Habana vs. Robles On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus:
The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its

ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific. Edmund Burke, Speech on Criticism.24

On page 100 of the book DEP,25 also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not. In several other pages26 the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET. We believe that respondent Robles act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners copyrights. When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished,
____________________________ Volume 1, Original Record, Annex Z, p. 89. 25 Ibid., Annex V, p. 111. 26 Page 24 of CET as to examples 2, 9, 11, and 14 also found on p. 33 of DEP; similarity in technique and presentation on page 15 of CET and page 27 of DEP; on pages 18, 20 and 21 of CET and page 29 of DEP; on page 74 of CET and page 86 of DEP, Original Record, Volume 1, Exhibits pp. 73, 91, 93, 96 and 97. 525
24

VOL. 310, JULY 19, 1999 525 Habana vs. Robles there is an infringement of copyright and to an injurious extent, the work is appropriated.27 In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially

and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy.28 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.29 The respondents claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec. 184 of Republic Act 8293 it is provided that:
____________________________ 18 Am Jur 2D, 104 citing Mazer v. Stein, 347 US 218, 98 L ed 630, 74 S Ct 460, reh den 347 US 949, 98 L ed 1096, 74 S Ct 637 [1953]. 28 Columbia Pictures, Inc. vs. Court of Appeals, 261 SCRA 144, 184, citing 18 CJS, Copyright and Literary Property, Sec. 94, 217218. 29 18 CJS, Copyright and Literary Property, Sec. 90, 212; 18 Am Jur 2D, Copyright and Literary Property, Sec. 106, 391-392. 526
27

52 SUPREME COURT REPORTS ANNOTATED 6 Habana vs. Robles

Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright: xxxx xxxx xxxx (c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned.

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.30 The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of the books are the same? In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the Author Card. However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration. The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background. However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be
____________________________
30

Ibid. 527

VOL. 310, JULY 19, 1999 527 Habana vs. Robles identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying? We consider as an indicia of guilt or wrongdoing the act of

respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners complaint while pharisaically denying petitioners demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated. 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 latters 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. Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned. In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana, et al. as the source of the portions of DEP. The final product of an authors toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough.
528

52 SUPREME COURT REPORTS ANNOTATED 8 Habana vs. Robles WHEREFORE, the petition is hereby GRANTED. The decision

and resolution of the Court of Appeals in CA-G.R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it. Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises G.R. No. 165306. September 20, 2005.* In the instant case, we find that the trial court did not abuse its discretion when it entertained the motion to quash considering that no criminal action has yet been instituted when it was filed. The trial court also properly quashed the search warrant it earlier issued after finding upon reevaluation of the evidence that no probable cause exists to justify its issuance in the first place. As ruled by the trial court, the copyrighted products do not appear to be original creations of MANLY and are not among the classes of work enumerated under Section 172 of RA 8293. The trial court, thus, may not be faulted for overturning its initial assessment that there was probable cause in view of its inherent power to issue search warrants and to quash the same. No objection may be validly posed to an order quashing a warrant already issued as the court must be provided with the opportunity to correct itself of an error unwittingly committed, or, with like effect, to allow the aggrieved party the chance to convince the court that its ruling is erroneous. Moreover, the trial court was acting within bounds when it ruled, in an ancillary proceeding, that the copyrighted products of petitioner are not original creations. This is because in the determination of the existence of probable cause for the issuance or quashal of a warrant, it is inevitable that the court may touch on issues properly threshed out in a regular proceeding. In so doing, it does not usurp the power of, much less preclude, the court from making a final judicial determination of the issues in a full-blown trial. Consequently, MANLYs assertion that the trial courts order

quashing the warrant preempted the finding of the intellectual property court has no legal basis.
391

VOL. 470, SEPTEMBER 20, 2005 391 Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises As pertinently held in Solid Triangle Sales Corp. v. Sheriff, RTC, Q.C., Br. 93:13
When the court, in determining probable cause for issuing or quashing a search warrant, finds that no offense has been committed, it does not interfere with or encroach upon the proceedings in the preliminary investigation. The court does not oblige the investigating officer not to file an information for the courts ruling that no crime exists is only for purposes of issuing or quashing the warrant. This does not, as petitioners would like to believe, constitute a usurpation of the executive function. Indeed, to shirk from this duty would amount to an abdication of a constitutional obligation. ... . . . The finding by the court that no crime exists does not preclude the authorized officer conducting the preliminary investigation from making his own determination that a crime has been committed and that probable cause exists for purposes of filing the information.

As correctly observed by the Court of Appeals, the trial courts finding that the seized products are not copyrightable was merely preliminary as it did not finally and permanently adjudicate on the status and character of the seized items. MANLY could still file a separate copyright infringement suit against the respondents because the order for the issuance or quashal of a warrant is not res judicata. Thus, in Vlasons Enterprises Corporation v. Court of Appeals14 we held that:
The proceeding for the seizure of property in virtue of a search warrant does not end with the actual taking of the property by the proper officers and its delivery, usually constructive, to the court. The order for the issuance of the warrant is not a final one and cannot constitute res judicata. Such an order does not ascertain and adjudicate the permanent status or character of the seized property. By its very nature, it is provisional, interlocutory. It is merely the
_______________

Id., at pp. 86-87; pp. 504-505. 14 No. L-61688, 28 October 1987, 155 SCRA 186, 191.
13

392

39 2

SUPREME COURT REPORTS ANNOTATED

Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises first step in the process to determine the character and title of the property. That determination is done in the criminal action involving the crime or crimes in connection with which the search warrant was issued. Hence, such a criminal action should be prosecuted, or commenced if not yet instituted, and prosecuted. The outcome of the criminal action will dictate the disposition of the seized property . . .

We have also ruled in Ching v. Salinas, Sr., et al.15 that:

The RTC had jurisdiction to delve into and resolve the issue whether the petitioners utility models are copyrightable and, if so, whether he is the owner of a copyright over the said models. It bears stressing that upon the filing of the application for search warrant, the RTC was duty-bound to determine whether probable cause existed, in accordance with Section 4, Rule 126 of the Rules of Criminal Procedure[.]

Further, the copyright certificates issued in favor of MANLY constitute merely prima facie evidence of validity and ownership. However, no presumption of validity is created where other evidence exist that may cast doubt on the copyright validity. Hence, where there is sufficient proof that the copyrighted products are not original creations but are readily available in the market under various brands, as in this case, validity and originality will not be presumed and the trial court may properly quash the issued warrant for lack of probable cause. Besides, no copyright accrues in favor of MANLY despite issuance of the certificates of registration and deposit16 pursu_______________ G.R. No. 161295, 29 June 2005, 462 SCRA 241. 16 Section 191, RA No. 8293 provides:
15

Sec. 191. Registration and Deposit with National Library and the Supreme Court Library.After the first public dissemination of performance by authority of the copyright owner of a work falling under Subsections 172.1, 172.2 and 172.3 of this Act, there shall, for the purpose of completing the records of the National Library and the

Supreme Court Library, within three (3) weeks, be registered and deposited with

393

VOL. 470, SEPTEMBER 20, 2005 393 Manly Sportwear Manufacturing, Inc. vs. Dadodette Enterprises ant to Section 2, Rule 7 of the Copyrights Safeguards and Regulations17 which states:
Sec. 2. Effects of Registration and Deposit of Work.The registration and deposit of the work is purely for recording the date of registration and deposit of the work and shall not be conclusive as to copyright ownership or the term of the copyrights or the rights of the copyright owner, including neighboring rights.

At most, the certificates of registration and deposit issued by the National Library and the Supreme Court Library serve merely as a notice of recording and registration of the work but do not confer any right or title upon the registered copyright owner or automatically put his work under the protec_______________
it, by personal delivery or by registered mail, two (2) complete copies or reproductions of the work in such form as the directors of said libraries may prescribe. A certificate of deposit shall be issued for which the prescribed fee shall be collected and the copyright owner shall be exempt from making additional deposit of the works with the National Library and the Supreme Court Library under other laws. If, within three (3) weeks after receipt by the copyright owner of a written demand from the directors for such deposit, the required copies or reproductions are not delivered and the fee is not paid, the copyright owner shall be liable to pay a fine equivalent to the required fee per month of delay and to pay to the National Library and the Supreme Court Library the amount of the retail price of the best edition of the work. Only the above mentioned classes of work shall be accepted for deposit by the National Library and the Supreme Court Library.

Issued on 13 August 1999 pursuant to Sec. 228 of RA No. 8293 which provides:
17

Sec. 228. Public Records.The section or division of the National Library charged with receiving copies and instruments deposited and with keeping records required under this Act and everything in it shall be open to public inspection. The Director of the National Library is empowered to issue such safeguards and regulations as may be necessary to implement this Section and other provisions of this Act.

394

39 SUPREME COURT REPORTS ANNOTATED 4 Manly Sportwear Manufacturing, Inc. vs. Dadodette

Enterprises tive mantle of the copyright law. It is not a conclusive proof of copyright ownership. As it is, non-registration and deposit of the work within the prescribed period only makes the copyright owner liable to pay a fine.18
G.R. No. 155282. January 17, 2005.*

MOVIE AND TELEVISION REVIEW AND CLASSIFICATION BOARD (MTRCB), petitioner, vs. ABS-CBN BROADCASTING CORPORATION and LOREN LEGARDA, respondents. Petitioner MTRCB through the Solicitor General, contends inter alia: first, all television programs, including public affairs programs, news documentaries, or socio-political editorials, are subject to petitioners power of review under Section 3 (b) of P.D. No. 1986 and pursuant to this Courts ruling in Iglesia ni Cristo vs. Court of Appeals;25 second, television programs are more accessible to the public than newspapers, thus, the liberal regulation of the latter cannot apply to the former; third, petitioners power to review television programs under Section 3(b) of P.D. No. 1986 does not amount to prior restraint; and fourth, Section 3(b) of P.D. No. 1986 does not violate respondents constitutional freedom of expression and of the press. Respondents take the opposite stance. The issue for our resolution is whether the MTRCB has the power or authority to review the The Inside Story prior to its exhibition or broadcast by television. The petition is impressed with merit. The present controversy brings into focus the provisions of Section 3 of P.D. No. 1986, partly reproduced as follows:
SEC. 3. Powers and Functions.The BOARD shall have the following functions, powers and duties: xxx xxx b) To screen, review and examine all motion pictures as herein defined, television programs, including publicity materials such as advertisements, trailers and stills, whether such motion pictures and publicity materials be

for theatrical or non-theatrical distribution, for television broadcast or for general viewing, imported or produced in the Philippines, and in the latter case, whether they be for local viewing or for export. c) To approve or disapprove, delete objectionable portions from and/or prohibit the importation, exportation, production, copy_______________ 25 G.R. No. 119673, July 26, 1996, 259 SCRA 529. 583

VOL. 448, JANUARY 17, 2005 583 Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation ing, distribution, sale, lease exhibition and/or television broadcast of the motion pictures, television programs and publicity materials subject of the preceding paragraph, which, in the judgment of the BOARD applying contemporary Filipino cultural values as standard, are objectionable for being immoral, indecent, contrary to law and/or good customs, injurious to the prestige of the Republic of the Philippines or its people, or with a dangerous tendency to encourage the commission of violence or of a wrong or crime, such as but not limited to: xxx d) To supervise, regulate, and grant, deny or cancel, permits for the importation, exportation, production, copying, distribution, sale, lease, exhibition, and/or television broadcast of all motion pictures, television programs and publicity materials, to the end and that no such pictures, programs and materials as are determined by the BOARD to be objectionable in accordance with paragraph (c) hereof shall be imported, exported, produced, copied, reproduced, distributed, sold, leased, exhibited and/or broadcast by television; xxx x x x.

Vis-a-vis the foregoing provisions, our task is to decide whether or not petitioner has the power to review the television program The Inside Story. The task is not Herculean because it merely resurrects this Court En Bancs ruling in Iglesia ni Cristo vs. Court of Appeals.26 There, the Iglesia ni Cristo sought exception from petitioners review power contending that the term television programs under Sec. 3 (b) does not include religious programs

which are protected under Section 5, Article III of the Constitution.27 This Court, through Justice Reynato Puno, categorically ruled that P.D. No. 1986 gives petitioner the power to screen, review and examine all television programs, emphasizing the phrase all television programs, thus:
_______________ 26 Supra. 27 No law shall be made respecting an establishment of religion or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. 584

58 SUPREME COURT REPORTS ANNOTATED 4 Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation
The law gives the Board the power to screen, review and examine all television programs. By the clear terms of the law, the Board has the power to approve, delete x x x and/or prohibit the x x x exhibition and/or television broadcast of x x x television programs x x x. The law also directs the Board to apply contemporary Filipino cultural values as standard to determine those which are objectionable for being immoral, indecent, contrary to law and/or good customs, injurious to the prestige of the Republic of the Philippines and its people, or with a dangerous tendency to encourage the commission of violence or of a wrong or crime.

Settled is the rule in statutory construction that where the law does not make any exception, courts may not except something therefrom, unless there is compelling reason apparent in the law to justify it.28 Ubi lex non distinguit nec distinguere debemos. Thus, when the law says all television programs, the word all covers all television programs, whether religious, public affairs, news documentary, etc.29 The principle assumes that the legislative body made no qualification in the use of general word or expression.30 It then follows that since The Inside Story is a television

program, it is within the jurisdiction of the MTRCB over which it has power of review. Here, respondents sought exemption from the coverage of the term television programs on the ground that the The Inside Story is a public affairs program, news documentary and socio political editorial protected under Section 4,31 Article III of the Constitution. Albeit, respondents basis is not
_______________ 28 Tolentino vs. Catoy, 82 Phil. 300 (1948). 29 See Olfato vs. Commission on Elections, G.R. No. 52749, March 31, 1981, 103 SCRA 741. 30 Agpalo, Statutory Construction, Third Edition, 1995, at p. 153. 31 SecTION 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. 585

VOL. 448, JANUARY 17, 2005 585 Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation freedom of religion, as in Iglesia ni Cristo,32 but freedom of expression and of the press, the ruling in Iglesia ni Cristo applies squarely to the instant issue. It is significant to note that in Iglesia ni Cristo, this Court declared that freedom of religion has been accorded a preferred status by the framers of our fundamental laws, past and present, designed to protect the broadest possible liberty of conscience, to allow each man to believe as his conscience directs x x x. Yet despite the fact that freedom of religion has been accorded a preferred status, still this Court, did not exempt the Iglesia ni Cristos religious program from petitioners review power. Respondents claim that the showing of The Inside Story is protected by the constitutional provision on freedom of speech and of the press. However, there has been no declaration at all by the

framers of the Constitution that freedom of expression and of the press has a preferred status. If this Court, in Iglesia ni Cristo, did not exempt religious programs from the jurisdiction and review power of petitioner MTRCB, with more reason, there is no justification to exempt therefrom The Inside Story which, according to respondents, is protected by the constitutional provision on freedom of expression and of the press, a freedom bearing no preferred status. The only exceptions from the MTRCBs power of review are those expressly mentioned in Section 7 of P.D. No. 1986, such as (1) television programs imprinted or exhibited by the Philippine Government and/or its departments and agencies, and (2) newsreels. Thus:
SEC. 7. Unauthorized showing or exhibition.It shall be unlawful for any person or entity to exhibit or cause to be exhibited in any moviehouse, theatre, or public place or by television within the Philippines any motion picture, television program or publicity material, including trailers, and stills for lobby displays in connection with motion pictures, not duly authorized by the owner or his
_______________ 32 Supra. 586

58 6

SUPREME COURT REPORTS ANNOTATED

Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation assignee and passed by the BOARD; or to print or cause to be printed on any motion picture to be exhibited in any theater or public place or by television a label or notice showing the same to have been officially passed by the BOARD when the same has not been previously authorized, except motion pictures, television programs or publicity material imprinted or exhibited by the Philippine Government and/or its departments and agencies, and newsreels.

Still in a desperate attempt to be exempted, respondents contend that the The Inside Story falls under the category of newsreels.

Their contention is unpersuasive. P.D. No. 1986 does not define newsreels. Websters dictionary defines newsreels as short motion picture films portraying or dealing with current events.33 A glance at actual samples of newsreels shows that they are mostly reenactments of events that had already happened. Some concrete examples are those of Dziga Vertovs Russian Kino-Pravda newsreel series (Kino-Pravda means literally film-truth, a term that was later translated literally into the French cinema verite) and Frank Capras Why We Fight series.34 Appar_______________ 33 Merriam Websters Third New International Dictionary (1993 Phil. Copyright). 34 Documentary Film, Wikipedia Encyclopedia, December 21, 2004, http:// en.wikipedia.org/wiki/Documentary_film. The newsreel tradition is an important tradition in documentary film; newsreels were also sometimes staged but were usually reenactments of events that had already happened, not attempts to steer events as they were in the process of happening. For instance, much of the battle footage from the early 20th century was stagedthe cameramen would usually arrive on site after a major battle and reenact scenes to film them. In the Kino-Pravda series, Vertov focused on everyday experiences, eschewing bourgeois concerns and filming marketplaces, bars, and schools instead, sometimes with a hidden camera, without asking permission first. The stories were typically descriptive, not narrative, and included vignettes and exposes, showing for instance the 587

VOL. 448, JANUARY 17, 2005 587 Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation ently, newsreels are straight presentation of events. They are depiction of actualities. Correspondingly, the MTRCB Rules and Regulations35 implementing P.D. No. 1986 define newsreels as straight news reporting, as distinguished from news analyses, commentaries and opinions. Talk shows on a given issue are not

considered newsreels.36 Clearly, the The Inside Story cannot be considered a newsreel. It is more of a public affairs program which is described as a variety of news treatment; a cross between pure television news and news-related commentaries, analysis and/or exchange of opinions.37 Certainly, such kind of program is within petitioners review power. It bears stressing that the sole issue here is whether petitioner MTRCB has authority to review The Inside Story. Clearly, we are not called upon to determine whether petitioner violated Section 4, Article III (Bill of Rights) of the Constitution providing that no law shall be passed abridging the freedom of speech, of oppression or the press. Petitioner did not disapprove or ban the showing of the program. Neither did it cancel respondents permit. Respondents were merely penalized for their failure to submit to petitioner The Inside Story for its review and approval. Therefore, we need not resolve whether certain provisions of P.D. No. 1986 and the MTRCB Rules and Regulations specified by respondents contravene the Constitution.
_______________ renovation of a trolley system, the organization of farmers into communes, and the trial of Social Revolutionaries; one story shows starvation in the nascent Marxist state. Vertovs driving vision was to capture film-truththat is, fragments of actuality, which when organized together, have a deeper truth that cannot be seen with the naked eye. (Dziga Vertov, Wikipedia Encyclopedia, December 21, 2004, http:// en.wikipedia.org/wiki/Dziga-Vertov.) 35 Promulgated on August 22, 1993. 36 Section 1(m), Chapter I, 1993 Implementing Rules and Regulations. 37 TSN, September 2, 1994 at pp. 13-14; see Rollo at p. 159. 588

58 SUPREME COURT REPORTS ANNOTATED 8 Movie and Television Review and Classification Board (MTRCB) vs. ABS-CBN Broadcasting Corporation

Consequently, we cannot sustain the RTCs ruling that Sections 3 (c) (d), 4, 7 and 11 of P.D. No. 1986 and Sections 3, 7 and 28 (a) of the MTRCB Rules and Regulations are unconstitutional. It is settled that no question involving the constitutionality or validity of a law or governmental act may be heard and decided by the court unless there is compliance with the legal requisites for judicial inquiry, namely: (1) that the question must be raised by the proper party; (2) that there must be an actual case or controversy; (3) that the question must be raised at the earliest possible opportunity; and, (4) that the decision on the constitutional or legal question must be necessary to the determination of the case itself.38