THIRD DIVISION

G.R. No. 154342             July 14, 2004

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO,

INC., petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.

DECISION

CORONA, J.:

In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La
Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the
November 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming
the November 26, 1998 decision, 2 as modified by the June 24, 1999 order, 3 of the Regional Trial
Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners
liable for, and permanently enjoined them from, committing trademark infringement and unfair
competition, and which ordered them to pay damages to respondents E. & J. Gallo Winery
(Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution
denying their motion for reconsideration4 and (c) the aforesaid Makati RTC decision itself.

I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but
organized and existing under the laws of the State of California, United States of America (U.S.),
where all its wineries are located. Gallo Winery produces different kinds of wines and brandy
products and sells them in many countries under different registered trademarks, including the
GALLO and ERNEST & JULIO GALLO wine trademarks.

Respondent domestic corporation, Andresons, has been Gallo Winery’s exclusive wine importer
and distributor in the Philippines since 1991, selling these products in its own name and for its
own account.5

Gallo Winery’s GALLO wine trademark was registered in the principal register of the Philippine
Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of
Registration No. 17021 which was renewed on November 16, 1991 for another 20 years. 6 Gallo
Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on
October 11, 1990 under Application Serial No. 901011-00073599-PN but the records do not
disclose if it was ever approved by the Director of Patents.7

On the other hand, petitioners Mighty Corporation and La Campana and their sister company,
Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation,
manufacture, distribution and sale of tobacco products for which they have been using the
GALLO cigarette trademark since 1973. 8

The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO 100’s
cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both
for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its
1
manufacturer’s sworn statement as basis for BIR’s collection of specific tax on GALLO
cigarettes.9

On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the
registration of the GALLO cigarette trademark in the principal register of the then Philippine
Patent Office.10

In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana
which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.11 On
July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La
Campana’s lifetime copyright claim over GALLO cigarette labels.12

Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes

bearing the GALLO trademark. 13 BIR approved Mighty Corporation’s use of GALLO 100’s
cigarette brand, under licensing agreement with Tobacco Industries, on May 18, 1988, and
GALLO SPECIAL MENTHOL 100’s cigarette brand on April 3, 1989.14

Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially
by Tobacco Industries, then by La Campana and finally by Mighty Corporation.15

On the other hand, although the GALLO wine trademark was registered in the Philippines in
1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO
GALLO wines in the Philippines circa 1974 within the then U.S. military facilities only. By
1979, they had expanded their Philippine market through authorized distributors and independent
outlets.16

Respondents claim that they first learned about the existence of GALLO cigarettes in the latter
part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in
a Davao supermarket wine cellar section.17 Forthwith, respondents sent a demand letter to
petitioners asking them to stop using the GALLO trademark, to no avail.

II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and
tradename infringement and unfair competition, with a prayer for damages and preliminary
injunction.

Respondents charged petitioners with violating Article 6bis of the Paris Convention for the
Protection of Industrial Property (Paris Convention)18 and RA 166 (Trademark
Law),19 specifically, Sections 22 and 23 (for trademark infringement), 20 29 and 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

2
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 –

3
 (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

4
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)
5
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.

6
 (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 create confusion therewith." There is no time limit for seeking the prohibition
of the use of marks used in bad faith.47

Thus, under Article 6bis of the Paris Convention, the following are the elements of trademark
infringement:

(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 Law 50 considers the trademark registration
certificate as prima facie evidence of the validity of the registration, the registrant’s ownership
and exclusive right to use the trademark in connection with the goods, business or services as
classified by the Director of 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:
7
 (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,
8
Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines
since 1973 or before July 9, 1981.56

In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we reiterated our

rulings in Pagasa Industrial Corporation vs. Court of Appeals,58 Converse Rubber Corporation
vs. Universal Rubber Products, Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken
Bayer Aktiengesellschaft,60 Kabushi Kaisha Isetan vs. Intermediate Appellate Court,61 and Philip
Morris vs. Court of Appeals,62 giving utmost importance to the actual commercial use of a
trademark in the Philippines prior to its registration, notwithstanding the provisions of the Paris
Convention:

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention

that private respondent failed to prove prior actual commercial use of its "LEE"
trademark in the Philippines before filing its application for registration with the
BPTTT and hence, has not acquired ownership over said mark.

Actual use in commerce in the Philippines is an essential prerequisite for the

acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166) x x x

xxx xxx xxx

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

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on

trademarks regarding the requirement of actual use in the Philippines must
subordinate an international agreement inasmuch as the apparent clash is
being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High
Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and
World Organization, 1971 Ed., p. 20). Withal, the fact that international law has
been made part of the law of the land does not by any means imply the primacy of
international law over national law in the municipal sphere. Under the doctrine of
incorporation as applied in most countries, rules of international law are given a
standing equal, not superior, to national legislative enactments.

xxx xxx xxx

In other words, (a foreign corporation) may have the capacity to sue for
infringement irrespective of lack of business activity in the Philippines on
account of Section 21-A of the Trademark Law but the question of whether
they have an exclusive right over their symbol as to justify issuance of the
controversial writ will depend on actual use of their trademarks in the
Philippines in line with Sections 2 and 2-A of the same law. It is thus
incongruous for petitioners to claim that when a foreign corporation not licensed
to do business in the Philippines files a complaint for infringement, the entity
9
 need not be actually using the trademark in commerce in the Philippines. Such a
foreign corporation may have the personality to file a suit for infringement but it
may not necessarily be entitled to protection due to absence of actual use of the
emblem in the local market.

xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several

registration certificates for its various trademarks "LEE," "LEE RIDERS," and
"LEESURES" in both the supplemental and principal registers, as early as 1969 to
1973. However, registration alone will not suffice. In Sterling Products International,
Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated
in Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared:

xxx xxx xxx

A rule widely accepted and firmly entrenched because it has come down through
the years is that actual use in commerce or business is a prerequisite in the
acquisition of the right of ownership over a trademark.

xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its weight as

evidence of validity, ownership and exclusive use, is qualified. A registration certificate
serves merely as prima facie evidence. It is not conclusive but can and may be
rebutted by controverting evidence.

xxx xxx xxx

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

On the other hand, petitioner has sufficiently shown that it has been in the business of
selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark
since 1975 as evidenced by appropriate sales invoices to various stores and retailers.
(Exhibit 1-e to 1-o)

10
 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
11
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

12
 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;

13
 (c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun
Liong,69 we dismissed Hickok’s petition to cancel private respondent’s HICKOK
trademark registration for its Marikina shoes as against petitioner’s earlier registration of
the same trademark for handkerchiefs, briefs, belts and wallets;

(d) in Shell Company of the Philippines vs. Court of Appeals, 70 in a minute resolution, we
dismissed the petition for review for lack of merit and affirmed the Patent Office’s
registration of the trademark SHELL used in the cigarettes manufactured by respondent
Fortune Tobacco Corporation, notwithstanding Shell Company’s opposition as the prior
registrant of the same trademark for its gasoline and other petroleum products;

(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSO’s complaint
for trademark infringement against United Cigarette Corporation and allowed the latter to
use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its
petroleum products, and

(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we
affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could
use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaisha’s
prior registration and use of the same trademark for its paints, chemical products, toner
and dyestuff (Class 2).

Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable
imitation"73 which has been defined as "such similarity in form, content, words, sound, meaning,
special arrangement or general appearance of the trademark or tradename in their overall
presentation or in their essential and substantive and distinctive parts as would likely mislead or
confuse persons in the ordinary course of purchasing the genuine article."74

Jurisprudence has developed two tests in determining similarity and likelihood of confusion in
trademark resemblance:75

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals 76 and other
cases,77 and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals 78 and
its preceding cases.79

The Dominancy Test focuses on the similarity of the prevalent features of the competing
trademarks which might cause confusion or deception, and thus infringement. If the competing
trademark contains the main, essential or dominant features of another, and confusion or
deception is likely to result, infringement takes place. Duplication or imitation is not necessary;
nor is it necessary that the infringing label should suggest an effort to imitate. The question is
whether the use of the marks involved is likely to cause confusion or mistake in the mind of the
public or deceive purchasers.80

On the other hand, the Holistic Test requires that the entirety of the marks in question be
considered in resolving confusing similarity. Comparison of words is not the only determining
factor. The trademarks in their entirety as they appear in their respective labels or hang tags must
also be considered in relation to the goods to which they are attached. The discerning eye of the
observer must focus not only on the predominant words but also on the other features appearing
in both labels in order that he may draw his conclusion whether one is confusingly similar to the
other.81
14
In comparing the resemblance or colorable imitation of marks, various factors have been
considered, such as the dominant color, style, size, form, meaning of letters, words, designs and
emblems used, the likelihood of deception of the mark or name's tendency to confuse 82 and the
commercial impression likely to be conveyed by the trademarks if used in conjunction with the
respective goods of the parties.83

Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO
cigarette trademark is the device of a large rooster facing left, outlined in black against a gold
background. The rooster’s color is either green or red – green for GALLO menthols and red for
GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device
is given prominence in the GALLO cigarette packs in terms of size and location on the labels.84

The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no
relation at all to the product but was chosen merely as a trademark due to the fondness for
fighting cocks of the son of petitioners’ president. Furthermore, petitioners adopted GALLO, the
Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets,
the sabungeros (cockfight aficionados).85

Also, as admitted by respondents themselves, 86 on the side of the GALLO cigarette packs are the
words "MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the
identity of the manufacturer of the cigarettes.

On the other hand, GALLO Winery’s wine and brandy labels are diverse. In many of them, the
labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while
in a few, one or two small roosters facing right or facing each other (atop the EJG crest,
surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear
as minor features thereof.87 Directly below or above these sketches is the entire printed name of
the founder-owners, "ERNEST & JULIO GALLO" or just their surname "GALLO," 88 which
appears in different fonts, sizes, styles and labels, unlike petitioners’ uniform casque-font bold-
lettered GALLO mark.

Moreover, on the labels of Gallo Winery’s wines are printed the words "VINTED AND
BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."89

The many different features like color schemes, art works and other markings of both products
drown out the similarity between them – the use of the word “GALLO” ― a family surname for
the Gallo Winery’s wines and a Spanish word for rooster for petitioners’ cigarettes.

WINES AND CIGARETTES ARE NOT

IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

Confusion of goods is evident where the litigants are actually in competition; but confusion of
business may arise between non-competing interests as well.90

Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6 bis of the
Paris Convention which proscribe trademark infringement not only of goods specified in the
certificate of registration but also of identical or similar goods, we have also uniformly
recognized and applied the modern concept of "related goods."91 Simply stated, when goods are
so related that the public may be, or is actually, deceived and misled that they come from the
same maker or manufacturer, trademark infringement occurs.92

15
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 purchased103 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
16
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

17
 In his decision, the Director of Patents enumerated the factors that set respondent’s
products apart from the goods of petitioner. He opined and we quote:

"I have taken into account such factors as probable purchaser attitude and habits,
marketing activities, retail outlets, and commercial impression likely to be
conveyed by the trademarks if used in conjunction with the respective goods of
the parties, I believe that ham on one hand, and lard, butter, oil, and soap on
the other are products that would not move in the same manner through the
same channels of trade. They pertain to unrelated fields of manufacture,
might be distributed and marketed under dissimilar conditions, and are
displayed separately even though they frequently may be sold through the
same retail food establishments. Opposer’s products are ordinary day-to-day
household items whereas ham is not necessarily so. Thus, the goods of the parties
are not of a character which purchasers would likely attribute to a common origin.

The observations and conclusion of the Director of Patents are correct. The particular
goods of the parties are so unrelated that consumers, would not, in any probability
mistake one as the source of origin of the product of the other. (Emphasis supplied).

The same is true in the present case. Wines and cigarettes are non-competing and are totally
unrelated products not likely to cause confusion vis-à-vis the goods or the business of the
petitioners and respondents.

Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages
and smoked. There is a whale of a difference between their descriptive properties, physical
attributes or essential characteristics like form, composition, texture and quality.

GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are
patronized by middle-to-high-income earners while GALLO cigarettes appeal only to simple
folks like farmers, fishermen, laborers and other low-income workers.116 Indeed, the big price
difference of these two products is an important factor in proving that they are in fact unrelated
and that they travel in different channels of trade. There is a distinct price segmentation based on
vastly different social classes of purchasers.117

GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO
cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as imported
or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through
ambulant and sidewalk vendors, small local sari-sari stores and grocery stores in Philippine rural
areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu. 118 On the other hand, GALLO
wines are imported, distributed and sold in the Philippines through Gallo Winery’s exclusive
contracts with a domestic entity, which is currently Andresons. By respondents’ own testimonial
evidence, GALLO wines are sold in hotels, expensive bars and restaurants, and high-end grocery
stores and supermarkets, not through sari-sari  stores or ambulant vendors.119

Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs.
Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO cigarettes are related
goods. The courts a quo should have taken into consideration the subsequent case of IDV North
America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.:121

IDV correctly acknowledges, however, that there is no per se rule that the use of the
same mark on alcohol and tobacco products always will result in a likelihood of
confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd.
18
vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), aff’d, 222 F. 2d 460
(5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER" on
cigars because the fame of the plaintiff’s mark for scotch whiskey and because the
plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The
court, in John Walker & Sons, placed great significance on the finding that the
infringers use was a deliberate attempt to capitalize on the senior marks’
fame. Id.  At 256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc.,  297
F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendant’s use
of the mark "BLACK LABEL" for cigarettes because it was likely to cause
confusion with the plaintiff’s well-known mark "BLACK LABEL" for beer.

xxx xxx xxx

Those decisions, however, must be considered in perspective of the principle that

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

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

xxx xxx xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the
family name ‘Bailey’s’ as the mark for its cigarettes, to capitalize upon the fame of the
‘BAILEYS’ mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be
discussed below, and as found in Mckesson & Robbins, the survey evidence refutes
the contention that cigarettes and alcoholic beverages are so intimately associated in
the public mind that they cannot under any circumstances be sold under the same
mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.
19
 Taken as a whole, the evidence here demonstrates the absence of the ‘special
circumstances’ in which courts have found a relationship between tobacco and alcohol
products sufficient to tip the similarity of goods analysis in favor of the protected mark
and against the allegedly infringing mark. It is true that BAILEYS liqueur, the world’s
best selling liqueur and the second best selling in the United States, is a well-known
product. That fact alone, however, is insufficient to invoke the special circumstances
connection here where so much other evidence and so many other factors disprove a
likelihood of confusion. The similarity of products analysis, therefore, augers
against finding that there is a likelihood of confusion. (Emphasis supplied).

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

THE GALLO WINE TRADEMARK IS NOT A

WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS

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

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

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

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

We agree with public respondents that the controlling doctrine with respect to the
applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha
Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the
BPTTT:

"Regarding the applicability of Article 8 of the Paris Convention, this Office

believes that there is no automatic protection afforded an entity whose
tradename is alleged to have been infringed through the use of that name as
a trademark by a local entity.

20
 In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No.
75420, 15 November 1991, the Honorable Supreme Court held that:

‘The Paris Convention for the Protection of Industrial Property does

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

This office is not unmindful that in (sic) the Treaty of Paris for the Protection of
Intellectual Property regarding well-known marks and possible application thereof
in this case. Petitioner, as this office sees it, is trying to seek refuge under its
protective mantle, claiming that the subject mark is well known in this country at
the time the then application of NSR Rubber was filed.

However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin,
issued a memorandum dated 25 October 1983 to the Director of Patents, a set of
guidelines in the implementation of Article 6bis of the Treaty of Paris. These
conditions are:

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

21
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.

22
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.

Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.

Carpio-Morales, J., no part..

23
 G.R. No. 149907               April 16, 2009

ROMA DRUG and ROMEO RODRIGUEZ, as Proprietor of ROMA

DRUG, Petitioners,
vs.
THE REGIONAL TRIAL COURT OF GUAGUA, PAMPANGA, THE
PROVINCIAL PROSECUTOR OF PAMPANGA, BUREAU OF FOOD &
DRUGS (BFAD) and GLAXO SMITHKLINE, Respondents.

DECISION

TINGA, J.:

On 14 August 2000, a team composed of the National Bureau of Investigation

(NBI) operatives and inspectors of the Bureau of Food and Drugs (BFAD)
conducted a raid on petitioner Roma Drug, a

duly registered sole proprietorship of petitioner Romeo Rodriguez (Rodriguez)

operating a drug store located at San Matias, Guagua, Pampanga. The raid was
conducted pursuant to a search warrant 1 issued by the Regional Trial Court (RTC),
Branch 57, Angeles City. The raiding team seized several imported medicines,
including Augmentin (375mg.) tablets, Orbenin (500mg.) capsules, Amoxil
(250mg.) capsules and Ampiclox (500mg.).2 It appears that Roma Drug is one of
six drug stores which were raided on or around the same time upon the request of
SmithKline Beecham Research Limited (SmithKline), a duly registered
corporation which is the local distributor of pharmaceutical products manufactured
by its parent London-based corporation. The local SmithKline has since merged
with Glaxo Wellcome Phil. Inc to form Glaxo SmithKline, private respondent in
this case. The seized medicines, which were manufactured by SmithKline, were
imported directly from abroad and not purchased through the local SmithKline, the
authorized Philippine distributor of these products.

The NBI subsequently filed a complaint against Rodriguez for violation of Section
4 (in relation to Sections 3 and 5) of Republic Act No. 8203, also known as the
Special Law on Counterfeit Drugs (SLCD), with the Office of the Provincial
Prosecutor in San Fernando, Pampanga. The section prohibits the sale of
counterfeit drugs, which under Section 3(b)(3), includes "an unregistered imported
drug product." The term "unregistered" signifies the lack of registration with the
Bureau of Patent, Trademark and Technology Transfer of a trademark, tradename
or other identification mark of a drug in the name of a natural or juridical person,
the process of which is governed under Part III of the Intellectual Property Code.

In this case, there is no doubt that the subject seized drugs are identical in content
with their Philippine-registered counterparts. There is no claim that they were
24
adulterated in any way or mislabeled at least. Their classification as "counterfeit" is
based solely on the fact that they were imported from abroad and not purchased
from the Philippine-registered owner of the patent or trademark of the drugs.

During preliminary investigation, Rodriguez challenged the constitutionality of the

SLCD. However, Assistant Provincial Prosecutor Celerina C. Pineda skirted the
challenge and issued a Resolution dated 17 August 2001 recommending that
Rodriguez be charged with violation of Section 4(a) of the SLCD. The
recommendation was approved by Provincial Prosecutor Jesus Y. Manarang
approved the recommendation.3

Hence, the present Petition for Prohibition questing the RTC-Guagua Pampanga
and the Provincial Prosecutor to desist from further prosecuting Rodriguez, and
that Sections 3(b)(3), 4 and 5 of the SLCD be declared unconstitutional. In gist,
Rodriguez asserts that the challenged provisions contravene three provisions of the
Constitution. The first is the equal protection clause of the Bill of Rights. The two
other provisions are Section 11, Article XIII, which mandates that the State make
"essential goods, health and other social services available to all the people at
affordable cost;" and Section 15, Article II, which states that it is the policy of the
State "to protect and promote the right to health of the people and instill health
consciousness among them."

Through its Resolution dated 15 October 2001, the Court issued a temporary
restraining order enjoining the RTC from proceeding with the trial against
Rodriguez, and the BFAD, the NBI and Glaxo Smithkline from prosecuting the
petitioners.4

Glaxo Smithkline and the Office of the Solicitor General (OSG) have opposed the
petition, the latter in behalf of public respondents RTC, Provincial Prosecutor and
Bureau of Food and Drugs (BFAD). On the constitutional issue, Glaxo Smithkline
asserts the rule that the SLCD is presumed constitutional, arguing that both Section
15, Article II and Section 11, Article XIII "are not self-executing provisions, the
disregard of which can give rise to a cause of action in the courts." It adds that
Section 11, Article XIII in particular cannot be work "to the oppression and
unlawful of the property rights of the legitimate manufacturers, importers or
distributors, who take pains in having imported drug products registered before the
BFAD." Glaxo Smithkline further claims that the SLCD does not in fact conflict
with the aforementioned constitutional provisions and in fact are in accord with
constitutional precepts in favor of the people’s right to health.

The Office of the Solicitor General casts the question as one of policy wisdom of
the law that is, beyond the interference of the judiciary.5 Again, the presumption of
constitutionality of statutes is invoked, and the assertion is made that there is no
clear and unequivocal breach of the Constitution presented by the SLCD.

25
II.

The constitutional aspect of this petition raises obviously interesting questions.

However, such questions have in fact been mooted with the passage in 2008 of
Republic Act No. 9502, also known as the "Universally Accessible Cheaper and
Quality Medicines Act of 2008".6

Section 7 of Rep. Act No. 9502 amends Section 72 of the Intellectual Property
Code in that the later law unequivocally grants third persons the right to import
drugs or medicines whose patent were registered in the Philippines by the owner of
the product:

Sec. 7. Section 72 of Republic Act No. 8293, otherwise known as the Intellectual
Property Code of the Philippines, is hereby amended to read as follows:

"Sec. 72. Limitations of Patent Rights. – The owner of a patent has no right to
prevent third parties from performing, without his authorization, the acts referred
to in Section 71 hereof in the following circumstances:

"72.1. Using a patented product which has been put on the market in the
Philippines by the owner of the product, or with his express consent, insofar as
such use is performed after that product has been so put on the said market:
Provided, That, with regard to drugs and medicines, the limitation on patent
rights shall apply after a drug or medicine has been introduced in the
Philippines or anywhere else in the world by the patent owner, or by any
party authorized to use the invention: Provided,

further, That the right to import the drugs and medicines contemplated in this
section shall be available to any government agency or any private third
party;

"72.2. Where the act is done privately and on a non-commercial scale or for
a non-commercial purpose: Provided, That it does not significantly prejudice
the economic interests of the owner of the patent;

"72.3. Where the act consists of making or using exclusively for

experimental use of the invention for scientific purposes or educational
purposes and such other activities directly related to such scientific or
educational experimental use;

"72.4. In the case of drugs and medicines, where the act includes testing,
using, making or selling the invention including any data related thereto,
solely for purposes reasonably related to the development and submission of
information and issuance of approvals by government regulatory agencies
required under any law of the Philippines or of another country that

26
 regulates the manufacture, construction, use or sale of any product:
Provided, That, in order to protect the data submitted by the original patent
holder from unfair commercial use provided in Article 39.3 of the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement), the Intellectual Property Office, in consultation with the
appropriate government agencies, shall issue the appropriate rules and
regulations necessary therein not later than one hundred twenty (120) days
after the enactment of this law;

"72.5. Where the act consists of the preparation for individual cases, in a
pharmacy or by a medical professional, of a medicine in accordance with a
medical shall apply after a drug or medicine has been introduced in the
Philippines or anywhere else in the world by the patent owner, or by any
party authorized to use the invention: Provided, further, That the right to
import the drugs and medicines contemplated in this section shall be
available to any government agency or any private third party; xxx7

The unqualified right of private third parties such as petitioner to import or possess
"unregistered imported drugs" in the Philippines is further confirmed by the
"Implementing Rules to Republic Act No. 9502" promulgated on 4 November
2008.8 The relevant provisions thereof read:

Rule 9. Limitations on Patent Rights. The owner of a patent has no right to

prevent third parties from performing, without his authorization, the acts referred
to in Section 71 of the IP Code as enumerated hereunder:

(i) Introduction in the Philippines or Anywhere Else in the World.

Using a patented product which has been put on the market in the Philippines by
the owner of the product, or with his express consent, insofar as such use is
performed after that product has been so put on the said market: Provided, That,
with regard to drugs and medicines, the limitation on patent rights shall apply after
a drug or medicine has been introduced in the Philippines or anywhere else in the
world by the patent owner, or by any party authorized to use the
invention: Provided, further, That the right to import the drugs and medicines
contemplated in this section shall be available to any government agency or any
private third party. (72.1)1avvphi1

The drugs and medicines are deemed introduced when they have been sold or
offered for sale anywhere else in the world. (n)

It may be that Rep. Act No. 9502 did not expressly repeal any provision of the
SLCD. However, it is clear that the SLCO’s classification of "unregistered
imported drugs" as "counterfeit drugs," and of corresponding criminal penalties
therefore are irreconcilably in the imposition conflict with Rep. Act No. 9502 since
27
the latter indubitably grants private third persons the unqualified right to import or
otherwise use such drugs. Where a statute of later date, such as Rep. Act No. 9502,
clearly reveals an intention on the part of the legislature to abrogate a prior act on
the subject that intention must be given effect.9 When a subsequent enactment
covering a field of operation coterminus with a prior statute cannot by any
reasonable construction be given effect while the prior law remains in operative
existence because of irreconcilable conflict between the two acts, the latest
legislative expression prevails and the prior law yields to the extent of the
conflict.10 Irreconcilable inconsistency between two laws embracing the same
subject may exist when the later law nullifies the reason or purpose of the earlier
act, so that the latter loses all meaning and function.11 Legis posteriors priores
contrarias abrogant.

For the reasons above-stated, the prosecution of petitioner is no longer warranted

and the quested writ of prohibition should accordingly be issued.

III.

Had the Court proceeded to directly confront the constitutionality of the assailed
provisions of the SLCD, it is apparent that it would have at least placed in doubt
the validity of the provisions. As written, the law makes a criminal of any person
who imports an unregistered drug regardless of the purpose, even if the medicine
can spell life or death for someone in the Philippines. It does not accommodate the
situation where the drug is out of stock in the Philippines, beyond the reach of a
patient who urgently depends on it. It does not allow husbands, wives, children,
siblings, parents to import the drug in behalf of their loved ones too physically ill
to travel and avail of the meager personal use exemption allotted by the law. It
discriminates, at the expense of health, against poor Filipinos without means to
travel abroad to purchase less expensive medicines in favor of their wealthier
brethren able to do so. Less urgently perhaps, but still within the range of
constitutionally protected behavior, it deprives Filipinos to choose a less expensive
regime for their health care by denying them a plausible and safe means of
purchasing medicines at a cheaper cost.

The absurd results from this far-reaching ban extends to implications that deny the
basic decencies of humanity. The law would make criminals of doctors from
abroad on medical missions of such humanitarian organizations such as the
International Red Cross, the International Red Crescent, Medicin Sans Frontieres,
and other

like-minded groups who necessarily bring their own pharmaceutical drugs when
they embark on their missions of mercy. After all, they are disabled from invoking
the bare "personal use" exemption afforded by the SLCD.

28
Even worse is the fact that the law is not content with simply banning, at civil
costs, the importation of unregistered drugs. It equates the importers of such drugs,
many of whom motivated to do so out of altruism or basic human love, with the
malevolents who would alter or counterfeit pharmaceutical drugs for reasons of
profit at the expense of public safety. Note that the SLCD is a special law, and the
traditional treatment of penal provisions of special laws is that of malum
prohibitum–or punishable regardless of motive or criminal intent. For a law that is
intended to help save lives, the SLCD has revealed itself as a heartless, soulless
legislative piece.

The challenged provisions of the SLCD apparently proscribe a range of

constitutionally permissible behavior. It is laudable that with the passage of Rep.
Act No. 9502, the State has reversed course and allowed for a sensible and
compassionate approach with respect to the importation of pharmaceutical drugs
urgently necessary for the people’s constitutionally-recognized right to health.

WHEREFORE, the petition is GRANTED in part. A writ of prohibition is hereby

ISSUED commanding respondents from prosecuting petitioner Romeo Rodriguez
for violation of Section 4 or Rep. Act No. 8203. The Temporary Restraining Order
dated 15 October 2001 is hereby made PERMANENT. No pronouncements as to
costs.

SO ORDERED.

DANTE O. TINGAAssociate Justice

29
 G. R. No. 126627               August 14, 2003

SMITH KLINE BECKMAN CORPORATION, Petitioner,

vs.
THE HONORABLE COURT OF APPEALS and TRYCO PHARMA
CORPORATION, Respondents.

DECISION

CARPIO-MORALES, J.:

Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of

the laws of the state of Pennsylvania, United States of America (U.S.) and licensed
to do business in the Philippines, filed on October 8, 1976, as assignee, before the
Philippine Patent Office (now Bureau of Patents, Trademarks and Technology
Transfer) an application for patent over an invention entitled "Methods and
Compositions for Producing Biphasic Parasiticide Activity Using Methyl 5
Propylthio-2-Benzimidazole Carbamate." The application bore Serial No. 18989.

On September 24, 1981, Letters Patent No. 14561 1 for the aforesaid invention was
issued to petitioner for a term of seventeen (17) years.

The letters patent provides in its claims2 that the patented invention consisted of a
new compound named methyl 5 propylthio-2-benzimidazole carbamate and the
methods or compositions utilizing the compound as an active ingredient in fighting
infections caused by gastrointestinal parasites and lungworms in animals such as
swine, sheep, cattle, goats, horses, and even pet animals.

Tryco Pharma Corporation (private respondent) is a domestic corporation that

manufactures, distributes and sells veterinary products including Impregon, a drug
that has Albendazole for its active ingredient and is claimed to be effective against
gastro-intestinal roundworms, lungworms, tapeworms and fluke infestation in
carabaos, cattle and goats.

Petitioner sued private respondent for infringement of patent and unfair

competition before the Caloocan City Regional Trial Court (RTC). 3 It claimed that
its patent covers or includes the substance Albendazole such that private
respondent, by manufacturing, selling, using, and causing to be sold and used the
drug Impregon without its authorization, infringed Claims 2, 3, 4, 7, 8 and 9 of
Letters Patent No. 145614 as well as committed unfair competition under Article
189, paragraph 1 of the Revised Penal Code and Section 29 of Republic Act No.
166 (The Trademark Law) for advertising and selling as its own the drug Impregon
although the same contained petitioner’s patented Albendazole.5

30
On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary
restraining order against private respondent enjoining it from committing acts of
patent infringement and unfair competition.6 A writ of preliminary injunction was
subsequently issued.7

Private respondent in its Answer8 averred that Letters Patent No. 14561 does not
cover the substance Albendazole for nowhere in it does that word appear; that even
if the patent were to include Albendazole, such substance is unpatentable; that the
Bureau of Food and Drugs allowed it to manufacture and market Impregon with
Albendazole as its known ingredient; that there is no proof that it passed off in any
way its veterinary products as those of petitioner; that Letters Patent No. 14561 is
null and void, the application for the issuance thereof having been filed beyond the
one year period from the filing of an application abroad for the same invention
covered thereby, in violation of Section 15 of Republic Act No. 165 (The Patent
Law); and that petitioner is not the registered patent holder.

Private respondent lodged a Counterclaim against petitioner for such amount of

actual damages as may be proven; ₱1,000,000.00 in moral damages; ₱300,000.00
in exemplary damages; and ₱150,000.00 in attorney’s fees.

Finding for private respondent, the trial court rendered a Decision dated July 23,
1991,9 the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, plaintiff’s complaint should be, as it is

hereby, DISMISSED. The Writ of injunction issued in connection with the case is
hereby ordered DISSOLVED.

The Letters Patent No. 14561 issued by the then Philippine Patents Office is
hereby declared null and void for being in violation of Sections 7, 9 and 15 of the
Patents Law.

Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby
directed to cancel Letters Patent No. 14561 issued to the plaintiff and to publish
such cancellation in the Official Gazette.

Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00

actual damages and P100,000.00 attorney’s fees as prayed for in its
counterclaim but said amount awarded to defendant is subject to the lien on correct
payment of filing fees.

SO ORDERED. (Underscoring supplied)

On appeal, the Court of Appeals, by Decision of April 21, 1995, 10 upheld the trial
court’s finding that private respondent was not liable for any infringement of the
patent of petitioner in light of the latter’s failure to show that Albendazole is the

31
same as the compound subject of Letters Patent No. 14561. Noting petitioner’s
admission of the issuance by the U.S. of a patent for Albendazole in the name of
Smith Kline and French Laboratories which was petitioner’s former corporate
name, the appellate court considered the U.S. patent as implying that Albendazole
is different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found
that private respondent was not guilty of deceiving the public by misrepresenting
that Impregon is its product.

The appellate court, however, declared that Letters Patent No. 14561 was not void
as it sustained petitioner’s explanation that Patent Application Serial No. 18989
which was filed on October 8, 1976 was a divisional application of Patent
Application Serial No. 17280 filed on June 17, 1975 with the Philippine Patent
Office, well within one year from petitioner’s filing on June 19, 1974 of its Foreign
Application Priority Data No. 480,646 in the U.S. covering the same compound
subject of Patent Application Serial No. 17280.

Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent
Application Serial No. 18989 was deemed filed on June 17, 1995 or still within
one year from the filing of a patent application abroad in compliance with the one-
year rule under Section 15 of the Patent Law. And it rejected the submission that
the compound in Letters Patent No. 14561 was not patentable, citing the
jurisprudentially established presumption that the Patent Office’s determination of
patentability is correct. Finally, it ruled that petitioner established itself to be the
one and the same assignee of the patent notwithstanding changes in its corporate
name. Thus the appellate court disposed:

WHEREFORE, the judgment appealed from is AFFIRMED with the

MODIFICATION that the orders for the nullification of Letters Patent No. 14561
and for its cancellation are deleted therefrom.

SO ORDERED.

Petitioner’s motion for reconsideration of the Court of Appeals’ decision having

been denied11 the present petition for review on certiorari 12 was filed, assigning as
errors the following:

I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCO’S
"IMPREGON" DRUG, IS INCLUDED IN PETITIONER’S LETTERS
PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS
ANSWERABLE FOR PATENT INFRINGEMENT.

II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO

PRIVATE RESPONDENT TRYCO PHARMA CORPORATION

32
 P330,000.00 ACTUAL DAMAGES AND P100,000.00 ATTORNEY’S
FEES.

Petitioner argues that under the doctrine of equivalents for determining patent
infringement, Albendazole, the active ingredient it alleges was appropriated by
private respondent for its drug Impregon, is substantially the same as methyl 5
propylthio-2-benzimidazole carbamate covered by its patent since both of them are
meant to combat worm or parasite infestation in animals. It cites the "unrebutted"
testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the chemical
formula in Letters Patent No. 14561 refers to the compound Albendazole.
Petitioner adds that the two substances substantially do the same function in
substantially the same way to achieve the same results, thereby making them truly
identical. Petitioner thus submits that the appellate court should have gone beyond
the literal wordings used in Letters Patent No. 14561, beyond merely applying the
literal infringement test, for in spite of the fact that the word Albendazole does not
appear in petitioner’s letters patent, it has ably shown by evidence its sameness
with methyl 5 propylthio-2-benzimidazole carbamate.

Petitioner likewise points out that its application with the Philippine Patent Office
on account of which it was granted Letters Patent No. 14561 was merely a
divisional application of a prior application in the U. S. which granted a patent for
Albendazole. Hence, petitioner concludes that both methyl 5 propylthio-2-
benzimidazole carbamate and the U.S.-patented Albendazole are dependent on
each other and mutually contribute to produce a single result, thereby making
Albendazole as much a part of Letters Patent No. 14561 as the other substance is.

Petitioner concedes in its Sur-Rejoinder13 that although methyl 5 propylthio-2-

benzimidazole carbamate is not identical with Albendazole, the former is an
improvement or improved version of the latter thereby making both substances still
substantially the same.

With respect to the award of actual damages in favor of private respondent in the
amount of ₱330,000.00 representing lost profits, petitioner assails the same as
highly speculative and conjectural, hence, without basis. It assails too the award of
₱100,000.00 in attorney’s fees as not falling under any of the instances enumerated
by law where recovery of attorney’s fees is allowed.

In its Comment,14 private respondent contends that application of the doctrine of

equivalents would not alter the outcome of the case, Albendazole and methyl 5
propylthio-2-benzimidazole carbamate being two different compounds with
different chemical and physical properties. It stresses that the existence of a
separate U.S. patent for Albendazole indicates that the same and the compound in
Letters Patent No. 14561 are different from each other; and that since it was on
account of a divisional application that the patent for methyl 5 propylthio-2-
benzimidazole carbamate was issued, then, by definition of a divisional
33
application, such a compound is just one of several independent inventions
alongside Albendazole under petitioner’s original patent application.

As has repeatedly been held, only questions of law may be raised in a petition for
review on certiorari before this Court. Unless the factual findings of the appellate
court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave
abuse of discretion, or contrary to the findings culled by the court of origin, 15 this
Court does not review them.

From an examination of the evidence on record, this Court finds nothing infirm in
the appellate court’s conclusions with respect to the principal issue of whether
private respondent committed patent infringement to the prejudice of petitioner.

The burden of proof to substantiate a charge for patent infringement rests on the
plaintiff.16 In the case at bar, petitioner’s evidence consists primarily of its Letters
Patent No. 14561, and the testimony of Dr. Orinion, its general manager in the
Philippines for its Animal Health Products Division, by which it sought to show
that its patent for the compound methyl 5 propylthio-2-benzimidazole carbamate
also covers the substance Albendazole.

From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other
portions thereof, no mention is made of the compound Albendazole. All that the
claims disclose are: the covered invention, that is, the compound methyl 5
propylthio-2-benzimidazole carbamate; the compound’s being anthelmintic but
nontoxic for animals or its ability to destroy parasites without harming the host
animals; and the patented methods, compositions or preparations involving the
compound to maximize its efficacy against certain kinds of parasites infecting
specified animals.

When the language of its claims is clear and distinct, the patentee is bound thereby
and may not claim anything beyond them.17 And so are the courts bound which
may not add to or detract from the claims matters not expressed or necessarily
implied, nor may they enlarge the patent beyond the scope of that which the
inventor claimed and the patent office allowed, even if the patentee may have been
entitled to something more than the words it had chosen would include.18

It bears stressing that the mere absence of the word Albendazole in Letters Patent
No. 14561 is not determinative of Albendazole’s non-inclusion in the claims of the
patent. While Albendazole is admittedly a chemical compound that exists by a
name different from that covered in petitioner’s letters patent, the language of
Letter Patent No. 14561 fails to yield anything at all regarding Albendazole. And
no extrinsic evidence had been adduced to prove that Albendazole inheres in
petitioner’s patent in spite of its omission therefrom or that the meaning of the
claims of the patent embraces the same.

34
While petitioner concedes that the mere literal wordings of its patent cannot
establish private respondent’s infringement, it urges this Court to apply the
doctrine of equivalents.

The doctrine of equivalents provides that an infringement also takes place when a
device appropriates a prior invention by incorporating its innovative concept and,
although with some modification and change, performs substantially the same
function in substantially the same way to achieve substantially the same
result.19 Yet again, a scrutiny of petitioner’s evidence fails to convince this Court of
the substantial sameness of petitioner’s patented compound and Albendazole.
While both compounds have the effect of neutralizing parasites in animals, identity
of result does not amount to infringement of patent unless Albendazole operates in
substantially the same way or by substantially the same means as the patented
compound, even though it performs the same function and achieves the same
result.20 In other words, the principle or mode of operation must be the same or
substantially the same.21

The doctrine of equivalents thus requires satisfaction of the function-means-and-

result test, the patentee having the burden to show that all three components of
such equivalency test are met.22

As stated early on, petitioner’s evidence fails to explain how Albendazole is in

every essential detail identical to methyl 5 propylthio-2-benzimidazole carbamate.
Apart from the fact that Albendazole is an anthelmintic agent like methyl 5
propylthio-2-benzimidazole carbamate, nothing more is asserted and accordingly
substantiated regarding the method or means by which Albendazole weeds out
parasites in animals, thus giving no information on whether that method is
substantially the same as the manner by which petitioner’s compound works. The
testimony of Dr. Orinion lends no support to petitioner’s cause, he not having been
presented or qualified as an expert witness who has the knowledge or expertise on
the matter of chemical compounds.

As for the concept of divisional applications proffered by petitioner, it comes into

play when two or more inventions are claimed in a single application but are of
such a nature that a single patent may not be issued for them.23 The applicant thus
is required "to divide," that is, to limit the claims to whichever invention he may
elect, whereas those inventions not elected may be made the subject of separate
applications which are called "divisional applications." 24 What this only means is
that petitioner’s methyl 5 propylthio-2-benzimidazole carbamate is an invention
distinct from the other inventions claimed in the original application divided out,
Albendazole being one of those other inventions. Otherwise, methyl 5 propylthio-
2-benzimidazole carbamate would not have been the subject of a divisional
application if a single patent could have been issued for it as well as
Albendazole.1âwphi1

35
The foregoing discussions notwithstanding, this Court does not sustain the award
of actual damages and attorney’s fees in favor of private respondent. The claimed
actual damages of ₱330,000.00 representing lost profits or revenues incurred by
private respondent as a result of the issuance of the injunction against it, computed
at the rate of 30% of its alleged ₱100,000.00 monthly gross sales for eleven
months, were supported by the testimonies of private respondent’s President25 and
Executive Vice-President that the average monthly sale of Impregon was
₱100,000.00 and that sales plummeted to zero after the issuance of the
injunction.26 While indemnification for actual or compensatory damages covers not
only the loss suffered (damnum emergens) but also profits which the obligee failed
to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the actual
amount of damages with a reasonable degree of certainty based on competent
proof and on the best evidence obtainable by the injured party. 27 The testimonies of
private respondent’s officers are not the competent proof or best evidence
obtainable to establish its right to actual or compensatory damages for such
damages also require presentation of documentary evidence to substantiate a claim
therefor.28

In the same vein, this Court does not sustain the grant by the appellate court of
attorney’s fees to private respondent anchored on Article 2208 (2) of the Civil
Code, private respondent having been allegedly forced to litigate as a result of
petitioner’s suit. Even if a claimant is compelled to litigate with third persons or to
incur expenses to protect its rights, still attorney’s fees may not be awarded where
no sufficient showing of bad faith could be reflected in a party’s persistence in a
case other than an erroneous conviction of the righteousness of his cause. 29 There
exists no evidence on record indicating that petitioner was moved by malice in
suing private respondent.

This Court, however, grants private respondent temperate or moderate damages in

the amount of ₱20,000.00 which it finds reasonable under the circumstances, it
having suffered some pecuniary loss the amount of which cannot, from the nature
of the case, be established with certainty.30

WHEREFORE, the assailed decision of the Court of Appeals is hereby

AFFIRMED with MODIFICATION. The award of actual or compensatory
damages and attorney’s fees to private respondent, Tryco Pharma Corporation, is
DELETED; instead, it is hereby awarded the amount of P20,000.00 as temperate or
moderate damages.

SO ORDERED.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Corona, JJ., concur.

36
 G.R. No. 167715               November 17, 2010

PHIL PHARMAWEALTH, INC., Petitioner,

vs.
PFIZER, INC. and PFIZER (PHIL.) INC., Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to annul and set
aside the Resolutions dated January 18, 20051 and April 11, 20052 by the Court of
Appeals (CA) in CA-G.R. SP No. 82734.

The instant case arose from a Complaint3 for patent infringement filed against
petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer
(Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Office
(BLA-IPO). The Complaint alleged as follows:

xxxx

6. Pfizer is the registered owner of Philippine Letters Patent No. 21116 (the
"Patent") which was issued by this Honorable Office on July 16, 1987. The
patent is valid until July 16, 2004. The claims of this Patent are directed to
"a method of increasing the effectiveness of a beta-lactam antibiotic in a
mammalian subject, which comprises co-administering to said subject a
beta-lactam antibiotic effectiveness increasing amount of a compound of the
formula IA." The scope of the claims of the Patent extends to a combination
of penicillin such as ampicillin sodium and beta-lactam antibiotic like
sulbactam sodium.

7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium

(hereafter "Sulbactam Ampicillin"). Ampicillin sodium is a specific example
of the broad beta-lactam antibiotic disclosed and claimed in the Patent. It is
the compound which efficacy is being enhanced by co-administering the
same with sulbactam sodium. Sulbactam sodium, on the other hand, is a
specific compound of the formula IA disclosed and claimed in the Patent.

8. Pfizer is marketing Sulbactam Ampicillin under the brand name

"Unasyn." Pfizer's "Unasyn" products, which come in oral and IV formulas,
are covered by Certificates of Product Registration ("CPR") issued by the
Bureau of Food and Drugs ("BFAD") under the name of complainants. The
sole and exclusive distributor of "Unasyn" products in the Philippines is
Zuellig Pharma Corporation, pursuant to a Distribution Services Agreement
it executed with Pfizer Phils. on January 23, 2001.
37
 9. Sometime in January and February 2003, complainants came to know that
respondent [herein petitioner] submitted bids for the supply of Sulbactam
Ampicillin to several hospitals without the consent of complainants and in
violation of the complainants' intellectual property rights. x x x

xxxx

10. Complainants thus wrote the above hospitals and demanded that the
latter immediately cease and desist from accepting bids for the supply [of]
Sulbactam Ampicillin or awarding the same to entities other than
complainants. Complainants, in the same letters sent through undersigned
counsel, also demanded that respondent immediately withdraw its bids to
supply Sulbactam Ampicillin.

11. In gross and evident bad faith, respondent and the hospitals named in
paragraph 9 hereof, willfully ignored complainants' just, plain and valid
demands, refused to comply therewith and continued to infringe the Patent,
all to the damage and prejudice of complainants. As registered owner of the
Patent, Pfizer is entitled to protection under Section 76 of the IP Code.

x x x x4

Respondents prayed for permanent injunction, damages and the forfeiture and
impounding of the alleged infringing products. They also asked for the issuance of
a temporary restraining order and a preliminary injunction that would prevent
herein petitioner, its agents, representatives and assigns, from importing,
distributing, selling or offering the subject product for sale to any entity in the
Philippines.

In an Order5 dated July 15, 2003 the BLA-IPO issued a preliminary injunction

which was effective for ninety days from petitioner's receipt of the said Order.

Prior to the expiration of the ninety-day period, respondents filed a Motion for
Extension of Writ of Preliminary Injunction6 which, however, was denied by the
BLA-IPO in an Order7 dated October 15, 2003.

Respondents filed a Motion for Reconsideration but the same was also denied by
the BLA-IPO in a Resolution8 dated January 23, 2004.

Respondents then filed a special civil action for certiorari with the CA assailing the
October 15, 2003 and January 23, 2004 Resolutions of the BLA-IPO. Respondents
also prayed for the issuance of a preliminary mandatory injunction for the
reinstatement and extension of the writ of preliminary injunction issued by the
BLA-IPO.

38
While the case was pending before the CA, respondents filed a Complaint 9 with the
Regional Trial Court (RTC) of Makati City for infringement and unfair
competition with damages against herein petitioner. In said case, respondents
prayed for the issuance of a temporary restraining order and preliminary injunction
to prevent herein petitioner from importing, distributing, selling or offering for sale
sulbactam ampicillin products to any entity in the Philippines. Respondents asked
the trial court that, after trial, judgment be rendered awarding damages in their
favor and making the injunction permanent.

On August 24, 2004, the RTC of Makati City issued an Order 10 directing the
issuance of a temporary restraining order conditioned upon respondents' filing of a
bond.

In a subsequent Order11 dated April 6, 2005, the same RTC directed the issuance of
a writ of preliminary injunction "prohibiting and restraining [petitioner], its agents,
representatives and assigns from importing, distributing or selling Sulbactam
Ampicillin products to any entity in the Philippines."

Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss 12 the

petition filed with the CA on the ground of forum shopping, contending that the
case filed with the RTC has the same objective as the petition filed with the CA,
which is to obtain an injunction prohibiting petitioner from importing, distributing
and selling Sulbactam Ampicillin products.

On January 18, 2005, the CA issued its questioned Resolution13 approving the bond
posted by respondents pursuant to the Resolution issued by the appellate court on
March 23, 2004 which directed the issuance of a temporary restraining order
conditioned upon the filing of a bond. On even date, the CA issued a temporary
restraining order14 which prohibited petitioner "from importing, distributing, selling
or offering for sale Sulbactam Ampicillin products to any hospital or to any other
entity in the Philippines, or from infringing Pfizer Inc.'s Philippine Patent No.
21116 and impounding all the sales invoices and other documents evidencing sales
by [petitioner] of Sulbactam Ampicillin products."

On February 7, 2005, petitioner again filed a Motion to Dismiss 15 the case for
being moot and academic, contending that respondents' patent had already lapsed.
In the same manner, petitioner also moved for the reconsideration of the temporary
restraining order issued by the CA on the same basis that the patent right sought to
be protected has been extinguished due to the lapse of the patent license and on the
ground that the CA has no jurisdiction to review the order of the BLA-IPO as said
jurisdiction is vested by law in the Office of the Director General of the IPO.

On April 11, 2005, the CA rendered its presently assailed Resolution denying the
Motion to Dismiss, dated November 16, 2004, and the motion for reconsideration,
as well as Motion to Dismiss, both dated February 7, 2005.
39
Hence, the present petition raising the following issues:

a) Can an injunctive relief be issued based on an action of patent

infringement when the patent allegedly infringed has already lapsed?

b) What tribunal has jurisdiction to review the decisions of the Director of

Legal Affairs of the Intellectual Property Office?

c) Is there forum shopping when a party files two actions with two
seemingly different causes of action and yet pray for the same relief?16

In the first issue raised, petitioner argues that respondents' exclusive right to
monopolize the subject matter of the patent exists only within the term of the
patent. Petitioner claims that since respondents' patent expired on July 16, 2004,
the latter no longer possess any right of monopoly and, as such, there is no more
basis for the issuance of a restraining order or injunction against petitioner insofar
as the disputed patent is concerned.

The Court agrees.

Section 37 of Republic Act No. (RA) 165, 17 which was the governing law at the
time of the issuance of respondents' patent, provides:

Section 37. Rights of patentees.  A patentee shall have the exclusive right to
make, use and sell the patented machine, article or product, and to use the patented
process for the purpose of industry or commerce, throughout the territory of the
Philippines for the term of the patent; and such making, using, or selling by any
person without the authorization of the patentee constitutes infringement of the
patent.18

It is clear from the above-quoted provision of law that the exclusive right of a
patentee to make, use and sell a patented product, article or process exists only
during the term of the patent. In the instant case, Philippine Letters Patent No.
21116, which was the basis of respondents in filing their complaint with the BLA-
IPO, was issued on July 16, 1987. This fact was admitted by respondents
themselves in their complaint. They also admitted that the validity of the said
patent is until July 16, 2004, which is in conformity with Section 21 of RA 165,
providing that the term of a patent shall be seventeen (17) years from the date of
issuance thereof. Section 4, Rule 129 of the Rules of Court provides that an
admission, verbal or written, made by a party in the course of the proceedings in
the same case, does not require proof and that the admission may be contradicted
only by showing that it was made through palpable mistake or that no such
admission was made. In the present case, there is no dispute as to respondents'
admission that the term of their patent expired on July 16, 2004. Neither is there
evidence to show that their admission was made through palpable mistake. Hence,
40
contrary to the pronouncement of the CA, there is no longer any need to present
evidence on the issue of expiration of respondents' patent.

On the basis of the foregoing, the Court agrees with petitioner that after July 16,
2004, respondents no longer possess the exclusive right to make, use and sell the
articles or products covered by Philippine Letters Patent No. 21116.

Section 3, Rule 58, of the Rules of Court lays down the requirements for the
issuance of a writ of preliminary injunction, viz:

(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance of
the acts complained of, or in requiring the performance of an act or acts,
either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the
applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or

attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject of
the action or proceeding, and tending to render the judgment ineffectual.

In this connection, pertinent portions of Section 5, Rule 58 of the same Rules

provide that if the matter is of extreme urgency and the applicant will suffer grave
injustice and irreparable injury, a temporary restraining order may be issued ex
parte.

From the foregoing, it can be inferred that two requisites must exist to warrant the
issuance of an injunctive relief, namely: (1) the existence of a clear and
unmistakable right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage.19

In the instant case, it is clear that when the CA issued its January 18, 2005
Resolution approving the bond filed by respondents, the latter no longer had a right
that must be protected, considering that Philippine Letters Patent No. 21116 which
was issued to them already expired on July 16, 2004. Hence, the issuance by the
CA of a temporary restraining order in favor of the respondents is not proper.

In fact, the CA should have granted petitioner's motion to dismiss the petition for
certiorari filed before it as the only issue raised therein is the propriety of
extending the writ of preliminary injunction issued by the BLA-IPO. Since the
patent which was the basis for issuing the injunction, was no longer valid, any

41
issue as to the propriety of extending the life of the injunction was already
rendered moot and academic.

As to the second issue raised, the Court, is not persuaded by petitioner's argument
that, pursuant to the doctrine of primary jurisdiction, the Director General of the
IPO and not the CA has jurisdiction to review the questioned Orders of the
Director of the BLA-IPO.

It is true that under Section 7(b) of RA 8293, otherwise known as the Intellectual
Property Code of the Philippines, which is the presently prevailing law, the
Director General of the IPO exercises exclusive appellate jurisdiction over all
decisions rendered by the Director of the BLA-IPO. However, what is being
questioned before the CA is not a decision, but an interlocutory order of the BLA-
IPO denying respondents' motion to extend the life of the preliminary injunction
issued in their favor.

RA 8293 is silent with respect to any remedy available to litigants who intend to
question an interlocutory order issued by the BLA-IPO. Moreover, Section 1(c),
Rule 14 of the Rules and Regulations on Administrative Complaints for Violation
of Laws Involving Intellectual Property Rights simply provides that interlocutory
orders shall not be appealable. The said Rules and Regulations do not prescribe a
procedure within the administrative machinery to be followed in assailing orders
issued by the BLA-IPO pending final resolution of a case filed with them. Hence,
in the absence of such a remedy, the provisions of the Rules of Court shall apply in
a suppletory manner, as provided under Section 3, Rule 1 of the same Rules and
Regulations. Hence, in the present case, respondents correctly resorted to the filing
of a special civil action for certiorari with the CA to question the assailed Orders of
the BLA-IPO, as they cannot appeal therefrom and they have no other plain,
speedy and adequate remedy in the ordinary course of law. This is consistent with
Sections 120 and 4,21 Rule 65 of the Rules of Court, as amended.

In the first place, respondents' act of filing their complaint originally with the
BLA-IPO is already in consonance with the doctrine of primary jurisdiction.

This Court has held that:

[i]n cases involving specialized disputes, the practice has been to refer the same to
an administrative agency of special competence in observance of the doctrine of
primary jurisdiction. The Court has ratiocinated that it cannot or will not determine
a controversy involving a question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that question by the administrative
tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the premises of the regulatory
42
statute administered. The objective of the doctrine of primary jurisdiction is to
guide a court in determining whether it should refrain from exercising its
jurisdiction until after an administrative agency has determined some question or
some aspect of some question arising in the proceeding before the court. It applies
where the claim is originally cognizable in the courts and comes into play
whenever enforcement of the claim requires the resolution of issues which, under a
regulatory scheme, has been placed within the special competence of an
administrative body; in such case, the judicial process is suspended pending
referral of such issues to the administrative body for its view.22

Based on the foregoing, the Court finds that respondents' initial filing of their
complaint with the BLA-IPO, instead of the regular courts, is in keeping with the
doctrine of primary jurisdiction owing to the fact that the determination of the
basic issue of whether petitioner violated respondents' patent rights requires the
exercise by the IPO of sound administrative discretion which is based on the
agency's special competence, knowledge and experience.

However, the propriety of extending the life of the writ of preliminary injunction
issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer a
matter that falls within the jurisdiction of the said administrative agency,
particularly that of its Director General. The resolution of this issue which was
raised before the CA does not demand the exercise by the IPO of sound
administrative discretion requiring special knowledge, experience and services in
determining technical and intricate matters of fact. It is settled that one of the
exceptions to the doctrine of primary jurisdiction is where the question involved is
purely legal and will ultimately have to be decided by the courts of justice. 23 This is
the case with respect to the issue raised in the petition filed with the CA.

Moreover, as discussed earlier, RA 8293 and its implementing rules and

regulations do not provide for a procedural remedy to question interlocutory orders
issued by the BLA-IPO. In this regard, it bears to reiterate that the judicial power
of the courts, as provided for under the Constitution, includes the authority of the
courts to determine in an appropriate action the validity of the acts of the political
departments.24 Judicial power also includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.25 Hence, the CA, and not the IPO Director
General, has jurisdiction to determine whether the BLA-IPO committed grave
abuse of discretion in denying respondents' motion to extend the effectivity of the
writ of preliminary injunction which the said office earlier issued.

Lastly, petitioner avers that respondents are guilty of forum shopping for having
filed separate actions before the IPO and the RTC praying for the same relief.

43
The Court agrees.

Forum shopping is defined as the act of a party against whom an adverse judgment
has been rendered in one forum, of seeking another (and possibly favorable)
opinion in another forum (other than by appeal or the special civil action
of certiorari), or the institution of two (2) or more actions or proceedings grounded
on the same cause on the supposition that one or the other court would make a
favorable disposition.26

The elements of forum shopping are: (a) identity of parties, or at least such parties
that represent the same interests in both actions; (b) identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; (c) identity of the
two preceding particulars, such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the action under
consideration.27

There is no question as to the identity of parties in the complaints filed with the
IPO and the RTC.

Respondents argue that they cannot be held guilty of forum shopping because their
complaints are based on different causes of action as shown by the fact that the
said complaints are founded on violations of different patents.

The Court is not persuaded.

Section 2, Rule 2 of the Rules of Court defines a cause of action as the act or
omission by which a party violates a right of another. In the instant case,
respondents' cause of action in their complaint filed with the IPO is the alleged act
of petitioner in importing, distributing, selling or offering for sale Sulbactam
Ampicillin products, acts that are supposedly violative of respondents' right to the
exclusive sale of the said products which are covered by the latter's patent.
However, a careful reading of the complaint filed with the RTC of Makati City
would show that respondents have the same cause of action as in their complaint
filed with the IPO. They claim that they have the exclusive right to make, use and
sell Sulbactam Ampicillin products and that petitioner violated this right. Thus, it
does not matter that the patents upon which the complaints were based are
different. The fact remains that in both complaints the rights violated and the acts
violative of such rights are identical.

In fact, respondents seek substantially the same reliefs in their separate complaints
with the IPO and the RTC for the purpose of accomplishing the same objective.

It is settled by this Court in several cases that the filing by a party of two
apparently different actions but with the same objective constitutes forum
shopping.28 The Court discussed this species of forum shopping as follows:
44
Very simply stated, the original complaint in the court a quo which gave rise to the
instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the
alleged perfected sale of real estate. On the other hand, the complaint in the Second
Case seeks to declare such purported sale involving the same real property "as
unenforceable as against the Bank," which is the petitioner herein. In other words,
in the Second Case, the majority stockholders, in representation of the Bank, are
seeking to accomplish what the Bank itself failed to do in the original case in the
trial court. In brief, the objective or the relief being sought, though worded
differently, is the same, namely, to enable the petitioner Bank to escape from the
obligation to sell the property to respondent.29

In Danville Maritime, Inc. v. Commission on Audit,30 the Court ruled as follows:

In the attempt to make the two actions appear to be different, petitioner impleaded
different respondents therein – PNOC in the case before the lower court and the
COA in the case before this Court and sought what seems to be different reliefs.
Petitioner asks this Court to set aside the questioned letter-directive of the COA
dated October 10, 1988 and to direct said body to approve the Memorandum of
Agreement entered into by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the PNOC from
conducting a rebidding and from selling to other parties the vessel "T/T Andres
Bonifacio," and for an extension of time for it to comply with the paragraph 1 of
the memorandum of agreement and damages. One can see that although the relief
prayed for in the two (2) actions are ostensibly different, the ultimate objective in
both actions is the same, that is, the approval of the sale of vessel in favor of
petitioner, and to overturn the letter directive of the COA of October 10, 1988
disapproving the sale.31

In the instant case, the prayer of respondents in their complaint filed with the IPO
is as follows:

A. Immediately upon the filing of this action, issue an ex parte order (a)
temporarily restraining respondent, its agents, representatives and assigns
from importing, distributing, selling or offering for sale Sulbactam
Ampicillin products to the hospitals named in paragraph 9 of this Complaint
or to any other entity in the Philippines, or from otherwise infringing Pfizer
Inc.'s Philippine Patent No. 21116; and (b) impounding all the sales invoices
and other documents evidencing sales by respondent of Sulbactam
Ampicillin products.

B. After hearing, issue a writ of preliminary injunction enjoining respondent,

its agents, representatives and assigns from importing, distributing, selling or
offering for sale Sulbactam Ampicillin products to the hospitals named in

45
 paragraph 9 of the Complaint or to any other entity in the Philippines, or
from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and

C. After trial, render judgment:

(i) declaring that respondent has infringed Pfizer Inc.'s Philippine

Patent No. 21116 and that respondent has no right whatsoever over
complainant's patent;

(ii) ordering respondent to pay complainants the following amounts:

(a) at least ₱1,000,000.00 as actual damages;

(b) ₱700,000.00 as attorney's fees and litigation expenses;

(d) ₱1,000,000.00 as exemplary damages; and

(d) costs of this suit.

(iii) ordering the condemnation, seizure or forfeiture of respondent's

infringing goods or products, wherever they may be found, including
the materials and implements used in the commission of infringement,
to be disposed of in such manner as may be deemed appropriate by
this Honorable Office; and

(iv) making the injunction permanent.32

In an almost identical manner, respondents prayed for the following in their

complaint filed with the RTC:

(a) Immediately upon the filing of this action, issue an ex parte order:

(1) temporarily restraining Pharmawealth, its agents, representatives

and assigns from importing, distributing, selling or offering for sale
infringing sulbactam ampicillin products to various government and
private hospitals or to any other entity in the Philippines, or from
otherwise infringing Pfizer Inc.'s Philippine Patent No. 26810.

(2) impounding all the sales invoices and other documents evidencing
sales by pharmawealth of sulbactam ampicillin products; and

(3) disposing of the infringing goods outside the channels of

commerce.

(b) After hearing, issue a writ of preliminary injunction:

46
 (1) enjoining Pharmawealth, its agents, representatives and assigns
from importing, distributing, selling or offering for sale infringing
sulbactam ampicillin products to various government hospitals or to
any other entity in the Philippines, or from otherwise infringing Patent
No. 26810;

(2) impounding all the sales invoices and other documents evidencing
sales by Pharmawealth of sulbactam ampicillin products; and

(3) disposing of the infringing goods outside the channels of

commerce.

(c) After trial, render judgment:

(1) finding Pharmawealth to have infringed Patent No. 26810 and

declaring Pharmawealth to have no right whatsoever over plaintiff's
patent;

(2) ordering Pharmawealth to pay plaintiffs the following amounts:

(i) at least ₱3,000,000.00 as actual damages;

(ii) ₱500,000.00 as attorney's fees and ₱1,000,000.00 as

litigation expenses;

(iii) ₱3,000,000.00 as exemplary damages; and

(iv) costs of this suit.

(3) ordering the condemnation, seizure or forfeiture of Pharmawealth's

infringing goods or products, wherever they may be found, including
the materials and implements used in the commission of infringement,
to be disposed of in such manner as may be deemed appropriate by
this Honorable Court; and

(4) making the injunction permanent.33

It is clear from the foregoing that the ultimate objective which respondents seek to
achieve in their separate complaints filed with the RTC and the IPO, is to ask for
damages for the alleged violation of their right to exclusively sell Sulbactam
Ampicillin products and to permanently prevent or prohibit petitioner from selling
said products to any entity. Owing to the substantial identity of parties, reliefs and
issues in the IPO and RTC cases, a decision in one case will necessarily amount
to res judicata in the other action.

47
It bears to reiterate that what is truly important to consider in determining whether
forum shopping exists or not is the vexation caused the courts and parties-litigant
by a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same reliefs, in
the process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue.341avvphi1

Thus, the Court agrees with petitioner that respondents are indeed guilty of forum
shopping.

Jurisprudence holds that if the forum shopping is not considered willful and
deliberate, the subsequent case shall be dismissed without prejudice, on the ground
of either litis pendentia or res judicata. 35 However, if the forum shopping is willful
and deliberate, both (or all, if there are more than two) actions shall be dismissed
with prejudice.36 In the present case, the Court finds that respondents did not
deliberately violate the rule on non-forum shopping. Respondents may not be
totally blamed for erroneously believing that they can file separate actions simply
on the basis of different patents. Moreover, in the suit filed with the RTC of Makati
City, respondents were candid enough to inform the trial court of the pendency of
the complaint filed with the BLA-IPO as well as the petition for certiorari filed
with the CA. On these bases, only Civil Case No. 04-754 should be dismissed on
the ground of litis pendentia.

WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions

of the Court of Appeals, dated January 18, 2005 and April 11, 2005, in CA-G.R.
No. 82734, are REVERSED and SET ASIDE. The petition for certiorari filed
with the Court of Appeals is DISMISSED for being moot and academic.

Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch
138, is likewise DISMISSED on the ground of litis pendentia.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

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