G.R. No.

154342 July 14, 2004 & JULIO GALLO wine trademark on October 11, 1990 under Application Serial No.
MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC., petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.
DECISION
CORONA, J.:
In this petition for review on certiorari under Rule 45, petitioners Mighty
Corporation and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul,
reverse and set aside: (a) the November 15, 2001 decision 1 of the Court of Appeals
(CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998 decision,2 as
modified by the June 24, 1999 order,3 of the Regional Trial Court of Makati City,
Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for,
and permanently enjoined them from, committing trademark infringement and
unfair competition, and which ordered them to pay damages to respondents E. & J.
Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the
July 11, 2002 CA resolution denying their motion for reconsideration4and (c) the
aforesaid Makati RTC decision itself.
I.
The Factual Background
Respondent Gallo Winery is a foreign corporation not doing business in the
Philippines but organized and existing under the laws of the State of California,
United States of America (U.S.), where all its wineries are located. Gallo Winery
produces different kinds of wines and brandy products and sells them in many
countries under different registered trademarks, including the GALLO and ERNEST &
JULIO GALLO wine trademarks.
Respondent domestic corporation, Andresons, has been Gallo Winery’s exclusive
wine importer and distributor in the Philippines since 1991, selling these products in
its own name and for its own account.5
Gallo Winery’s GALLO wine trademark was registered in the principal register of the
Philippine Patent Office (now Intellectual Property Office) on November 16, 1971
under Certificate of Registration No. 17021 which was renewed on November 16,
1991 for another 20 years.6 Gallo Winery also applied for registration of its ERNEST
901011-00073599-PN but the records do not disclose if it was ever approved by the
Director of Patents.7
On the other hand, petitioners Mighty Corporation and La Campana and their sister
company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in
the cultivation, manufacture, distribution and sale of tobacco products for which
they have been using the GALLO cigarette trademark since 1973. 8
The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO
100’s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on
March 26, 1976, both for the manufacture and sale of its cigarette products. In
1976, Tobacco Industries filed its manufacturer’s sworn statement as basis for BIR’s
collection of specific tax on GALLO cigarettes.9
On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue,
the registration of the GALLO cigarette trademark in the principal register of the
then Philippine Patent Office.10
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La
Campana which, on July 16, 1985, applied for trademark registration in the
Philippine Patent Office.11 On July 17, 1985, the National Library issued Certificate of
Copyright Registration No. 5834 for La Campana’s lifetime copyright claim over
GALLO cigarette labels.12
Subsequently, La Campana authorized Mighty Corporation to manufacture and sell
cigarettes bearing the GALLO trademark.13 BIR approved Mighty Corporation’s use
of GALLO 100’s cigarette brand, under licensing agreement with Tobacco Industries,
on May 18, 1988, and GALLO SPECIAL MENTHOL 100’s cigarette brand on April 3,
1989.14
Petitioners claim that GALLO cigarettes have been sold in the Philippines since
1973, initially by Tobacco Industries, then by La Campana and finally by Mighty
Corporation.15
On the other hand, although the GALLO wine trademark was registered in the
Philippines in 1971, respondents claim that they first introduced and sold the
GALLO and ERNEST & JULIO GALLO wines in the Philippines circa1974 within the
then U.S. military facilities only. By 1979, they had expanded their Philippine market
through authorized distributors and independent outlets. 16
Respondents claim that they first learned about the existence of GALLO cigarettes
in the latter part of 1992 when an Andresons employee saw such cigarettes on
display with GALLO wines in a Davao supermarket wine cellar section. 17 Forthwith,
respondents sent a demand letter to petitioners asking them to stop using the
GALLO trademark, to no avail.
II.
The Legal Dispute
On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark
and tradename infringement and unfair competition, with a prayer for damages
and preliminary injunction.
Respondents charged petitioners with violating Article 6bis of the Paris Convention
for the Protection of Industrial Property (Paris Convention)18 and RA 166
(Trademark Law),19 specifically, Sections 22 and 23 (for trademark
infringement),20 29 and 3021 (for unfair competition and false designation of origin)
and 37 (for tradename infringement).22 They claimed that petitioners adopted the
GALLO trademark to ride on Gallo Winery’s GALLO and ERNEST & JULIO GALLO
trademarks’ established reputation and popularity, thus causing confusion,
deception and mistake on the part of the purchasing public who had always
associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winery’s
wines. Respondents prayed for the issuance of a writ of preliminary injunction
and ex parte restraining order, plus P2 million as actual and compensatory
damages, at least P500,000 as exemplary and moral damages, and at least P500,000
as attorney’s fees and litigation expenses.23
In their answer, petitioners alleged, among other affirmative defenses, that:
petitioner’s GALLO cigarettes and Gallo Winery’s wines were totally unrelated
products; Gallo Winery’s GALLO trademark registration certificate covered wines
only, not cigarettes; GALLO cigarettes and GALLO wines were sold through different
channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for
GALLO menthols, were low-cost items compared to Gallo Winery’s high-priced
luxury wines which cost between P98 to P242.50; the target market of Gallo
Winery’s wines was the middle or high-income bracket with at least P10,000
monthly income while GALLO cigarette buyers were farmers, fishermen, laborers
and other low-income workers; the dominant feature of the GALLO cigarette mark
was the rooster device with the manufacturer’s name clearly indicated as MIGHTY
CORPORATION while, in the case of Gallo Winery’s wines, it was the full names of
the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their
inaction and conduct, respondents were guilty of laches and estoppel; and
petitioners acted with honesty, justice and good faith in the exercise of their right
to manufacture and sell GALLO cigarettes.
In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit,
respondent’s prayer for the issuance of a writ of preliminary injunction, 25 holding
that respondent’s GALLO trademark registration certificate covered wines only, that
respondents’ wines and petitioners’ cigarettes were not related goods and
respondents failed to prove material damage or great irreparable injury as required
by Section 5, Rule 58 of the Rules of Court. 26
On August 19, 1993, the Makati RTC denied, for lack of merit, respondents’ motion
for reconsideration. The court reiterated that respondents’ wines and petitioners’
cigarettes were not related goods since the likelihood of deception and confusion
on the part of the consuming public was very remote. The trial court emphasized
that it could not rely on foreign rulings cited by respondents "because the[se] cases
were decided by foreign courts on the basis of unknown facts peculiar to each case
or upon factual surroundings which may exist only within their jurisdiction.
Moreover, there [was] no showing that [these cases had] been tested or found
applicable in our jurisdiction."27
On February 20, 1995, the CA likewise dismissed respondents’ petition for review
on certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTC’s
denial of the application for issuance of a writ of preliminary injunction against
petitioners.28
After trial on the merits, however, the Makati RTC, on November 26, 1998, held
petitioners liable for, and permanently enjoined them from, committing trademark
infringement and unfair competition with respect to the GALLO trademark:
WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the
defendant (sic), to wit:
a. permanently restraining and enjoining defendants, their distributors, trade
outlets, and all persons acting for them or under their instructions, from (i) using E
& J’s registered trademark GALLO or any other reproduction, counterfeit, copy or
colorable imitation of said trademark, either singly or in conjunction with other
words, designs or emblems and other acts of similar nature, and (ii) committing
other acts of unfair competition against plaintiffs by manufacturing and selling their
cigarettes in the domestic or export markets under the GALLO trademark.
b. ordering defendants to pay plaintiffs –
(i) actual and compensatory damages for the injury and prejudice and impairment
of plaintiffs’ business and goodwill as a result of the acts and conduct pleaded as
basis for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO
HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the
complaint until fully paid;
(ii) exemplary damages in the amount of PHP100,000.00;
(iii) attorney’s fees and expenses of litigation in the amount of PHP1,130,068.91;
(iv) the cost of suit.
SO ORDERED."29
On June 24, 1999, the Makati RTC granted respondent’s motion for partial
reconsideration and increased the award of actual and compensatory damages to
10% of P199,290,000 or P19,929,000.30
On appeal, the CA affirmed the Makati RTC decision and subsequently denied
petitioner’s motion for reconsideration.
III.
The Issues
Petitioners now seek relief from this Court contending that the CA did not follow
prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual
Property Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO
cigarettes and GALLO wines were identical, similar or related goods for the reason
alone that they were purportedly forms of vice; [c] both goods passed through the
same channels of trade and [d] petitioners were liable for trademark infringement,
unfair competition and damages.31
Respondents, on the other hand, assert that this petition which invokes Rule 45
does not involve pure questions of law, and hence, must be dismissed outright.
IV.
Discussion
THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CA’S FACTUAL FINDINGS
As a general rule, a petition for review on certiorari under Rule 45 must raise only
"questions of law"32 (that is, the doubt pertains to the application and
interpretation of law to a certain set of facts) and not "questions of fact" (where the
doubt concerns the truth or falsehood of alleged facts), 33 otherwise, the petition
will be denied. We are not a trier of facts and the Court of Appeals’ factual findings
are generally conclusive upon us.34
This case involves questions of fact which are directly related and intertwined with
questions of law. The resolution of the factual issues concerning the goods’
similarity, identity, relation, channels of trade, and acts of trademark infringement
and unfair competition is greatly dependent on the interpretation of applicable
laws. The controversy here is not simply the identity or similarity of both parties’
trademarks but whether or not infringement or unfair competition was committed,
a conclusion based on statutory interpretation. Furthermore, one or more of the
following exceptional circumstances oblige us to review the evidence on record: 35
(1) the conclusion is grounded entirely on speculation, surmises, and conjectures;
(2) the inference of the Court of Appeals from its findings of fact is manifestly
mistaken, absurd and impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts;
(5) the appellate court, in making its findings, went beyond the issues of the case,
and the same are contrary to the admissions of both the appellant and the
appellee;
(6) the findings are without citation of specific evidence on which they are based;
(7) the facts set forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondents; and
(8) the findings of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted [by the evidence] on record. 36
In this light, after thoroughly examining the evidence on record, weighing, analyzing
and balancing all factors to determine whether trademark infringement and/or
unfair competition has been committed, we conclude that both the Court of
Appeals and the trial court veered away from the law and well-settled
jurisprudence.
Thus, we give due course to the petition.
THE TRADEMARK LAW AND THE PARIS
CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE
We note that respondents sued petitioners on March 12, 1993 for trademark
infringement and unfair competition committed during the effectivity of the Paris
Convention and the Trademark Law.
Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable
not only under the aforesaid governing laws but also under the IP Code which took
effect only on January 1, 1998,37 or about five years after the filing of the complaint:
Defendants’ unauthorized use of the GALLO trademark constitutes trademark
infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the IP
Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS Agreement
as it causes confusion, deception and mistake on the part of the purchasing
public.38 (Emphasis and underscoring supplied)
The CA apparently did not notice the error and affirmed the Makati RTC decision:
In the light of its finding that appellants’ use of the GALLO trademark on its
cigarettes is likely to create confusion with the GALLO trademark on wines
previously registered and used in the Philippines by appellee E & J Gallo Winery,
the trial court thus did not err in holding that appellants’ acts not only violated the
provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but
also Article 6bis of the Paris Convention.39 (Emphasis and underscoring supplied)
We therefore hold that the courts a quo erred in retroactively applying the IP Code
in this case.
It is a fundamental principle that the validity and obligatory force of a law proceed
from the fact that it has first been promulgated. A law that is not yet effective
cannot be considered as conclusively known by the populace. To make a law
binding even before it takes effect may lead to the arbitrary exercise of the
legislative power.40 Nova constitutio futuris formam imponere debet non
praeteritis. A new state of the law ought to affect the future, not the past. Any
doubt must generally be resolved against the retroactive operation of laws,
whether these are original enactments, amendments or repeals. 41 There are only a
few instances when laws may be given retroactive effect, 42 none of which is present
in this case.
The IP Code, repealing the Trademark Law, 43 was approved on June 6, 1997. Section
241 thereof expressly decreed that it was to take effect only on January 1, 1998,
without any provision for retroactive application. Thus, the Makati RTC and the CA
should have limited the consideration of the present case within the parameters of
the Trademark Law and the Paris Convention, the laws in force at the time of the
filing of the complaint.
DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION
Although the laws on trademark infringement and unfair competition have a
common conception at their root, that is, a person shall not be permitted to
misrepresent his goods or his business as the goods or business of another, the law
on unfair competition is broader and more inclusive than the law on trademark
infringement. The latter is more limited but it recognizes a more exclusive right
derived from the trademark adoption and registration by the person whose goods
or business is first associated with it. The law on trademarks is thus a specialized
subject distinct from the law on unfair competition, although the two subjects are
entwined with each other and are dealt with together in the Trademark Law (now,
both are covered by the IP Code). Hence, even if one fails to establish his exclusive
property right to a trademark, he may still obtain relief on the ground of his
competitor’s unfairness or fraud. Conduct constitutes unfair competition if the
effect is to pass off on the public the goods of one man as the goods of another. It is
not necessary that any particular means should be used to this end. 44
In Del Monte Corporation vs. Court of Appeals, 45 we distinguished trademark
infringement from unfair competition:
(1) Infringement of trademark is the unauthorized use of a trademark, whereas
unfair competition is the passing off of one's goods as those of another.
(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair
competition fraudulent intent is essential.
(3) In infringement of trademark the prior registration of the trademark is a
prerequisite to the action, whereas in unfair competition registration is not
necessary.
Pertinent Provisions on Trademark
Infringement under the Paris
Convention and the Trademark Law
Article 6bis of the Paris Convention,46 an international agreement binding on the
Philippines and the United States (Gallo Winery’s country of domicile and origin)
prohibits "the [registration] or use of a trademark which constitutes a reproduction,
imitation or translation, liable to create confusion, of a mark considered by the
competent authority of the country of registration or use to be well-known in that
country as being already the mark of a person entitled to the benefits of the [Paris]
Convention and used for identical or similar goods. [This rule also applies] when the
essential part of the mark constitutes a reproduction of any such well-known mark
or an imitation liable to createconfusion therewith." There is no time limit for
seeking the prohibition of the use of marks used in bad faith. 47
Thus, under Article 6bis of the Paris Convention, the following are the elements of
trademark infringement:
(a) registration or use by another person of a trademark which is a reproduction,
imitation or translation liable to create confusion,
(b) of a mark considered by the competent authority of the country of registration
or use48 to be well-known in that country and is already the mark of a person
entitled to the benefits of the Paris Convention, and
(c) such trademark is used for identical or similar goods.
On the other hand, Section 22 of the Trademark Law holds a person liable for
infringement when, among others, he "uses without the consent of the registrant,
any reproduction, counterfeit, copy or colorable imitation of any registered mark or
tradename in connection with the sale, offering for sale, or advertising of any
goods, business or services or in connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others as to the source or origin of
such goods or services, or identity of such business; or reproduce, counterfeit, copy
or colorably imitate any such mark or tradename and apply such reproduction,
counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with such
goods, business or services."49 Trademark registration and actual use are material to
the complaining party’s cause of action.
Corollary to this, Section 20 of the Trademark Law50 considers the trademark
registration certificate as prima facieevidence of the validity of the registration, the
registrant’s ownership and exclusive right to use the trademark in connection with
the goods, business or services as classified by the Director of Patents51 and as
specified in the certificate, subject to the conditions and limitations stated therein.
Sections 2 and 2-A52 of the Trademark Law emphasize the importance of the
trademark’s actual use in commerce in the Philippines prior to its registration. In
the adjudication of trademark rights between contending parties, equitable
principles of laches, estoppel, and acquiescence may be considered and applied. 53
Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following
constitute the elements of trademark infringement:
(a) a trademark actually used in commerce in the Philippines and registered in the
principal register of the Philippine Patent Office
(b) is used by another person in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such use
is likely to cause confusion or mistake or to deceive purchasers or others as to
the source or origin of such goods or services, or identity of such business; or such
trademark is reproduced, counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or colorable imitation is applied to
labels, signs, prints, packages, wrappers, receptacles or advertisements intended to
be used upon or in connection with such goods, business or services as to likely
cause confusion or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.
In summary, the Paris Convention protects well-known trademarks only (to be
determined by domestic authorities), while the Trademark Law protects all
trademarks, whether well-known or not, provided that they have been registered
and are in actual commercial use in the Philippines. Following universal
acquiescence and comity, in case of domestic legal disputes on any conflicting
provisions between the Paris Convention (which is an international agreement) and
the Trademark law (which is a municipal law) the latter will prevail. 54
Under both the Paris Convention and the Trademark Law, the protection of a
registered trademark is limited only to goods identical or similar to those in respect
of which such trademark is registered and only when there is likelihood of
confusion. Under both laws, the time element in commencing infringement cases is
material in ascertaining the registrant’s express or implied consent to another’s use
of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel
or laches may defeat the registrant’s otherwise valid cause of action.
Hence, proof of all the elements of trademark infringement is a condition precedent
to any finding of liability.
THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.
By respondents’ own judicial admission, the GALLO wine trademark was registered
in the Philippines in November 1971 but the wine itself was first marketed and sold
in the country only in 1974 and only within the former U.S. military facilities, and
outside thereof, only in 1979. To prove commercial use of the GALLO wine
trademark in the Philippines, respondents presented sales invoice no. 29991 dated
July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales
invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc.,
Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO
wines to the Philippines during that period.55 Nothing at all, however, was
presented to evidence the alleged sales of GALLO wines in the Philippines in 1974
or, for that matter, prior to July 9, 1981.
On the other hand, by testimonial evidence supported by the BIR authorization
letters, forms and manufacturer’s sworn statement, it appears that petitioners and
its predecessor-in-interest, Tobacco Industries, have indeed been using and selling
GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56
In Emerald Garment Manufacturing Corporation vs. Court of Appeals, 57 we
reiterated our rulings in Pagasa Industrial Corporation vs. Court of
Appeals,58 Converse Rubber Corporation vs. Universal Rubber Products,
Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken Bayer
Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. Intermediate Appellate
Court,61 and Philip Morris vs. Court of Appeals,62 giving utmost importance to
the actual commercial useof a trademark in the Philippines prior to its registration,
notwithstanding the provisions of the Paris Convention:
xxx xxx xxx
In addition to the foregoing, we are constrained to agree with petitioner's
contention that private respondent failed to prove prior actual commercial use of
its "LEE" trademark in the Philippines before filing its application for registration
with the BPTTT and hence, has not acquired ownership over said mark.
Actual use in commerce in the Philippines is an essential prerequisite for the
acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166) x x x
xxx xxx xxx
The provisions of the 1965 Paris Convention for the Protection of Industrial
Property relied upon by private respondent and Sec. 21-A of the Trademark Law
(R.A. No. 166) were sufficiently expounded upon and qualified in the recent case
of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):
xxx xxx xxx
Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a
municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization,
1971 Ed., p. 20). Withal, the fact that international law has been made part of the
law of the land does not by any means imply the primacy of international law over
national law in the municipal sphere. Under the doctrine of incorporation as applied
in most countries, rules of international law are given a standing equal, not
superior, to national legislative enactments.
xxx xxx xxx
In other words, (a foreign corporation) may have the capacity to sue for
infringement irrespective of lack of business activity in the Philippines on account
of Section 21-A of the Trademark Law but the question of whether they have an
exclusive right over their symbol as to justify issuance of the controversial writ
will depend on actual use of their trademarks in the Philippines in line with
Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim
that when a foreign corporation not licensed to do business in the Philippines files a
complaint for infringement, the entity need not be actually using the trademark in
commerce in the Philippines. Such a foreign corporation may have the personality
to file a suit for infringement but it may not necessarily be entitled to protection
due to absence of actual use of the emblem in the local market.
xxx xxx xxx
Undisputably, private respondent is the senior registrant, having obtained several
registration certificates for its various trademarks "LEE," "LEE RIDERS," and
"LEESURES" in both the supplemental and principal registers, as early as 1969 to
1973. However, registration alone will not suffice. In Sterling Products
International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214
[1969]; Reiterated inKabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583
[1991]) we declared:
xxx xxx xxx
A rule widely accepted and firmly entrenched because it has come down through
the years is that actual use in commerce or business is a prerequisite in the
acquisition of the right of ownership over a trademark.
xxx xxx xxx
The credibility placed on a certificate of registration of one's trademark, or its
weight as evidence of validity, ownership and exclusive use, is qualified. A
registration certificate serves merely as prima facieevidence. It is not conclusive
but can and may be rebutted by controverting evidence.
xxx xxx xxx
In the case at bench, however, we reverse the findings of the Director of Patents
and the Court of Appeals. After a meticulous study of the records, we observe that
the Director of Patents and the Court of Appeals relied mainly on the registration
certificates as proof of use by private respondent of the trademark "LEE" which,
as we have previously discussed are not sufficient. We cannot give credence to
private respondent's claim that its "LEE" mark first reached the Philippines in the
1960's through local sales by the Post Exchanges of the U.S. Military Bases in the
Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of
Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned
subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original
Records, p. 52) Similarly, we give little weight to the numerous vouchers
representing various advertising expenses in the Philippines for "LEE" products. It
is well to note that these expenses were incurred only in 1981 and 1982 by LEE
(Phils.), Inc. after it entered into a licensing agreement with private respondent on
11 May 1981. (Exhibit E)
On the other hand, petitioner has sufficiently shown that it has been in the
business of selling jeans and other garments adopting its "STYLISTIC MR. LEE"
trademark since 1975 as evidenced by appropriate sales invoices to various stores
and retailers. (Exhibit 1-e to 1-o)
Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526
[1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA
154 [1987]), respectively, are instructive:
The Trademark Law is very clear. It requires actual commercial use of the mark prior
to its registration. There is no dispute that respondent corporation was the first
registrant, yet it failed to fully substantiate its claim that it used in trade or
business in the Philippines the subject mark; it did not present proof to invest it
with exclusive, continuous adoption of the trademark which should consist
among others, of considerable sales since its first use. The invoices submitted by
respondent which were dated way back in 1957 show that the zippers sent to the
Philippines were to be used as "samples" and "of no commercial value." The
evidence for respondent must be clear, definite and free from inconsistencies.
"Samples" are not for sale and therefore, the fact of exporting them to the
Philippines cannot be considered to be equivalent to the "use" contemplated by
law. Respondent did not expect income from such "samples." There were no
receipts to establish sale, and no proof were presented to show that they were
subsequently sold in the Philippines.
xxx xxx xxx
For lack of adequate proof of actual use of its trademark in the Philippines prior to
petitioner's use of its own mark and for failure to establish confusing similarity
between said trademarks, private respondent's action for infringement must
necessarily fail. (Emphasis supplied.)
In view of the foregoing jurisprudence and respondents’ judicial admission that
the actual commercial use of the GALLO wine trademark was subsequent to its
registration in 1971 and to Tobacco Industries’ commercial use of the GALLO
cigarette trademark in 1973, we rule that, on this account, respondents never
enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of
Tobacco Industries and its successors-in-interest, herein petitioners, either under
the Trademark Law or the Paris Convention.
Respondents’ GALLO trademark
registration is limited to wines only
We also note that the GALLO trademark registration certificates in the Philippines
and in other countries expressly state that they cover wines only, without any
evidence or indication that registrant Gallo Winery expanded or intended to expand
its business to cigarettes.63
Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s
exclusive right to use the GALLO trademark should be limited to wines, the only
product indicated in its registration certificates. This strict statutory limitation on
the exclusive right to use trademarks was amply clarified in our ruling in Faberge,
Inc. vs. Intermediate Appellate Court:64
Having thus reviewed the laws applicable to the case before Us, it is not difficult to
discern from the foregoing statutory enactments that private respondent may be
permitted to register the trademark "BRUTE" for briefs produced by it
notwithstanding petitioner's vehement protestations of unfair dealings in
marketing its own set of items which are limited to: after-shave lotion, shaving
cream, deodorant, talcum powder and toilet soap. Inasmuch as petitioner has not
ventured in the production of briefs, an item which is not listed in its certificate of
registration, petitioner cannot and should not be allowed to feign that private
respondent had invaded petitioner's exclusive domain. To be sure, it is significant
that petitioner failed to annex in its Brief the so-called "eloquent proof that
petitioner indeed intended to expand its mark ‘BRUT’ to other goods" (Page 27,
Brief for the Petitioner; page 202, Rollo). Even then, a mere application by
petitioner in this aspect does not suffice and may not vest an exclusive right in its
favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing
Section 20 of the Trademark Law as applied to the documentary evidence
adduced by petitioner, the certificate of registration issued by the Director of
Patents can confer upon petitioner the exclusive right to use its own symbol only
to those goods specified in the certificate, subject to any conditions and limitations
stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin
in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed
the principle enunciated by the United States Supreme Court in American Foundries
vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has
adopted and used a trademark on his goods does not prevent the adoption and
use of the same trademark by others for products which are of a different
description. Verily, this Court had the occasion to observe in the 1966 case
of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious
objection was posed by the petitioner therein since the applicant utilized the
emblem "Tango" for no other product than hair pomade in which petitioner does
not deal.
This brings Us back to the incidental issue raised by petitioner which private
respondent sought to belie as regards petitioner's alleged expansion of its business.
It may be recalled that petitioner claimed that it has a pending application for
registration of the emblem "BRUT 33" for briefs (page 25, Brief for the Petitioner;
page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL
Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that
dissimilarity of goods will not preclude relief if the junior user's goods are not
remote from any other product which the first user would be likely to make or
sell (vide, at page 1025). Commenting on the former provision of the Trademark
Law now embodied substantially under Section 4(d) of Republic Act No. 166, as
amended, the erudite jurist opined that the law in point "does not require that the
articles of manufacture of the previous user and late user of the mark should
possess the same descriptive properties or should fall into the same categories as to
bar the latter from registering his mark in the principal register." (supra at page
1026).
Yet, it is equally true that as aforesaid, the protective mantle of the Trademark
Law extends only to the goods used by the first user as specified in the certificate
of registration following the clear message conveyed by Section 20.
How do We now reconcile the apparent conflict between Section 4(d) which was
relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would
seem that Section 4(d) does not require that the goods manufactured by the
second user be related to the goods produced by the senior user while Section 20
limits the exclusive right of the senior user only to those goods specified in the
certificate of registration. But the rule has been laid down that the clause which
comes later shall be given paramount significance over an anterior proviso upon the
presumption that it expresses the latest and dominant purpose. (Graham Paper Co.
vs. National Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L.
Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited
by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably
follows that Section 20 is controlling and, therefore, private respondent can
appropriate its symbol for the briefs it manufactures because as aptly remarked
by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken
Bayer(27 SCRA 1214 [1969]):
"Really, if the certificate of registration were to be deemed as including goods not
specified therein, then a situation may arise whereby an applicant may be
tempted to register a trademark on any and all goods which his mind may
conceive even if he had never intended to use the trademark for the said
goods. We believe that such omnibus registration is not contemplated by our
Trademark Law." (1226).
NO LIKELIHOOD OF CONFUSION, MISTAKE
OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS’ AND RESPONDENTS’
GOODS OR BUSINESS
A crucial issue in any trademark infringement case is the likelihood of confusion,
mistake or deceit as to the identity, source or origin of the goods or identity of the
business as a consequence of using a certain mark. Likelihood of confusion is
admittedly a relative term, to be determined rigidly according to the particular (and
sometimes peculiar) circumstances of each case. Thus, in trademark cases, more
than in other kinds of litigation, precedents must be studied in the light of each
particular case. 65
There are two types of confusion in trademark infringement. The first is "confusion
of goods" when an otherwise prudent purchaser is induced to purchase one
product in the belief that he is purchasing another, in which case defendant’s goods
are then bought as the plaintiff’s and its poor quality reflects badly on the plaintiff’s
reputation. The other is "confusion of business" wherein the goods of the parties
are different but the defendant’s product can reasonably (though mistakenly) be
assumed to originate from the plaintiff, thus deceiving the public into believing that
there is some connection between the plaintiff and defendant which, in fact, does
not exist.66
In determining the likelihood of confusion, the Court must consider: [a] the
resemblance between the trademarks; [b] the similarity of the goods to which the
trademarks are attached; [c] the likely effect on the purchaser and [d] the
registrant’s express or implied consent and other fair and equitable considerations.
Petitioners and respondents both use "GALLO" in the labels of their respective
cigarette and wine products. But, as held in the following cases, the use of an
identical mark does not, by itself, lead to a legal conclusion that there is trademark
infringement:
(a) in Acoje Mining Co., Inc. vs. Director of Patent, 67 we ordered the approval of
Acoje Mining’s application for registration of the trademark LOTUS for its soy sauce
even though Philippine Refining Company had prior registration and use of such
identical mark for its edible oil which, like soy sauce, also belonged to Class 47;
(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 68 we upheld
the Patent Director’s registration of the same trademark CAMIA for Ng Sam’s ham
under Class 47, despite Philippine Refining Company’s prior trademark registration
and actual use of such mark on its lard, butter, cooking oil (all of which belonged to
Class 47), abrasive detergents, polishing materials and soaps;
(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun
Liong,69 we dismissed Hickok’s petition to cancel private respondent’s HICKOK
trademark registration for its Marikina shoes as against petitioner’s earlier
registration of the same trademark for handkerchiefs, briefs, belts and wallets;
(d) in Shell Company of the Philippines vs. Court of Appeals, 70 in a minute resolution,
we dismissed the petition for review for lack of merit and affirmed the Patent
Office’s registration of the trademark SHELL used in the cigarettes manufactured by
respondent Fortune Tobacco Corporation, notwithstanding Shell Company’s
opposition as the prior registrant of the same trademark for its gasoline and other
petroleum products;
(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSO’s
complaint for trademark infringement against United Cigarette Corporation and
allowed the latter to use the trademark ESSO for its cigarettes, the same trademark
used by ESSO for its petroleum products, and
(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we
affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation
could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki
Kaisha’s prior registration and use of the same trademark for its paints, chemical
products, toner and dyestuff (Class 2).
Whether a trademark causes confusion and is likely to deceive the public hinges on
"colorable imitation"73 which has been defined as "such similarity in form, content,
words, sound, meaning, special arrangement or general appearance of the
trademark or tradename in their overall presentation or in their essential and
substantive and distinctive parts as would likely mislead or confuse persons in the
ordinary course of purchasing the genuine article."74
Jurisprudence has developed two tests in determining similarity and likelihood of
confusion in trademark resemblance:75
(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals76 and
other cases,77 and
(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of
Appeals78 and its preceding cases.79
The Dominancy Test focuses on the similarity of the prevalent features of the
competing trademarks which might cause confusion or deception, and thus
infringement. If the competing trademark contains the main, essential or dominant
features of another, and confusion or deception is likely to result, infringement
takes place. Duplication or imitation is not necessary; nor is it necessary that the
infringing label should suggest an effort to imitate. The question is whether the use
of the marks involved is likely to cause confusion or mistake in the mind of the
public or deceive purchasers.80
On the other hand, the Holistic Test requires that the entirety of the marks in
question be considered in resolving confusing similarity. Comparison of words is not
the only determining factor. The trademarks in their entirety as they appear in their
respective labels or hang tags must also be considered in relation to the goods to
which they are attached. The discerning eye of the observer must focus not only on
the predominant words but also on the other features appearing in both labels in
order that he may draw his conclusion whether one is confusingly similar to the
other.81
In comparing the resemblance or colorable imitation of marks, various factors have
been considered, such as the dominant color, style, size, form, meaning of letters,
words, designs and emblems used, the likelihood of deception of the mark or
name's tendency to confuse82 and the commercial impression likely to be conveyed
by the trademarks if used in conjunction with the respective goods of the parties. 83
Applying the Dominancy and Holistic Tests, we find that the dominant feature of
the GALLO cigarette trademark is the device of a large rooster facing left, outlined
in black against a gold background. The rooster’s color is either green or red – green
for GALLO menthols and red for GALLO filters. Directly below the large rooster
device is the word GALLO. The rooster device is given prominence in the GALLO
cigarette packs in terms of size and location on the labels.84
The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it
has no relation at all to the product but was chosen merely as a trademark due to
the fondness for fighting cocks of the son of petitioners’ president. Furthermore,
petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark
to appeal to one of their target markets, the sabungeros (cockfight aficionados).85
Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette
packs are the words "MADE BY MIGHTY CORPORATION," thus clearly informing the
public as to the identity of the manufacturer of the cigarettes.
On the other hand, GALLO Winery’s wine and brandy labels are diverse. In many of
them, the labels are embellished with sketches of buildings and trees, vineyards or
a bunch of grapes while in a few, one or two small roosters facing right or facing
each other (atop the EJG crest, surrounded by leaves or ribbons), with additional
designs in green, red and yellow colors, appear as minor features thereof. 87 Directly
below or above these sketches is the entire printed name of the founder-owners,
"ERNEST & JULIO GALLO" or just their surname "GALLO," 88which appears
in different fonts, sizes, styles and labels, unlike petitioners’ uniform casque-font
bold-lettered GALLO mark.
Moreover, on the labels of Gallo Winery’s wines are printed the words "VINTED
AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."89
The many different features like color schemes, art works and other markings of
both products drown out the similarity between them – the use of the word
“GALLO” ― a family surname for the Gallo Winery’s wines and a Spanish word for
rooster for petitioners’ cigarettes.
WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS
Confusion of goods is evident where the litigants are actually in competition; but
confusion of business may arise between non-competing interests as well.90
Thus, apart from the strict application of Section 20 of the Trademark Law and
Article 6bis of the Paris Convention which proscribe trademark infringement not only
of goods specified in the certificate of registration but also of identical or similar
goods, we have also uniformly recognized and applied the modern concept of
"related goods."91Simply stated, when goods are so related that the public may be,
or is actually, deceived and misled that they come from the same maker or
manufacturer, trademark infringement occurs.92
Non-competing goods may be those which, though they are not in actual
competition, are so related to each other that it can reasonably be assumed that
they originate from one manufacturer, in which case, confusion of business can
arise out of the use of similar marks. 93 They may also be those which, being entirely
unrelated, cannot be assumed to have a common source; hence, there is no
confusion of business, even though similar marks are used.94 Thus, there is no
trademark infringement if the public does not expect the plaintiff to make or sell
the same class of goods as those made or sold by the defendant.95
In resolving whether goods are related,96 several factors come into play:
(a) the business (and its location) to which the goods belong
(b) the class of product to which the goods belong
(c) the product's quality, quantity, or size, including the nature of the package,
wrapper or container 97
(d) the nature and cost of the articles98
(e) the descriptive properties, physical attributes or essential characteristics with
reference to their form, composition, texture or quality
(f) the purpose of the goods99
(g) whether the article is bought for immediate consumption, 100 that is, day-to-day
household items101
(h) the fields of manufacture102
(i) the conditions under which the article is usually purchased 103 and
(j) the channels of trade through which the goods flow, 104 how they are distributed,
marketed, displayed and sold.105
The wisdom of this approach is its recognition that each trademark infringement
case presents its own unique set of facts. No single factor is preeminent, nor can
the presence or absence of one determine, without analysis of the others, the
outcome of an infringement suit. Rather, the court is required to sift the evidence
relevant to each of the criteria. This requires that the entire panoply of elements
constituting the relevant factual landscape be comprehensively examined. 106 It is a
weighing and balancing process. With reference to this ultimate question, and from
a balancing of the determinations reached on all of the factors, a conclusion is
reached whether the parties have a right to the relief sought.107
A very important circumstance though is whether there exists a likelihood that an
appreciable number of ordinarily prudent purchasers will be misled, or simply
confused, as to the source of the goods in question. 108 The "purchaser" is not the
"completely unwary consumer" but is the "ordinarily intelligent buyer" considering
the type of product involved.109 He is "accustomed to buy, and therefore to some
extent familiar with, the goods in question. The test of fraudulent simulation is to
be found in the likelihood of the deception of some persons in some measure
acquainted with an established design and desirous of purchasing the commodity
with which that design has been associated. The test is not found in the deception,
or the possibility of deception, of the person who knows nothing about the design
which has been counterfeited, and who must be indifferent between that and the
other. The simulation, in order to be objectionable, must be such as appears likely
to mislead the ordinary intelligent buyer who has a need to supply and is familiar
with the article that he seeks to purchase."110
Hence, in the adjudication of trademark infringement, we give due regard to the
goods’ usual purchaser’s character, attitude, habits, age, training and education. 111
Applying these legal precepts to the present case, petitioner’s use of the GALLO
cigarette trademark is not likely to cause confusion or mistake, or to deceive the
"ordinarily intelligent buyer" of either wines or cigarettes or both as to the identity
of the goods, their source and origin, or identity of the business of petitioners and
respondents.
Obviously, wines and cigarettes are not identical or competing products. Neither do
they belong to the same class of goods. Respondents’ GALLO wines belong to Class
33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases
while petitioners’ GALLO cigarettes fall under Class 34.
We are mindful that product classification alone cannot serve as the decisive factor
in the resolution of whether or not wines and cigarettes are related goods.
Emphasis should be on the similarity of the products involved and not on the
arbitrary classification or general description of their properties or characteristics.
But the mere fact that one person has adopted and used a particular trademark for
his goods does not prevent the adoption and use of the same trademark by others
on articles of a different description. 112
Both the Makati RTC and the CA held that wines and cigarettes are related products
because: (1) "they are related forms of vice, harmful when taken in excess, and
used for pleasure and relaxation" and (2) "they are grouped or classified in the
same section of supermarkets and groceries."
We find these premises patently insufficient and too arbitrary to support the legal
conclusion that wines and cigarettes are related products within the contemplation
of the Trademark Law and the Paris Convention.
First, anything –- not only wines and cigarettes ― can be used for pleasure and
relaxation and can be harmful when taken in excess. Indeed, it would be a grave
abuse of discretion to treat wines and cigarettes as similar or related products likely
to cause confusion just because they are pleasure-giving, relaxing or potentially
harmful. Such reasoning makes no sense.
Second, it is common knowledge that supermarkets sell an infinite variety of wholly
unrelated products and the goods here involved, wines and cigarettes, have nothing
whatsoever in common with respect to their essential characteristics, quality,
quantity, size, including the nature of their packages, wrappers or containers. 113
Accordingly, the U.S. patent office and courts have consistently held that the mere
fact that goods are sold in one store under the same roof does not automatically
mean that buyers are likely to be confused as to the goods’ respective sources,
connections or sponsorships. The fact that different products are available in the
same store is an insufficient standard, in and of itself, to warrant a finding of
likelihood of confusion.114
In this regard, we adopted the Director of Patents’ finding in Philippine Refining Co.,
Inc. vs. Ng Sam and the Director of Patents:115
In his decision, the Director of Patents enumerated the factors that set
respondent’s products apart from the goods of petitioner. He opined and we quote:
"I have taken into account such factors as probable purchaser attitude and habits,
marketing activities, retail outlets, and commercial impression likely to be conveyed
by the trademarks if used in conjunction with the respective goods of the parties, I
believe that ham on one hand, and lard, butter, oil, and soap on the other are
products that would not move in the same manner through the same channels of
trade. They pertain to unrelated fields of manufacture, might be distributed and
marketed under dissimilar conditions, and are displayed separately even though
they frequently may be sold through the same retail food
establishments. Opposer’s products are ordinary day-to-day household items
whereas ham is not necessarily so. Thus, the goods of the parties are not of a
character which purchasers would likely attribute to a common origin.
The observations and conclusion of the Director of Patents are correct. The
particular goods of the parties are so unrelated that consumers, would not, in any
probability mistake one as the source of origin of the product of the other.
(Emphasis supplied).
The same is true in the present case. Wines and cigarettes are non-competing and
are totally unrelated products not likely to cause confusion vis-à-vis the goods or
the business of the petitioners and respondents.
Wines are bottled and consumed by drinking while cigarettes are packed in cartons
or packages and smoked. There is a whale of a difference between their descriptive
properties, physical attributes or essential characteristics like form, composition,
texture and quality.
GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines
are patronized by middle-to-high-income earners while GALLO cigarettes appeal
only to simple folks like farmers, fishermen, laborers and other low-income
workers.116 Indeed, the big price difference of these two products is an important
factor in proving that they are in fact unrelated and that they travel in different
channels of trade. There is a distinct price segmentation based on vastly different
social classes of purchasers.117
GALLO cigarettes and GALLO wines are not sold through the same channels of
trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass
off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are
distributed, marketed and sold through ambulant and sidewalk vendors, small
local sari-saristores and grocery stores in Philippine rural areas, mainly in Misamis
Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are
imported, distributed and sold in the Philippines through Gallo Winery’s exclusive
contracts with a domestic entity, which is currently Andresons. By respondents’
own testimonial evidence, GALLO wines are sold in hotels, expensive bars and
restaurants, and high-end grocery stores and supermarkets, not through sari-
sari stores or ambulant vendors.119
Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing
Company vs. Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO
cigarettes are related goods. The courts a quo should have taken into consideration
the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S &
M Brands, Inc.:121
IDV correctly acknowledges, however, that there is no per se rule that the use of the
same mark on alcohol and tobacco products always will result in a likelihood of
confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons,
Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), aff’d, 222 F. 2d 460
(5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER"
on cigars because the fame of the plaintiff’s mark for scotch whiskey and because
the plaintiff advertised its scotch whiskey on, or in connection with tobacco
products. The court, in John Walker & Sons, placed great significance on the
finding that the infringers use was a deliberate attempt to capitalize on the senior
marks’ fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris,
Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the
defendant’s use of the mark "BLACK LABEL" for cigarettes because it was likely to
cause confusion with the plaintiff’s well-known mark "BLACK LABEL" for beer.
xxx xxx xxx
Those decisions, however, must be considered in perspective of the principle that
tobacco products and alcohol products should be considered related only in cases
involving special circumstances.Schenley Distillers, Inc. v. General Cigar
Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special
circumstances has been found to exist where there is a finding of unfair
competition or where a ‘famous’ or ‘well-known mark’ is involved and there is a
demonstrated intent to capitalize on that mark. For example, in John Walker &
Sons, the court was persuaded to find a relationship between products, and hence a
likelihood of confusion, because of the plaintiff’s long use and extensive advertising
of its mark and placed great emphasis on the fact that the defendant used the
trademark ‘Johnnie Walker with full knowledge of its fame and reputation and with
the intention of taking advantage thereof.’ John Walker & Sons, 124 F. Supp. At
256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q.
306, 307 (1959) (holding that the decision in John Walker & Sons was ‘merely the
law on the particular case based upon its own peculiar facts’); see also Alfred
Dunhill, 350 F. Supp. At 1363 (defendant’s adoption of ‘Dunhill’ mark was not
innocent). However, in Schenley, the court noted that the relation between tobacco
and whiskey products is significant where a widely known arbitrary mark has long
been used for diversified products emanating from a single source and a newcomer
seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785.
Significantly, in Schenley, the court looked at the industry practice and the facts of
the case in order to determine the nature and extent of the relationship between
the mark on the tobacco product and the mark on the alcohol product.
The record here establishes conclusively that IDV has never advertised BAILEYS
liqueurs in conjunction with tobacco or tobacco accessory products and that IDV
has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not
market bar accessories, or liqueur related products, with its cigarettes. The
advertising and promotional materials presented a trial in this action demonstrate a
complete lack of affiliation between the tobacco and liqueur products bearing the
marks here at issue.
xxx xxx xxx
Of equal significance, it is undisputed that S & M Brands had no intent, by adopting Second, the GALLO trademark cannot be considered a strong and distinct mark in
the family name ‘Bailey’s’ as the mark for its cigarettes, to capitalize upon the fame the Philippines. Respondents do not dispute the documentary evidence that aside
of the ‘BAILEYS’ mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will from Gallo Winery’s GALLO trademark registration, the Bureau of Patents,
be discussed below, and as found in Mckesson & Robbins, the survey evidence Trademarks and Technology Transfer also issued on September 4, 1992 Certificate
refutes the contention that cigarettes and alcoholic beverages are so intimately of Registration No. 53356 under the Principal Register approving Productos
associated in the public mind that they cannot under any circumstances be sold Alimenticios Gallo, S.A’s April 19, 1990 application for GALLO trademark registration
under the same mark without causing confusion. See Mckesson & Robbins, 120 and use for its "noodles, prepared food or canned noodles, ready or canned sauces
U.S.P.Q. at 308. for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice
cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species
Taken as a whole, the evidence here demonstrates the absence of the ‘special and ice."122
circumstances’ in which courts have found a relationship between tobacco and
alcohol products sufficient to tip the similarity of goods analysis in favor of the Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs.
protected mark and against the allegedly infringing mark. It is true that BAILEYS Court of Appeals and NSR Rubber Corporation,123 "GALLO" cannot be considered a
liqueur, the world’s best selling liqueur and the second best selling in the United "well-known" mark within the contemplation and protection of the Paris Convention
States, is a well-known product. That fact alone, however, is insufficient to invoke in this case since wines and cigarettes are not identical or similar goods:
the special circumstances connection here where so much other evidence and so
many other factors disprove a likelihood of confusion. The similarity of products We agree with public respondents that the controlling doctrine with respect to the
analysis, therefore, augers against finding that there is a likelihood of applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha
confusion. (Emphasis supplied). Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the
BPTTT:
In short, tobacco and alcohol products may be considered related only in cases
involving special circumstanceswhich exist only if a famous mark is involved and "Regarding the applicability of Article 8 of the Paris Convention, this Office
there is a demonstrated intent to capitalize on it. Both of these are absent in the believes that there is no automatic protection afforded an entity whose
present case. tradename is alleged to have been infringed through the use of that name as a
trademark by a local entity.
THE GALLO WINE TRADEMARK IS NOT A
WELL-KNOWN MARK IN THE CONTEXT In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No.
OF THE PARIS CONVENTION IN THIS CASE 75420, 15 November 1991, the Honorable Supreme Court held that:
SINCE WINES AND CIGARETTES ARE NOT
‘The Paris Convention for the Protection of Industrial Property does not
IDENTICAL OR SIMILAR GOODS
automatically exclude all countries of the world which have signed it from using a
First, the records bear out that most of the trademark registrations took place in tradename which happens to be used in one country. To illustrate — if a taxicab
the late 1980s and the 1990s, that is, after Tobacco Industries’ use of the GALLO or bus company in a town in the United Kingdom or India happens to use the
cigarette trademark in 1973 and petitioners’ use of the same mark in 1984. tradename ‘Rapid Transportation,’ it does not necessarily follow that ‘Rapid’ can
no longer be registered in Uganda, Fiji, or the Philippines.
GALLO wines and GALLO cigarettes are neither the same, identical, similar nor
related goods, a requisite elementunder both the Trademark Law and the Paris This office is not unmindful that in (sic) the Treaty of Paris for the Protection of
Convention. Intellectual Property regarding well-known marks and possible application thereof
in this case. Petitioner, as this office sees it, is trying to seek refuge under its
protective mantle, claiming that the subject mark is well known in this country at
the time the then application of NSR Rubber was filed.
However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin,
issued a memorandum dated 25 October 1983 to the Director of Patents, a set of
guidelines in the implementation of Article 6bis of the Treaty of Paris. These
conditions are:
a) the mark must be internationally known;
b) the subject of the right must be a trademark, not a patent or copyright or
anything else;
c) the mark must be for use in the same or similar kinds of goods; and
d) the person claiming must be the owner of the mark (The Parties Convention
Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the
World Intellectual Property Organization, Geneva, Switzerland, 1985)’
From the set of facts found in the records, it is ruled that the Petitioner failed to
comply with the third requirement of the said memorandum that is the mark
must be for use in the same or similar kinds of goods. The Petitioner is using the
mark "CANON" for products belonging to class 2 (paints, chemical products) while
the Respondent is using the same mark for sandals (class 25).
Hence, Petitioner's contention that its mark is well-known at the time the
Respondent filed its application for the same mark should fail." (Emphasis
supplied.)
Consent of the Registrant and
Other air, Just and Equitable
Considerations
Each trademark infringement case presents a unique problem which must be
answered by weighing the conflicting interests of the litigants.124
Respondents claim that GALLO wines and GALLO cigarettes flow through the same
channels of trade, that is, retail trade. If respondents’ assertion is true, then both
goods co-existed peacefully for a considerable period of time. It took respondents
almost 20 years to know about the existence of GALLO cigarettes and sue
petitioners for trademark infringement. Given, on one hand, the long period of time
that petitioners were engaged in the manufacture, marketing, distribution and sale
of GALLO cigarettes and, on the other, respondents’ delay in enforcing their rights
(not to mention implied consent, acquiescence or negligence) we hold that equity,
justice and fairness require us to rule in favor of petitioners. The scales of
conscience and reason tip far more readily in favor of petitioners than respondents.
Moreover, there exists no evidence that petitioners employed malice, bad faith or
fraud, or that they intended to capitalize on respondents’ goodwill in adopting the
GALLO mark for their cigarettes which are totally unrelated to respondents’ GALLO
wines. Thus, we rule out trademark infringement on the part of petitioners.
PETITIONERS ARE ALSO NOT LIABLE
FOR UNFAIR COMPETITION
Under Section 29 of the Trademark Law, any person who employs deception or any
other means contrary to good faith by which he passes off the goods manufactured
by him or in which he deals, or his business, or services for those of the one having
established such goodwill, or who commits any acts calculated to produce said
result, is guilty of unfair competition. It includes the following acts:
(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer
or dealer other than the actual manufacturer or dealer, or who otherwise clothes
the goods with such appearance as shall deceive the public and defraud another of
his legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public;
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
the goods, business or services of another.
The universal test question is whether the public is likely to be deceived. Nothing
less than conduct tending to pass off one man’s goods or business as that of
another constitutes unfair competition. Actual or probable deception and confusion
on the part of customers by reason of defendant’s practices must always
appear.125 On this score, we find that petitioners never attempted to pass off their
cigarettes as those of respondents. There is no evidence of bad faith or fraud
imputable to petitioners in using their GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws as well as those
recognized by jurisprudence, we conclude that petitioners are not liable for
trademark infringement, unfair competition or damages.
WHEREFORE, finding the petition for review meritorious, the same is hereby
GRANTED. The questioned decision and resolution of the Court of Appeals in CA-
G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999
order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are
hereby REVERSED and SET ASIDE and the complaint against petitioners DISMISSED.
Costs against respondents.
SO ORDERED.
104 Mighty Corporation vs. Gallo Winery
Date: 14 July 2004
Doctrine:
Following universal acquiescence and comity, in case of domestic legal disputes on
any conflicting provisions between the Paris Convention for the Protection of
Industrial Property (which is an international agreement) and Republic Act No. 166
or the Trademark Law (which is a municipal law), the latter will prevail. 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.
Facts: Gallo Winery was organized under the laws of the State of California where
all its wineries are located. It sells its products in different countries using various
trademarks, including GALLO. The GALLO wine trademark was registered with the
Philippine Patent Office in 1971. Despite said registration, GALLO wines were
introduced in the Philippines only in 1974 within the U.S. military facilities. In 1979,
GALLO wines saw a bigger Philippine market through distributors and independent
outlets. However, in 1992, a distributor’s employee found GALLO cigarettes on
display in the wine cellar section of a supermarket in Davao City.
GALLO cigarettes were products of Mighty Corp. and its sister company, Tobacco
Industries, which have been manufacturing, selling, and distributing GALLO
cigarettes throughout the Philippines since 1973. That same year, the Bureau of
Internal Revenue approved Tobacco Industries’ use of the GALLO 100’s cigarette
mark, and three years later or in 1976, of the GALLO filter cigarette mark. The
GALLO cigarette trademark was registered with the Philippine Patent Office in 1985.
Gallo Winery filed suit for trademark infringement [and unfair competition] against
Mighty Corp. and Tobacco Industries, claiming that the use of GALLO cigarettes
caused confusion on the part of the purchasing public who had always associated
GALLO with Gallo Winery’s products, thus constituting a violation of the Paris
Convention for the Protection of Industrial Property1 and Republic Act No. 166 or
the Trademark Law2.
The RTC decided the case in favor of Gallo Winery, applying not only the Paris
Convention and Republic Act No. 166, but also Republic Act No. 8293 or the
Intellectual Property Code of the Philippines, and reasoning that GALLO cigarettes
and GALLO wines were identical, similar or related goods since they were “forms of
vice.” The Court of Appeals affirmed the RTC decision. Mighty Corp. and Tobacco
Industries elevated the matter to the Supreme Court.
Issues:
(a) Whether or not Republic Act No. 8293 or the Intellectual Property Code is
applicable. (NO, it is not applicable.)
(b) Whether the Paris Convention or Republic Act No. 166 governs as regards
Gallo Winery’s capacity to sue. (Republic Act No. 166 governs.)
1 CONVENTION OF PARIS FOR THE PROTECTION OF INDUSTRIAL PROPERTY of
20th March, 1883, revised at BRUSSELS on 14th December, 1900, at WASHINGTON on
2nd June, 1911, at THE HAGUE on 6th November, 1925, at LONDON on 2nd June, 1934,
and at Lisbon on 31st October, 1958.
2An Act To Provide For The Registration And Protection Of Trademarks, Trade Names And
Servicemarks, Defining Unfair Competition And False Marking And Providing Remedies
Against The Same, And For Other Purposes.
(c) Whether or not Gallo Winery has exclusive right to use the trademark GALLO.
(No, it does not have the exclusive right to use said trademark. Hence, there
was no trademark infringement.)
Ratio:
(a) Republic Act No. 8293 is not applicable: Republic Act No. 8293 or the Intellectual
Property Code, which repealed Republic Act No. 166 or the Trademark Law, took
effect about five years after the filing of the complaint. The RTC and the CA
should have limited the consideration of the case within the parameters of the
Trademark Law and the Paris Convention, the laws in force at the time of the
filing of the complaint.
(b) Gallo Winery has capacity to sue: Article 6bis of the Paris Convention, an
international agreement binding on the Philippines and the United States (Gallo
Winery’s country of domicile and origin) prohibits “the [registration] or use of a
trademark which constitutes a reproduction, imitation or translation, liable to
create confusion, of a mark considered by the competent authority of the
country of registration or use to be well-known in that country as being already
the mark of a person entitled to the benefits of the [Paris] Convention and used
for identical or similar goods.”
GALLO cannot be considered a well-known mark within the contemplation and
protection of the Paris Convention. “[T]he GALLO trademark cannot be
considered a strong and distinct mark in the Philippines. [Gallo Winery does] not
dispute the documentary evidence that aside from Gallo Winery’s GALLO
trademark registration, the Bureau of Patents, Trademarks and Technology
Transfer also issued on September 4, 1992 Certificate of Registration No. 53356
uxnder the Principal Register approving Productos Alimenticios Gallo, S.A’s April
19, 1990 application for GALLO trademark registration and use for its ‘noodles,
prepared food or canned noodles, ready or canned sauces for noodles,
semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream,
honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species and
ice.’”
However, while the Paris Convention protects well-known trademarks only, the
Trademark Law protects all trademarks, whether well-known or not, provided
that they have been registered and are in actual commercial use in the
Philippines. Following universal acquiescence and comity, in case of domestic
legal disputes on any conflicting provisions between the Paris Convention (which
is an international agreement) and the Trademark law (which is a municipal law),
the latter will prevail. Thus, even if the GALLO wine trademark is not considered
well-known, it may still be the proper subject of trademark infringement by
virtue of its registration and actual commercial use in the Philippines. Gallo
Winery may sue for trademark infringement.
(c) Gallo Winery does not have the exclusive right to use the GALLO trademark:
The provisions of the Paris Convention and Republic Act No. 166 were
sufficiently expounded upon and qualified in Philip Morris, Inc. v. Court of
Appeals (224 SCRA 576 [1993]):
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. 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.
In other words, (a foreign corporation) may have the capacity to
sue for infringement irrespective of lack of business activity in the
country but the question of whether they have an exclusive right
over their symbol will depend on actual use of their trademarks in
the Philippines in line with Sections 2 and 2-A3 of Republic Act No.
166.
3 SEC. 2. What are registrable. – Trademarks, tradenames, and servicemarks owned by
persons, corporations, partnerships or associations domiciled in the Philippines and by
persons, corporations, partnerships or associations domiciled in any foreign country may be
registered in accordance with the provisions of this Act; Provided, That said trademarks,
tradenames, or servicemarks are actually in use in commerce and services not less than two
months in the Philippines before the time the applications for registration are filed. And
provided, further, That the country of which the applicant for registration is a citizen grants by
law substantially similar privileges to citizens of the Philippines, and such fact is officially
certified, with a certified true copy of the foreign law translated into the English language, by
the government of the foreign country to the Government of the Republic of the Philippines.
(As amended by R.A. 865).
SEC. 2-A. Ownership of trademarks, tradenames and servicemarks; how acquired. –
Anyone who lawfully produces or deals in merchandise of any kind or engages in any lawful
business, or who renders any lawful service in commerce, by actual use thereof in manufacture
or trade, in business, and in the service rendered, may appropriate to his exclusive use a
trademark, a tradename, or a servicemark not so appropriated by another, to distinguish his
merchandise, business or service from the merchandise, business or service of others. The
ownership or possession of a trademark, tradename, servicemark heretofore or hereafter
appropriated, as in this section provided, shall be recognized and protected in the same manner
 A rule widely accepted and firmly entrenched because it has come
down through the years is that actual use in commerce or
business is a prerequisite in the acquisition of the right of
ownership over a trademark.

In view of the foregoing jurisprudence and Gallo Winery’s judicial admission that
the actual commercial use of the GALLO wine trademark was subsequent to its
registration in 1971 and to Tobacco Industries’ commercial use of the GALLO
cigarette trademark in 1973, we rule that, on this account, Gallo Winery never
enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of
Tobacco Industries and its successors-in-interest. Also, GALLO trademark
registration certificates in the Philippines and in other countries expressly state
that they cover wines only, without any evidence or indication that registrant
Gallo Winery expanded or intended to expand its business to cigarettes. Thus, by
strict application of Section 204 of the Trademark Law, Gallo Winery’s exclusive
right to use the GALLO trademark should be limited to wines, the only product
indicated in its registration certificates. G.R. No. 148222 August 15, 2003
Dispositive: “[F]inding the petition for review meritorious, the same is hereby
PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,
GRANTED. The questioned decision and resolution of the Court of Appeals in CA-
vs.
G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999
order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are SHOEMART, INCORPORATED, and NORTH EDSA MARKETING,
INCORPORATED, Respondents.
hereby REVERSED and SET ASIDE and the complaint against petitioners
DISMISSED.”
DECISION

CORONA, J.:

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

and to the same extent as are other property rights known to the law. (As amended by R.A.
638).
4 SEC 20. Certificate of registration prima facie evidence of validity. — A certificate of
registration of a mark or trade-name shall be prima facie evidence of the validity of the
registration, the registrant's ownership of the mark or tradename, and of the registrant's
exclusive right to use the same in connection with the goods, business or services specified in
the certificate, subject to any conditions and limitations stated therein.
FACTUAL ANTECEDENTS
The May 22, 2001 decision of the Court of Appeals3 contained a summary of this
dispute:
"Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the
manufacture of advertising display units simply referred to as light boxes. These
units utilize specially printed posters sandwiched between plastic sheets and
illuminated with back lights. Pearl and Dean was able to secure a Certificate of
Copyright Registration dated January 20, 1981 over these illuminated display units.
The advertising light boxes were marketed under the trademark "Poster Ads". The
application for registration of the trademark was filed with the Bureau of Patents,
Trademarks and Technology Transfer on June 20, 1983, but was approved only on
September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl
and Dean employed the services of Metro Industrial Services to manufacture its
advertising displays.
Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart,
Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa.
Since SM City North Edsa was under construction at that time, SMI offered as an
alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On
September 11, 1985, Pearl and Dean’s General Manager, Rodolfo Vergara,
submitted for signature the contracts covering SM Cubao and SM Makati to SMI’s
Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the
contract for SM Makati, however, was returned signed. On October 4, 1985,
Vergara wrote Abano inquiring about the other contract and reminding him that
their agreement for installation of light boxes was not only for its SM Makati
branch, but also for SM Cubao. SMI did not bother to reply.
Instead, in a letter dated January 14, 1986, SMI’s house counsel informed Pearl and
Dean that it was rescinding the contract for SM Makati due to non-performance of
the terms thereof. In his reply dated February 17, 1986, Vergara protested the
unilateral action of SMI, saying it was without basis. In the same letter, he pushed
for the signing of the contract for SM Cubao.
Two years later, Metro Industrial Services, the company formerly contracted by
Pearl and Dean to fabricate its display units, offered to construct light boxes for
Shoemart’s chain of stores. SMI approved the proposal and ten (10) light boxes
were subsequently fabricated by Metro Industrial for SMI. After its contract with
Metro Industrial was terminated, SMI engaged the services of EYD Rainbow
Advertising Corporation to make the light boxes. Some 300 units were fabricated in
1991. These were delivered on a staggered basis and installed at SM Megamall and
SM City.
Sometime in 1989, Pearl and Dean, received reports that exact copies of its light
boxes were installed at SM City and in the fastfood section of SM Cubao. Upon
investigation, Pearl and Dean found out that aside from the two (2) reported SM
branches, light boxes similar to those it manufactures were also installed in two (2)
other SM stores. It further discovered that defendant-appellant North Edsa
Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services,
was set up primarily to sell advertising space in lighted display units located in SMI’s
different branches. Pearl and Dean noted that NEMI is a sister company of SMI.
In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991
to both SMI and NEMI enjoining them to cease using the subject light boxes and to
remove the same from SMI’s establishments. It also demanded the discontinued
use of the trademark "Poster Ads," and the payment to Pearl and Dean of
compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00).
Upon receipt of the demand letter, SMI suspended the leasing of two hundred
twenty-four (224) light boxes and NEMI took down its advertisements for "Poster
Ads" from the lighted display units in SMI’s stores. Claiming that both SMI and NEMI
failed to meet all its demands, Pearl and Dean filed this instant case for
infringement of trademark and copyright, unfair competition and damages.
In denying the charges hurled against it, SMI maintained that it independently
developed its poster panels using commonly known techniques and available
technology, without notice of or reference to Pearl and Dean’s copyright. SMI noted
that the registration of the mark "Poster Ads" was only for stationeries such as
letterheads, envelopes, and the like. Besides, according to SMI, the word "Poster
Ads" is a generic term which cannot be appropriated as a trademark, and, as such,
registration of such mark is invalid. It also stressed that Pearl and Dean is not
entitled to the reliefs prayed for in its complaint since its advertising display units
contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that
Pearl and Dean had no cause of action against it and that the suit was purely
intended to malign SMI’s good name. On this basis, SMI, aside from praying for the
dismissal of the case, also counterclaimed for moral, actual and exemplary damages
and for the cancellation of Pearl and Dean’s Certification of Copyright Registration
No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration
No. 4165 dated September 12, 1988.
NEMI, for its part, denied having manufactured, installed or used any advertising
display units, nor having engaged in the business of advertising. It repleaded SMI’s
averments, admissions and denials and prayed for similar reliefs and counterclaims
as SMI."
The RTC of Makati City decided in favor of P & D:
Wherefore, defendants SMI and NEMI are found jointly and severally liable for
infringement of copyright under Section 2 of PD 49, as amended, and infringement
of trademark under Section 22 of RA No. 166, as amended, and are hereby
penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA
166, as amended. Accordingly, defendants are hereby directed:
(1) to pay plaintiff the following damages:
 (a) actual damages - ₱16,600,000.00, 841 (1879). In that case, Selden had obtained a copyright protection for a book
representing profits entitled "Selden’s Condensed Ledger or Bookkeeping Simplified" which purported
derived by defendants to explain a new system of bookkeeping. Included as part of the book were blank
as a result of infringe- forms and illustrations consisting of ruled lines and headings, specially designed for
ment of plaintiff’s copyright use in connection with the system explained in the work. These forms showed the
from 1991 to 1992 entire operation of a day or a week or a month on a single page, or on two pages
following each other. The defendant Baker then produced forms which were similar
(b) moral damages - ₱1,000.000.00 to the forms illustrated in Selden’s copyrighted books. The Court held that
exclusivity to the actual forms is not extended by a copyright. The reason was that
(c) exemplary damages - ₱1,000,000.00 "to grant a monopoly in the underlying art when no examination of its novelty has
ever been made would be a surprise and a fraud upon the public; that is the
province of letters patent, not of copyright." And that is precisely the point. No
(d) attorney’s fees - ₱1,000,000.00
doubt aware that its alleged original design would never pass the rigorous
examination of a patent application, plaintiff-appellant fought to foist a fraudulent
plus
monopoly on the public by conveniently resorting to a copyright registration which
merely employs a recordal system without the benefit of an in-depth examination
(e) costs of suit; of novelty.

(2) to deliver, under oath, for impounding in the National Library, all light
boxes of SMI which were fabricated by Metro Industrial Services and EYD
Rainbow Advertising Corporation;
(3) to deliver, under oath, to the National Library, all filler-posters using the
trademark "Poster Ads", for destruction; and
(4) to permanently refrain from infringing the copyright on plaintiff’s light
boxes and its trademark "Poster Ads".
Defendants’ counterclaims are hereby ordered dismissed for lack of merit.
SO ORDERED.4
On appeal, however, the Court of Appeals reversed the trial court:
Since the light boxes cannot, by any stretch of the imagination, be considered as
either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to
be properly classified as a copyrightable class "O" work, we have to agree with SMI
when it posited that what was copyrighted were the technical drawings only, and
not the light boxes themselves, thus:
The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough
Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained
a copyright over an unpublished drawing entitled "Bridge Approach – the drawing
showed a novel bridge approach to unsnarl traffic congestion". The defendant
constructed a bridge approach which was alleged to be an infringement of the new
design illustrated in plaintiff’s drawings. In this case it was held that protection of
the drawing does not extend to the unauthorized duplication of the object drawn
because copyright extends only to the description or expression of the object and
not to the object itself. It does not prevent one from using the drawings to
construct the object portrayed in the drawing.
In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz
Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright
infringement when one who, without being authorized, uses a copyrighted
architectural plan to construct a structure. This is because the copyright does not
extend to the structures themselves.
In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the
technical drawings of the latter’s advertising display units.
xxx xxx xxx

42. When a drawing is technical and depicts a utilitarian object, a copyright over the The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate
drawings like plaintiff-appellant’s will not extend to the actual object. It has so been Appellate Court that the protective mantle of the Trademark Law extends only to
held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. the goods used by the first user as specified in the certificate of registration,
following the clear mandate conveyed by Section 20 of Republic Act 166, as
amended, otherwise known as the Trademark Law, which reads:
SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of
registration of a mark or trade-name shall be prima facie evidence of the validity of
the registration, the registrant’s ownership of the mark or trade-name, and of the
registrant’s exclusive right to use the same in connection with the goods, business
or services specified in the certificate, subject to any conditions and limitations
stated therein." (underscoring supplied)
The records show that on June 20, 1983, Pearl and Dean applied for the registration
of the trademark "Poster Ads" with the Bureau of Patents, Trademarks, and
Technology Transfer. Said trademark was recorded in the Principal Register on
September 12, 1988 under Registration No. 41165 covering the following products:
stationeries such as letterheads, envelopes and calling cards and newsletters.
With this as factual backdrop, we see no legal basis to the finding of liability on the
part of the defendants-appellants for their use of the words "Poster Ads", in the
advertising display units in suit. Jurisprudence has interpreted Section 20 of the
Trademark Law as "an implicit permission to a manufacturer to venture into the
production of goods and allow that producer to appropriate the brand name of the
senior registrant on goods other than those stated in the certificate of registration."
The Supreme Court further emphasized the restrictive meaning of Section 20 when
it stated, through Justice Conrado V. Sanchez, that:
Really, if the certificate of registration were to be deemed as including goods not
specified therein, then a situation may arise whereby an applicant may be tempted
to register a trademark on any and all goods which his mind may conceive even if
he had never intended to use the trademark for the said goods. We believe that
such omnibus registration is not contemplated by our Trademark Law.
While we do not discount the striking similarity between Pearl and Dean’s
registered trademark and defendants-appellants’ "Poster Ads" design, as well as the
parallel use by which said words were used in the parties’ respective advertising
copies, we cannot find defendants-appellants liable for infringement of trademark.
"Poster Ads" was registered by Pearl and Dean for specific use in its stationeries, in
contrast to defendants-appellants who used the same words in their advertising
display units. Why Pearl and Dean limited the use of its trademark to stationeries is
simply beyond us. But, having already done so, it must stand by the consequence of
the registration which it had caused.
xxx xxx xxx
We are constrained to adopt the view of defendants-appellants that the words
"Poster Ads" are a simple contraction of the generic term poster advertising. In the
absence of any convincing proof that "Poster Ads" has acquired a secondary
meaning in this jurisdiction, we find that Pearl and Dean’s exclusive right to the use
of "Poster Ads" is limited to what is written in its certificate of registration, namely,
stationeries.
Defendants-appellants cannot thus be held liable for infringement of the trademark
"Poster Ads".
There being no finding of either copyright or trademark infringement on the part of
SMI and NEMI, the monetary award granted by the lower court to Pearl and Dean
has no leg to stand on.
xxx xxx xxx
WHEREFORE, premises considered, the assailed decision is REVERSED and SET
ASIDE, and another is rendered DISMISSING the complaint and counterclaims in the
above-entitled case for lack of merit.5
Dissatisfied with the above decision, petitioner P & D filed the instant petition
assigning the following errors for the Court’s consideration:
A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO
COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND
NEMI;
B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO
INFRINGEMENT OF PEARL & DEAN’S TRADEMARK "POSTER ADS" WAS
COMMITTED BY RESPONDENTS SM AND NEMI;
C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE
AWARD OF THE TRIAL COURT, DESPITE THE LATTER’S FINDING, NOT
DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY
OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH
PEARL & DEAN.
D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL,
MORAL & EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.6
ISSUES
In resolving this very interesting case, we are challenged once again to put into
proper perspective four main concerns of intellectual property law — patents,
copyrights, trademarks and unfair competition arising from infringement of any of
the first three. We shall focus then on the following issues:
(1) if the engineering or technical drawings of an advertising display unit
(light box) are granted copyright protection (copyright certificate of
registration) by the National Library, is the light box depicted in such
engineering drawings ipso facto also protected by such copyright?
(2) or should the light box be registered separately and protected by a
patent issued by the Bureau of Patents Trademarks and Technology
Transfer (now Intellectual Property Office) — in addition to the copyright
of the engineering drawings?
(3) can the owner of a registered trademark legally prevent others from
using such trademark if it is a mere abbreviation of a term descriptive of
his goods, services or business?
ON THE ISSUE OF COPYRIGHT INFRINGEMENT
Petitioner P & D’s complaint was that SMI infringed on its copyright over the light
boxes when SMI had the units manufactured by Metro and EYD Rainbow
Advertising for its own account. Obviously, petitioner’s position was premised on its
belief that its copyright over the engineering drawings extended ipso facto to the
light boxes depicted or illustrated in said drawings. In ruling that there was no
copyright infringement, the Court of Appeals held that the copyright was limited to
the drawings alone and not to the light box itself. We agree with the appellate
court.
First, petitioner’s application for a copyright certificate — as well as Copyright
Certificate No. PD-R2588 issued by the National Library on January 20, 1981 —
clearly stated that it was for a class "O" work under Section 2 (O) of PD 49 (The
Intellectual Property Decree) which was the statute then prevailing. Said Section 2
expressly enumerated the works subject to copyright:
SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist
with respect to any of the following works:
xxx xxx xxx
(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps;
xxx xxx xxx
Although petitioner’s copyright certificate was entitled "Advertising Display Units"
(which depicted the box-type electrical devices), its claim of copyright infringement
cannot be sustained.
Copyright, in the strict sense of the term, is purely a statutory right. Being a mere
statutory grant, the rights are limited to what the statute confers. It may be
obtained and enjoyed only with respect to the subjects and by the persons, and on
terms and conditions specified in the statute.7 Accordingly, it can cover only the
works falling within the statutory enumeration or description.8
P & D secured its copyright under the classification class "O" work. This being so,
petitioner’s copyright protection extended only to the technical drawings and not
to the light box itself because the latter was not at all in the category of "prints,
pictorial illustrations, advertising copies, labels, tags and box wraps." Stated
otherwise, even as we find that P & D indeed owned a valid copyright, the same
could have referred only to the technical drawings within the category of "pictorial
illustrations." It could not have possibly stretched out to include the underlying light
box. The strict application9 of the law’s enumeration in Section 2 prevents us from
giving petitioner even a little leeway, that is, even if its copyright certificate was
entitled "Advertising Display Units." What the law does not include, it excludes, and
for the good reason: the light box was not a literary or artistic piece which could be
copyrighted under the copyright law. And no less clearly, neither could the lack of
statutory authority to make the light box copyrightable be remedied by the
simplistic act of entitling the copyright certificate issued by the National Library as
"Advertising Display Units."
In fine, if SMI and NEMI reprinted P & D’s technical drawings for sale to the public
without license from P & D, then no doubt they would have been guilty of copyright
infringement. But this was not the case. SMI’s and NEMI’s acts complained of by P
& D were to have units similar or identical to the light box illustrated in the
technical drawings manufactured by Metro and EYD Rainbow Advertising, for
leasing out to different advertisers. Was this an infringement of petitioner’s
copyright over the technical drawings? We do not think so.
During the trial, the president of P & D himself admitted that the light box was
neither a literary not an artistic work but an "engineering or marketing
invention."10 Obviously, there appeared to be some confusion regarding what
ought or ought not to be the proper subjects of copyrights, patents and trademarks.
In the leading case of Kho vs. Court of Appeals,11 we ruled that these three legal
rights are completely distinct and separate from one another, and the protection
afforded by one cannot be used interchangeably to cover items or works that
exclusively pertain to the others:
Trademark, copyright and patents are different intellectual property rights that
cannot be interchanged with one another. A trademark is any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an enterprise and
shall include a stamped or marked container of goods. In relation thereto, a trade
name means the name or designation identifying or distinguishing an enterprise.
Meanwhile, the scope of a copyright is confined to literary and artistic works which
are original intellectual creations in the literary and artistic domain protected from
the moment of their creation. Patentable inventions, on the other hand, refer to any
technical solution of a problem in any field of human activity which is new, involves
an inventive step and is industrially applicable.
ON THE ISSUE OF PATENT INFRINGEMENT
This brings us to the next point: if, despite its manufacture and commercial use of
the light boxes without license from petitioner, private respondents cannot be held
legally liable for infringement of P & D’s copyright over its technical drawings of the
said light boxes, should they be liable instead for infringement of patent? We do
not think so either.
For some reason or another, petitioner never secured a patent for the light boxes. It
therefore acquired no patent rights which could have protected its invention, if in
fact it really was. And because it had no patent, petitioner could not legally prevent
anyone from manufacturing or commercially using the contraption. In Creser
Precision Systems, Inc. vs. Court of Appeals,12 we held that "there can be no
infringement of a patent until a patent has been issued, since whatever right one
has to the invention covered by the patent arises alone from the grant of patent. x x
x (A)n inventor has no common law right to a monopoly of his invention. He has the
right to make use of and vend his invention, but if he voluntarily discloses it, such as
by offering it for sale, the world is free to copy and use it with impunity. A patent,
however, gives the inventor the right to exclude all others. As a patentee, he has
the exclusive right of making, selling or using the invention.13 On the assumption
that petitioner’s advertising units were patentable inventions, petitioner revealed
them fully to the public by submitting the engineering drawings thereof to the
National Library.
To be able to effectively and legally preclude others from copying and profiting
from the invention, a patent is a primordial requirement. No patent, no protection.
The ultimate goal of a patent system is to bring new designs and technologies into
the public domain through disclosure.14 Ideas, once disclosed to the public without
the protection of a valid patent, are subject to appropriation without significant
restraint.15
On one side of the coin is the public which will benefit from new ideas; on the other
are the inventors who must be protected. As held in Bauer & Cie vs.
O’Donnel,16 "The act secured to the inventor the exclusive right to make use, and
vend the thing patented, and consequently to prevent others from exercising like
privileges without the consent of the patentee. It was passed for the purpose of
encouraging useful invention and promoting new and useful inventions by the
protection and stimulation given to inventive genius, and was intended to secure to
the public, after the lapse of the exclusive privileges granted the benefit of such
inventions and improvements."
The law attempts to strike an ideal balance between the two interests:
"(The p)atent system thus embodies a carefully crafted bargain for encouraging the
creation and disclosure of new useful and non-obvious advances in technology and
design, in return for the exclusive right to practice the invention for a number of
years. The inventor may keep his invention secret and reap its fruits indefinitely. In
consideration of its disclosure and the consequent benefit to the community, the
patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon
the expiration of that period, the knowledge of the invention inures to the people,
who are thus enabled to practice it and profit by its use."17
The patent law has a three-fold purpose: "first, patent law seeks to foster and
reward invention; second, it promotes disclosures of inventions to stimulate further
innovation and to permit the public to practice the invention once the patent
expires; third, the stringent requirements for patent protection seek to ensure that
ideas in the public domain remain there for the free use of the public."18
It is only after an exhaustive examination by the patent office that a patent is
issued. Such an in-depth investigation is required because "in rewarding a useful
invention, the rights and welfare of the community must be fairly dealt with and
effectively guarded. To that end, the prerequisites to obtaining a patent are strictly
observed and when a patent is issued, the limitations on its exercise are equally
strictly enforced. To begin with, a genuine invention or discovery must be
demonstrated lest in the constant demand for new appliances, the heavy hand of
tribute be laid on each slight technological advance in art."19
There is no such scrutiny in the case of copyrights nor any notice published before
its grant to the effect that a person is claiming the creation of a work. The law
confers the copyright from the moment of creation20 and the copyright certificate
is issued upon registration with the National Library of a sworn ex-parte claim of
creation.
Therefore, not having gone through the arduous examination for patents, the
petitioner cannot exclude others from the manufacture, sale or commercial use of
the light boxes on the sole basis of its copyright certificate over the technical
drawings.
Stated otherwise, what petitioner seeks is exclusivity without any opportunity for
the patent office (IPO) to scrutinize the light box’s eligibility as a patentable
invention. The irony here is that, had petitioner secured a patent instead, its
exclusivity would have been for 17 years only. But through the simplified procedure
of copyright-registration with the National Library — without undergoing the rigor
of defending the patentability of its invention before the IPO and the public — the
petitioner would be protected for 50 years. This situation could not have been the
intention of the law.
In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court held
that only the expression of an idea is protected by copyright, not the idea itself. In
that case, the plaintiff held the copyright of a book which expounded on a new
accounting system he had developed. The publication illustrated blank forms of
ledgers utilized in such a system. The defendant reproduced forms similar to those
illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled that:
"There is no doubt that a work on the subject of book-keeping, though only
explanatory of well known systems, may be the subject of a copyright; but, then, it
is claimed only as a book. x x x. But there is a clear distinction between the books,
as such, and the art, which it is, intended to illustrate. The mere statement of the
proposition is so evident that it requires hardly any argument to support it. The
same distinction may be predicated of every other art as well as that of
bookkeeping. A treatise on the composition and use of medicines, be they old or
new; on the construction and use of ploughs or watches or churns; or on the
mixture and application of colors for painting or dyeing; or on the mode of drawing
lines to produce the effect of perspective, would be the subject of copyright; but no
one would contend that the copyright of the treatise would give the exclusive right
to the art or manufacture described therein. The copyright of the book, if not
pirated from other works, would be valid without regard to the novelty or want of
novelty of its subject matter. The novelty of the art or thing described or explained
has nothing to do with the validity of the copyright. To give to the author of the
book an exclusive property in the art described therein, when no examination of
its novelty has ever been officially made, would be a surprise and a fraud upon
the public. That is the province of letters patent, not of copyright. The claim to an
invention of discovery of an art or manufacture must be subjected to the
examination of the Patent Office before an exclusive right therein can be
obtained; and a patent from the government can only secure it.
The difference between the two things, letters patent and copyright, may be
illustrated by reference to the subjects just enumerated. Take the case of
medicines. Certain mixtures are found to be of great value in the healing art. If the
discoverer writes and publishes a book on the subject (as regular physicians
generally do), he gains no exclusive right to the manufacture and sale of the
medicine; he gives that to the public. If he desires to acquire such exclusive right,
he must obtain a patent for the mixture as a new art, manufacture or composition
of matter. He may copyright his book, if he pleases; but that only secures to him
the exclusive right of printing and publishing his book. So of all other inventions
or discoveries.
The copyright of a book on perspective, no matter how many drawings and
illustrations it may contain, gives no exclusive right to the modes of drawing
described, though they may never have been known or used before. By publishing
the book without getting a patent for the art, the latter is given to the public.
xxx
Now, whilst no one has a right to print or publish his book, or any material part
thereof, as a book intended to convey instruction in the art, any person may
practice and use the art itself which he has described and illustrated therein. The
use of the art is a totally different thing from a publication of the book explaining
it. The copyright of a book on bookkeeping cannot secure the exclusive right to
make, sell and use account books prepared upon the plan set forth in such book.
Whether the art might or might not have been patented, is a question, which is not
before us. It was not patented, and is open and free to the use of the public. And, of
course, in using the art, the ruled lines and headings of accounts must necessarily
be used as incident to it.
The plausibility of the claim put forward by the complainant in this case arises from
a confusion of ideas produced by the peculiar nature of the art described in the
books, which have been made the subject of copyright. In describing the art, the
illustrations and diagrams employed happened to correspond more closely than
usual with the actual work performed by the operator who uses the art. x x x The
description of the art in a book, though entitled to the benefit of copyright, lays
no foundation for an exclusive claim to the art itself. The object of the one is
explanation; the object of the other is use. The former may be secured by
copyright. The latter can only be secured, if it can be secured at all, by letters
patent." (underscoring supplied)
ON THE ISSUE OF TRADEMARK INFRINGEMENT
This issue concerns the use by respondents of the mark "Poster Ads" which
petitioner’s president said was a contraction of "poster advertising." P & D was able
to secure a trademark certificate for it, but one where the goods specified were
"stationeries such as letterheads, envelopes, calling cards and
newsletters."22 Petitioner admitted it did not commercially engage in or market
these goods. On the contrary, it dealt in electrically operated backlit advertising
units and the sale of advertising spaces thereon, which, however, were not at all
specified in the trademark certificate.
Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs.
Intermediate Appellate Court,23where we, invoking Section 20 of the old
Trademark Law, ruled that "the certificate of registration issued by the Director of
Patents can confer (upon petitioner) the exclusive right to use its own symbol only
to those goods specified in the certificate, subject to any conditions and limitations
specified in the certificate x x x. One who has adopted and used a trademark on his
goods does not prevent the adoption and use of the same trademark by others for
products which are of a different description."24 Faberge, Inc. was correct and was
in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals.25
Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the
failure of P & D to secure a trademark registration for specific use on the light boxes
meant that there could not have been any trademark infringement since
registration was an essential element thereof.1âwphi1
ON THE ISSUE OF UNFAIR COMPETITION
If at all, the cause of action should have been for unfair competition, a situation
which was possible even if P & D had no registration.26 However, while the
petitioner’s complaint in the RTC also cited unfair competition, the trial court did
not find private respondents liable therefor. Petitioner did not appeal this particular
point; hence, it cannot now revive its claim of unfair competition.
But even disregarding procedural issues, we nevertheless cannot hold respondents
guilty of unfair competition.
By the nature of things, there can be no unfair competition under the law on
copyrights although it is applicable to disputes over the use of trademarks. Even a
name or phrase incapable of appropriation as a trademark or tradename may, by
long and exclusive use by a business (such that the name or phrase becomes
associated with the business or product in the mind of the purchasing public), be
entitled to protection against unfair competition.27 In this case, there was no
evidence that P & D’s use of "Poster Ads" was distinctive or well-known. As noted
by the Court of Appeals, petitioner’s expert witnesses himself had testified that "
‘Poster Ads’ was too generic a name. So it was difficult to identify it with any
company, honestly speaking."28 This crucial admission by its own expert witness
that "Poster Ads" could not be associated with P & D showed that, in the mind of
the public, the goods and services carrying the trademark "Poster Ads" could not be
distinguished from the goods and services of other entities.
This fact also prevented the application of the doctrine of secondary meaning.
"Poster Ads" was generic and incapable of being used as a trademark because it
was used in the field of poster advertising, the very business engaged in by
petitioner. "Secondary meaning" means that a word or phrase originally incapable
of exclusive appropriation with reference to an article in the market (because it is
geographically or otherwise descriptive) might nevertheless have been used for so
long and so exclusively by one producer with reference to his article that, in the
trade and to that branch of the purchasing public, the word or phrase has come to
mean that the article was his property.29 The admission by petitioner’s own expert
witness that he himself could not associate "Poster Ads" with petitioner P & D
because it was "too generic" definitely precluded the application of this exception.
Having discussed the most important and critical issues, we see no need to belabor
the rest.
All told, the Court finds no reversible error committed by the Court of Appeals
when it reversed the Regional Trial Court of Makati City.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of
Appeals dated May 22, 2001 is AFFIRMED in toto.
SO ORDERED.
Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated
G.R. No. 148222, August 15, 2003
Facts: Pearl & Dean (P&D) is engaged in the manufacture of advertising display
units referred to as light boxes. These units utilize specially printed posters
sandwiched between plastic sheets and illuminated with backlights. It was able to
secure registration over these illuminated display units. The advertising light boxes
were marketed under the trademark “Poster Ads”.
In 1985, P&D negotiated with defendant Shoemart, Inc. (SMI) for the lease
and installation of the light boxes in SM North Edsa. However, since SM North Edsa
was under construction, SMI offered as alternative SM Makati and Cubao. During
the signing of the Contract, SMI only returned the Contract with SM Makati.
Manager of petitioner reminded SMI that their agreement includes SM Cubao.
However, SMI did not bother to reply. Instead, respondent informed petitioner that
they are rescinding the contract for SM Makati due to non-performance.
Two years later, SMI engaged the services of EYD Rainbow Advertising to
make the light boxes. These were delivered in a staggered basis and installed at SM
Megamall and SM City. In 1989, petitioner received reports that exact copy of its
light boxes was installed by SMI. It further discovered that North Edsa Marketing
Inc. (NEMI), sister company of SMI, was set up primarily to sell advertising space in
lighted display units located in SMI’s different branches. Petitioner sent letters to
respondents asking them to cease using the light boxes and the discontinued use of
the trademark “Poster Ads”.
Claiming that SMI and NEMI failed to meet its demand, petitioner filed a
case for infringement of trademark and copy right, unfair competition and
damages. SMI maintained that it independently developed its poster panels using
commonly known techniques and available technology without notice of or
reference to P&D’s copyright. In addition, it said that registration of “Poster Ads”
obtained by petitioner was only for stationeries such as letterheads, envelopes and
the like. “Poster Ads” is a generic term which cannot be appropriated as trademark,
and, as such, registration of such mark is invalid. It also stressed that P&D is not
entitled to the reliefs sought because the advertising display units contained no
copyright notice as provided for by law.
RTC found SMI and NEMI jointly and severally liable for infringement of
copyright and trademark. CA reversed saying that it agreed with SMI that what was
copyrighted was the technical drawings only and not the light boxes. Light boxes
cannot be considered as either prints, pictorial illustrations, advertising copies,
labels, tags or box wraps, to be properly classified as copyrightable class “O” work.
In addition, CA stressed that the protective mantle of the Trademark Law extends
only to the goods used by the first user as specified in its certificate of registration.
The registration of the trademark “Poster Ads” covers only stationeries such as
letterheads, envelopes and calling cards and newsletter.
ISSUES: (1) If the engineering or technical drawings of an advertising display unit
are granted copyright protection is the light box depicted in such drawings ipso
facto also protected by such copyright? (2) Should the light box be registered
separately? (3) Can the owner of the registered trademark legally prevent others
from using such mark if it is mere abbreviation of a term descriptive of his goods,
services or business?
Held:
1. No. Copyright is purely statutory. As such, 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 the terms and conditions specified
in the statute. Accordingly, it can cover only the works falling within the
statutory enumeration or description. Petitioner secured copyright under
classification class “O” work. Thus, copyright protection extended only to
the technical drawings and not to the light box itself because the latter was
not at all in the category of “prints, pictorial illustrations, advertising
copies, labels, tags and box wraps.
What the law does not include, it excludes, and for the good
reason: the light box was not a literary or artistic piece which could be
copyrighted under the copyright law. And no less clearly, neither could the
lack of statutory authority to make the light box copyrightable be
remedied by the simplistic act of entitling the copyright certificate issued
by the National Library as “Advertising Display Units”.
It must be noted that copyright is confined to literary and artistic
works which are original intellectual creations in the literary and artistic
domain protected from the moment of their creation.
2. Yes. 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. 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 through
disclosure. Ideas, once, disclosed to the public without protection of a valid
patent, are subject to appropriation without significant restraint.
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. It is only after an exhaustive
examination by the patent office that patent is issued. Therefore, not
having gone through the arduous examination for patents, petitioner
cannot exclude other s from the manufacture, sale or commercial use of
the light boxes on the sole basis of its copyright certificate over the
technical drawings.
3. Court agrees with CA that the certificate of registration issued by the
Director of Patents can confer 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. 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.
 Assuming arguendo that “Poster Ads” could validly qualify as a
trademark, the failure of petitioner to secure a trademark registration for
specific use on the light boxes meant that there could not have been any
trademark infringement since registration was an essential element
thereof.
There is no evidence that petitioner’s use of “poster Ads” was
distinctive or well-known. As noted by CA, petitioner’s expert witness
himself had testified that “Poster Ads” was not too generic a name. SO it
was difficult to identify it with any company. This fact also prevented the
application of the doctrine of secondary meaning. “Poster Ads” was
generic and incapable of being used as a trademark because it was used in
the field of poster advertising the very business engaged in by petitioner.
Secondary meaning means that a word or phrase originally incapable of
exclusive appropriation with reference to an article in the market might
nevertheless have been used for so long and so exclusively by one
producer with reference to his article that , in the trade and to that branch
of the purchasing public, the word or phrase has come to mean that the
article was his property.
PETITION WAS DENIED.
G.R. No. 115758 March 19, 2002
ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS
LABORATORY, petitioner,
vs.
HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and
COMPANY, and ANG TIAM CHAY, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993
of the Court of Appeals setting aside and declaring as null and void the
Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court,
Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction.
The facts of the case are as follows:
On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and
damages with a prayer for the issuance of a writ of preliminary injunction, docketed
as Civil Case No. Q-91-10926, against the respondents Summerville General
Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay.
The petitioner's complaint alleges that petitioner, doing business under the name
and style of KEC Cosmetics Laboratory, is the registered owner of the
copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by
Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has
patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream after
purchasing the same from Quintin Cheng, the registered owner thereof in the
Supplemental Register of the Philippine Patent Office on February 7, 1980 under
Registration Certificate No. 4529; that respondent Summerville advertised and sold
petitioner's cream products under the brand name Chin Chun Su, in similar
containers that petitioner uses, thereby misleading the public, and resulting in the
decline in the petitioner's business sales and income; and, that the respondents
should be enjoined from allegedly infringing on the copyrights and patents of the
petitioner.
The respondents, on the other hand, alleged as their defense that Summerville is
the exclusive and authorized importer, re-packer and distributor of Chin Chun
Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese
manufacturing company authorized Summerville to register its trade name Chin
Chun Su Medicated Cream with the Philippine Patent Office and other appropriate
governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained
the copyrights through misrepresentation and falsification; and, that the authority
of Quintin Cheng, assignee of the patent registration certificate, to distribute and
market Chin Chun Suproducts in the Philippines had already been terminated by the
said Taiwanese Manufacturing Company.
After due hearing on the application for preliminary injunction, the trial court
granted the same in an Order dated February 10, 1992, the dispositive portion of
which reads:
ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business
under the style of KEC Cosmetic Laboratory, for preliminary injunction, is
hereby granted. Consequentially, plaintiff is required to file with the Court
a bond executed to defendants in the amount of five hundred thousand
pesos (P500,000.00) to the effect that plaintiff will pay to defendants all
damages which defendants may sustain by reason of the injunction if the
Court should finally decide that plaintiff is not entitled thereto.
SO ORDERED.3
The respondents moved for reconsideration but their motion for reconsideration
was denied by the trial court in an Order dated March 19, 1992.4
On April 24, 1992, the respondents filed a petition for certiorari with the Court of
Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said
writ of preliminary injunction issued by the trial court. After the respondents filed
their reply and almost a month after petitioner submitted her comment, or on
August 14 1992, the latter moved to dismiss the petition for violation of Supreme
Court Circular No. 28-91, a circular prohibiting forum shopping. According to the
petitioner, the respondents did not state the docket number of the civil case in the
caption of their petition and, more significantly, they did not include therein a
certificate of non-forum shopping. The respondents opposed the petition and
submitted to the appellate court a certificate of non-forum shopping for their
petition.
On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803
ruling in favor of the respondents, the dispositive portion of which reads:
WHEREFORE, the petition is hereby given due course and the orders of
respondent court dated February 10, 1992 and March 19, 1992 granting
the writ of preliminary injunction and denying petitioners' motion for
reconsideration are hereby set aside and declared null and void.
Respondent court is directed to forthwith proceed with the trial of Civil
Case No. Q-91-10926 and resolve the issue raised by the parties on the
merits.
SO ORDERED.5
In granting the petition, the appellate court ruled that:
The registration of the trademark or brandname "Chin Chun Su" by KEC
with the supplemental register of the Bureau of Patents, Trademarks and
Technology Transfer cannot be equated with registration in the principal
register, which is duly protected by the Trademark Law.1âwphi1.nêt
xxx xxx xxx
As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373,
393:
"Registration in the Supplemental Register, therefore, serves as
notice that the registrant is using or has appropriated the
trademark. By the very fact that the trademark cannot as yet be
on guard and there are certain defects, some obstacles which the
use must still overcome before he can claim legal ownership of
the mark or ask the courts to vindicate his claims of an exclusive
right to the use of the same. It would be deceptive for a party
with nothing more than a registration in the Supplemental
Register to posture before courts of justice as if the registration is
in the Principal Register.
The reliance of the private respondent on the last sentence of the
Patent office action on application Serial No. 30954 that
'registrants is presumed to be the owner of the mark until after
the registration is declared cancelled' is, therefore, misplaced and
grounded on shaky foundation. The supposed presumption not
only runs counter to the precept embodied in Rule 124 of the
Revised Rules of Practice before the Philippine Patent Office in
Trademark Cases but considering all the facts ventilated before us
in the four interrelated petitions involving the petitioner and the
respondent, it is devoid of factual basis. As even in cases where
presumption and precept may factually be reconciled, we have
held that the presumption is rebuttable, not conclusive, (People v.
Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may
be declared an unfair competitor even if his competing trademark
is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil
928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6
The petitioner filed a motion for reconsideration. This she followed with several
motions to declare respondents in contempt of court for publishing advertisements
notifying the public of the promulgation of the assailed decision of the appellate
court and stating that genuine Chin Chun Su products could be obtained only from
Summerville General Merchandising and Co.
In the meantime, the trial court went on to hear petitioner's complaint for final
injunction and damages. On October 22, 1993, the trial court rendered a
Decision7 barring the petitioner from using the trademark Chin Chun Su and
upholding the right of the respondents to use the same, but recognizing the
copyright of the petitioner over the oval shaped container of her beauty cream. The
trial court did not award damages and costs to any of the parties but to their
respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each
as attorney's fees. The petitioner duly appealed the said decision to the Court of
Appeals.
On June 3, 1994, the Court of Appeals promulgated a Resolution 8 denying the
petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP
No. 27803.
Hence, this petition anchored on the following assignment of errors:
 I consists in restraining the commission or continuance of the act or acts complained
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING
TO RULE ON PETITIONER'S MOTION TO DISMISS.
II
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR
RECONSIDERATION.
III
IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR
RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED
PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED
PETITIONER'S RIGHT TO DUE PROCESS.
IV
RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING
TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9
The petitioner faults the appellate court for not dismissing the petition on the
ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner
contends that the appellate court violated Section 6, Rule 9 of the Revised Internal
Rules of the Court of Appeals when it failed to rule on her motion for
reconsideration within ninety (90) days from the time it is submitted for resolution.
The appellate court ruled only after the lapse of three hundred fifty-four (354) days,
or on June 3, 1994. In delaying the resolution thereof, the appellate court denied
the petitioner's right to seek the timely appellate relief. Finally, petitioner describes
as arbitrary the denial of her motions for contempt of court against the
respondents.
We rule in favor of the respondents.
Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the
grounds for the issuance of a writ of preliminary injunction is a proof that the
applicant is entitled to the relief demanded, and the whole or part of such relief
of, either for a limited period or perpetually. Thus, a preliminary injunction order
may be granted only when the application for the issuance of the same shows facts
entitling the applicant to the relief demanded.10 This is the reason why we have
ruled that it must be shown that the invasion of the right sought to be protected is
material and substantial, that the right of complainant is clear and unmistakable,
and, that there is an urgent and paramount necessity for the writ to prevent serious
damage.11
In the case at bar, the petitioner applied for the issuance of a preliminary injunctive
order on the ground that she is entitled to the use of the trademark on Chin Chun
Su and its container based on her copyright and patent over the same. We first find
it appropriate to rule on whether the copyright and patent over the name and
container of a beauty cream product would entitle the registrant to the use and
ownership over the same to the exclusion of others.
Trademark, copyright and patents are different intellectual property rights that
cannot be interchanged with one another. A trademark is any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an enterprise and
shall include a stamped or marked container of goods.12 In relation thereto, a trade
name means the name or designation identifying or distinguishing an
enterprise.13 Meanwhile, the scope of a copyright is confined to literary and artistic
works which are original intellectual creations in the literary and artistic domain
protected from the moment of their creation.14 Patentable inventions, on the other
hand, refer to any technical solution of a problem in any field of human activity
which is new, involves an inventive step and is industrially applicable.15
Petitioner has no right to support her claim for the exclusive use of the subject
trade name and its container. The name and container of a beauty cream product
are proper subjects of a trademark inasmuch as the same falls squarely within its
definition. In order to be entitled to exclusively use the same in the sale of the
beauty cream product, the user must sufficiently prove that she registered or used
it before anybody else did. The petitioner's copyright and patent registration of the
name and container would not guarantee her the right to the exclusive use of the
same for the reason that they are not appropriate subjects of the said intellectual
rights. Consequently, a preliminary injunction order cannot be issued for the reason
that the petitioner has not proven that she has a clear right over the said name and
container to the exclusion of others, not having proven that she has registered a
trademark thereto or used the same before anyone did.
We cannot likewise overlook the decision of the trial court in the case for final
injunction and damages. The dispositive portion of said decision held that the
petitioner does not have trademark rights on the name and container of the beauty
cream product. The said decision on the merits of the trial court rendered the
issuance of the writ of a preliminary injunction moot and academic notwithstanding
the fact that the same has been appealed in the Court of Appeals. This is supported
by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit:
Considering that preliminary injunction is a provisional remedy which may
be granted at any time after the commencement of the action and before
judgment when it is established that the plaintiff is entitled to the relief
demanded and only when his complaint shows facts entitling such reliefs
xxx and it appearing that the trial court had already granted the issuance
of a final injunction in favor of petitioner in its decision rendered after trial
on the merits xxx the Court resolved to Dismiss the instant petition having
been rendered moot and academic. An injunction issued by the trial court
after it has already made a clear pronouncement as to the plaintiff's right
thereto, that is, after the same issue has been decided on the merits, the
trial court having appreciated the evidence presented, is proper,
notwithstanding the fact that the decision rendered is not yet final xxx.
Being an ancillary remedy, the proceedings for preliminary injunction
cannot stand separately or proceed independently of the decision
rendered on the merit of the main case for injunction. The merit of the
main case having been already determined in favor of the applicant, the
preliminary determination of its non-existence ceases to have any force
and effect. (italics supplied)
La Vista categorically pronounced that the issuance of a final injunction renders any
question on the preliminary injunctive order moot and academic despite the fact
that the decision granting a final injunction is pending appeal. Conversely, a
decision denying the applicant-plaintiff's right to a final injunction, although
appealed, renders moot and academic any objection to the prior dissolution of a
writ of preliminary injunction.
The petitioner argues that the appellate court erred in not dismissing the petition
for certiorari for non-compliance with the rule on forum shopping. We disagree.
First, the petitioner improperly raised the technical objection of non-compliance
with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for
certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the
Revised Rules of Civil Procedure which provides that "(I)n petitions
for certiorari before the Supreme Court and the Court of Appeals, the provisions of
Section 2, Rule 56, shall be observed. Before giving due course thereto, the court
may require the respondents to file their comment to, and not a motion to dismiss,
the petition xxx (italics supplied)". Secondly, the issue was raised one month after
petitioner had filed her answer/comment and after private respondent had replied
thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion
to dismiss shall be filed within the time for but before filing the answer to the
complaint or pleading asserting a claim. She therefore could no longer submit a
motion to dismiss nor raise defenses and objections not included in the
answer/comment she had earlier tendered. Thirdly, substantial justice and equity
require this Court not to revive a dissolved writ of injunction in favor of a party
without any legal right thereto merely on a technical infirmity. The granting of an
injunctive writ based on a technical ground rather than compliance with the
requisites for the issuance of the same is contrary to the primary objective of legal
procedure which is to serve as a means to dispense justice to the deserving party.
The petitioner likewise contends that the appellate court unduly delayed the
resolution of her motion for reconsideration. But we find that petitioner
contributed to this delay when she filed successive contentious motions in the same
proceeding, the last of which was on October 27, 1993, necessitating counter-
manifestations from private respondents with the last one being filed on November
9, 1993. Nonetheless, it is well-settled that non-observance of the period for
deciding cases or their incidents does not render such judgments ineffective or
void.17With respect to the purported damages she suffered due to the alleged delay
in resolving her motion for reconsideration, we find that the said issue has likewise
been rendered moot and academic by our ruling that she has no right over the
trademark and, consequently, to the issuance of a writ of preliminary
injunction.1âwphi1.nêt
Finally, we rule that the Court of Appeals correctly denied the petitioner's several
motions for contempt of court. There is nothing contemptuous about the
advertisements complained of which, as regards the proceedings in CA-G.R. SP No.
27803 merely announced in plain and straightforward language the promulgation of
the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of
Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the
injunctive writ was immediately executory.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of
Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.
G.R. No. 115758 March 19, 2002
ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS
LABORATORY, petitioner, 
vs.
 HON. COURT OF APPEALS, SUMMERVILLE
GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents.
FACTS: protected from the moment of their creation. Patentable inventions, on the other
hand, refer to any technical solution of a problem in any field of human activity
The petitioner alleged that she is the registered owner of the copyrights Chin Chun which is new, involves an inventive step and is industrially applicable”.
Su and Oval Facial Cream Container/Case as evidenced by certificates of copyright
registrations and patent rights on Chun Chun Su & Device and Chin Chun Su
(medicated cream) after she purchased it from Quintin Cheng (previous registered
owner in the Philippine Patent Office [PPO]).

Meanwhile, there was a decline in the petitioner’s business income due to the
advertisement and sale made by Summerville on petitioner’s products under the
same brand name and in similar containers. According to Summerville, they are the
exclusive and authorized importer, re-packer and distributor of Chin Chun Su
products manufactured by Shun Yi Factory of Taiwan and that said company
authorized them to register its trade name “Chin Chun Su Mediated Cream” with
the PPO.

The application for preliminary injunction filed by petitioner was granted. Hence,
respondents moved for reconsideration, which was denied. The respondents then
moved for nullification of said preliminary injunction with the CA. The latter
granted its petition.

ISSUE: WON the copyright and patent over the name and container of the beauty
cream product entitle the registrant to its EXCLUSIVE use and ownership .

HELD: NO. The petitioner has no right for the EXCLUSIVE use of the trade name
and its container. In order to be entitled to its exclusive use, the user must
sufficiently prove that she registered or used it before anybody else did. This,
petitioner failed to do.

“Trademark, copyright and patents are different intellectual property rights that
cannot be interchanged with one another. A trademark is any visible sign capable
of distinguishing the goods (trademark) or services (service mark) of an enterprise
and shall include a stamped or marked container of goods. In relation thereto, a
trade name means the name or designation identifying or distinguishing an
enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic
works which are original intellectual creations in the literary and artistic domain