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G.R. No. 179367 January 29, 2014

UNILEVER PHILIPPINES, INC., Petitioner,

vs.
MICHAEL TAN a.k.a. PAUL D. TAN, Respondent.

BRION, J.:

Before us is a petition for review on certiorari 1 filed by Unilever Philippines, Inc. (petitioner), assailing the decision2dated June 18, 2007 and the
resolution3 dated August 16, 2007 of the Court of Appeals (CA) in CA G.R. SP No. 87000. These CA rulings dismissed the petitioner's petition for certiorari and
mandamus for lack of merit.

The Factual Antecedents

The records show that on January 17, 2002, agents of the National Bureau of Investigation (NBI) applied for the issuance of search warrants for the search of a
warehouse located on Camia Street, Marikina City, and of an office located on the 3rd floor of Probest International Trading Building, Katipunan Street,
Concepcion, Marikina City, allegedly owned by Michael Tan a.k.a. Paul D. Tan (respondent). The application alleged that the respondent had in his possession
counterfeit shampoo products which were being sold, retailed, distributed, dealt with or intended to be disposed of, in violation of Section 168, in relation
with Section 170, of Republic Act (R.A.) No. 8293, otherwise known as the Intellectual Property Code of the Philippines.

On the same date, Judge Antonio M. Eugenio, Jr. of the Regional Trial Court of Manila, Branch 1, granted the application and issued Search Warrant Nos. 02-
2606 and 02-2607. Armed with the search warrants, the NBI searched the premises and, in the course of the search, seized the following items:

(A) From [the respondent’s] office:

(a) 192 sachets of Creamsilk Hair Conditioner (White);
(b) 156 sachets of Creamsilk Hair Conditioner (Blue);
(c) 158 sachets of Creamsilk Hair Conditioner (Green);
(d) 204 sachets of Creamsilk Hair Conditioner (Black);
(e) 192 sachets of Vaseline Amino Collagen Shampoo;
(f) 192 sachets of Sunsilk Nutrient Shampoo (Pink);
(g) 144 sachets of Sunsilk Nutrient Shampoo (Blue);
(h) 136 sachets of Sunsilk Nutrient Shampoo (Orange);
(i) 144 sachets of Sunsilk Nutrient Shampoo (Green); and
(j) 1 box of assorted commercial documents.
(B) From [the respondent’s] warehouse[:]
(a) 372 boxes each containing six (6) cases of Sunsilk Nutrient Shampoo; and
(b) 481 boxes each containing six (6) cases Creamsilk Hair Conditioner. 4

The NBI thereafter filed with the Department of Justice (DOJ) a complaint against the respondent for violation of R.A. No. 8293, specifically Section 168 (unfair
competition), in relation with Section 170, docketed as I.S. No. 2002-667.

In his counter-affidavit, the respondent claimed that he is "Paul D. Tan," and not "Michael Tan" as alluded in the complaint; he is engaged in the business of
selling leather goods and raw materials for making leather products, and he conducts his business under the name "Probest International Trading," registered
with the Department of Trade and Industry; he is not engaged in the sale of counterfeit Unilever shampoo products; the sachets of Unilever shampoos seized
from his office in Probest International Trading Building are genuine shampoo products which they use for personal consumption; he does not own and does
not operate the warehouse located on Camia Street, Marikina City, where a substantial number of alleged counterfeit Unilever shampoo products were found;
and he did not violate R.A. No. 8293 because there is no prima facie evidence that he committed the offense charged.

Rulings of the DOJ

On December 18, 2002, State Prosecutor Melvin J. Abad issued a Resolution 5 dismissing the criminal complaint on the ground of insufficiency of evidence. To
quote:

After a thorough evaluation of the evidence, we find no sufficient evidence so as to warrant a finding of probable cause to indict respondent Paul D. Tan (not
Michael Tan) for violation of Section 168 (unfair competition) in relation to Section 170 of R.A. No. 8293.

WHEREFORE, it is respectfully recommended that the instant complaint for Violation of Section 168 (unfair competition) in relation to Section 170 of R.A. No.
8293 be DISMISSED for insufficiency of evidence.6

The State Prosecutor found that the petitioner failed to show the respondent’s actual and direct participation in the offense charged. While the Certificate of
Registration of Probest International Trading shows that a certain "Paul D. Tan" is the registered owner and proprietor of the office, there is no showing that
he is also the registered owner of the warehouse where the alleged counterfeit Unilever shampoo products were found. There is also no evidence to support
the claim that the respondent was engaged in the sale of counterfeit products other than the self-serving claim of the petitioner’s representatives. Lastly, the
State Prosecutor found that the pieces of evidence adduced against the respondent, e.g. alleged counterfeit Unilever shampoo products, by themselves, are not
sufficient to support a finding of probable cause that he is engaged in unfair competition.

The motion for reconsideration that followed was denied in a resolution7 dated June 5, 2003.
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On September 9, 2003, the petitioner filed a petition for review with the DOJ,8 which the Acting Secretary of Justice, Merceditas N. Gutierrez, dismissed in her
March 16, 2004 resolution. In the resolution, the Acting Secretary of Justice affirmed the State Prosecutor’s finding of lack of probable cause.

The petitioner thereafter sought, but failed, to secure a reconsideration.

On October 19, 2004, the petitioner filed with the CA a petition for certiorari under Rule 65 of the Rules of Court, imputing grave abuse of discretion on the
Acting Secretary of Justice, et al., in deciding the case in the respondent’s favor.

The Rulings of the CA

The CA, in a decision dated June 18, 2007, dismissed the petition on the ground that the petitioner failed to establish facts and circumstances that would
constitute acts of unfair competition under R.A. No. 8293. The CA took into account the insufficiency of evidence that would link the respondent to the offense
charged. It also ruled that the Acting Secretary of Justice did not gravely abuse her discretion when she affirmed the State Prosecutor’s resolution dismissing
the petitioner’s complaint for insufficiency of evidence to establish probable cause.

The petitioner sought reconsideration of the aforementioned decision rendered by the CA but its motion was denied in a resolution dated August 16, 2007.

The present Rule 45 petition questions the CA’s June 18, 2007 decision and August 16, 2007 resolution.

The Petition

The petitioner contends that the CA erred in dismissing its petition for certiorari and in affirming the DOJ’s rulings. It argues that while it may be possible that
the respondent is not the owner of the warehouse, the overwhelming pieces of evidence nonetheless prove that he is the owner of the counterfeit shampoo
products found therein. The petitioner also maintains that the voluminous counterfeit shampoo products seized from the respondent are more than sufficient
evidence to indict him for unfair competition.

The Issue

The case presents to us the issue of whether the CA committed a reversible error in upholding the Acting Secretary of Justice’s decision dismissing the
information against the respondent. The resolution of this issue requires a determination of the existence of probable cause in order to indict the respondent
of unfair competition.

The Court’s Ruling

We find merit in the petition.

Determination of Probable Cause

Lies Within the Competence of the
Public Prosecutor

The determination of probable cause for purposes of filing of information in court is essentially an executive function that is lodged, at the first instance, with
the public prosecutor and, ultimately, to the Secretary of Justice. 9 The prosecutor and the Secretary of Justice have wide latitude of discretion in the conduct of
preliminary investigation;10and their findings with respect to the existence or non-existence of probable cause are generally not subject to review by the
Court.

Consistent with this rule, the settled policy of non-interference in the prosecutor’s exercise of discretion requires the courts to leave to the prosecutor and to
the DOJ the determination of what constitutes sufficient evidence to establish probable cause. 11 Courts can neither override their determination nor substitute
their own judgment for that of the latter. They cannot likewise order the prosecution of the accused when the prosecutor has not found a prima facie case.12

Nevertheless, this policy of non-interference is not without exception. The Constitution itself allows (and even directs) court action where executive discretion
has been gravely abused.13 In other words, the court may intervene in the executive determination of probable cause, review the findings and conclusions, and
ultimately resolve the existence or non-existence of probable cause by examining the records of the preliminary investigation when necessary for the orderly
administration of justice.14

Courts Cannot Reverse the Secretary

of Justice’s Findings Except in Clear
Cases of Grave Abuse of Discretion

The term "grave abuse of discretion" means such capricious or whimsical exercise of judgment which is equivalent to lack of jurisdiction. To justify judicial
intervention, the abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty
enjoined by law or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion or
hostility.15 In Elma v. Jacobi,16 we said that:

This error or abuse alone, however, does not render his act amenable to correction and annulment by the extraordinary remedy of certiorari. To justify
judicial intrusion into what is fundamentally the domain of the Executive, the petitioner must clearly show that the prosecutor gravely abused his discretion
amounting to lack or excess of jurisdiction in making his determination and in arriving at the conclusion he reached. This requires the petitioner to establish
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that the prosecutor exercised his power in an arbitrary and despotic manner by reason of passion or personal hostility; and it must be so patent and gross as
to amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplation of law, before judicial relief from a discretionary
prosecutorial action may be obtained. [emphasis supplied]

An examination of the decisions of the State Prosecutor and of the DOJ shows that the complaint’s dismissal was anchored on the insufficiency of evidence to
establish the respondent’s direct, personal or actual participation in the offense charged. As the State Prosecutor found (and affirmed by the DOJ), the
petitioner failed to prove the ownership of the warehouse where counterfeit shampoo products were found. This finding led to the conclusion that there was
insufficient basis for an indictment for unfair competition as the petitioner failed to sufficiently prove that the respondent was the owner or manufacturer of
the counterfeit shampoo products found in the warehouse.

A careful analysis of the lower courts’ rulings and the records, however, reveals that substantial facts and circumstances that could affect the result of the case
have been overlooked. While the ownership of the warehouse on Camia Street, Marikina City, was not proven, sufficient evidence to prove the existence of
probable cause nevertheless exists. These pieces of evidence consist of: (1) the result of the NBI agents’ search of the office and of the warehouse; (2) Elmer
Cadano’s complaint-affidavit; (3) Rene Baltazar’s affidavit; (4) Unilever’s representatives’ claim that all the laborers present at the warehouse confirmed that
it was operated by Probest International Trading; (5) other object evidence found and seized at the respondent’s office and warehouse; (6) the NBI operatives’
Joint Affidavit; (7) the subsequent seizure of counterfeit Unilever products from the respondent’s warehouse in Antipolo City; and (8) other photographs and
documents relative to the counterfeit products.

These pieces of evidence, to our mind, are sufficient to form a reasonable ground to believe that the crime of unfair competition was committed and that the
respondent was its author.

First, a total of 1,238 assorted counterfeit Unilever products were found at, and seized from, the respondent’s office located on the 3rd floor of Probest
International Trading Building, Katipunan Street, Concepcion, Marikina City. The huge volume and the location where these shampoos were found (inside a
box under a pile of other boxes located inside the respondent’s office) belie the respondent’s claim of personal consumption. Human experience and common
sense dictate that shampoo products (intended for personal consumption) will ordinarily and logically be found inside the house, specifically, inside the
bathroom or in a private room, not in the consumer’s office.

Second, the failure to prove that the respondent is the owner of the warehouse located on Camia St., Marikina City, does not automatically free him from
liability. Proof of the warehouse’s ownership is not crucial to the finding of probable cause. In fact, ownership of the establishment where the counterfeit
products were found is not even an element of unfair competition. While the respondent may not be its owner, this does not foreclose the possibility that he
was the manufacturer or distributor of the counterfeit shampoo products. Needless to say, what is material to a finding of probable cause is the commission of
acts constituting unfair competition, the presence of all its elements and the reasonable belief, based on evidence, that the respondent had committed it.

Third, the result of the NBI’s search conducted on January 17, 2002 (yielding to several boxes of counterfeit shampoo sachets) and the NBI’s Joint Affidavits in
support of the application for search warrants serve as corroborating evidence. The striking similarities 17 between the genuine Unilever shampoo sachets and
the counterfeit sachets seized by the NBI support the belief that the respondent had been engaged in dealing, manufacturing, selling and distributing
counterfeit Unilever shampoo products.

Fourth, there were also allegations that the respondent’s laborers and warehousemen who were present during the search had confirmed that the warehouse
was being maintained and operated by Probest International Trading. The NBI investigators who served the search warrant also claimed that several persons,
introducing themselves as the respondent’s relatives and friends, had requested them to seize only a portion of the counterfeit shampoo products. Whether
these claims are admissible in evidence or whether they should be excluded as hearsay are matters that should be determined not in a preliminary
investigation, but in a full-blown trial.

In Lee v. KBC Bank N.V.,18 citing Andres v. Justice Secretary Cuevas,19 we held that:

[A preliminary investigation] is not the occasion for the full and exhaustive display of [the prosecution’s] evidence.1âwphi1The presence or absence of the
elements of the crime is evidentiary in nature and is a matter of defense that may be passed upon after a full-blown trial on the merits.

We also emphasized in that case that:

In fine, the validity and merits of a party’s defense or accusation, as well as the admissibility of testimonies and evidence, are better ventilated during trial
proper than at the preliminary investigation level.20

Finally, the subsequent events that occurred – after the filing of the petitioner’s complaint and the institution of its appeal to the CA – are too significant to be
ignored.

In its motion to reconsider the CA’s decision,21 the petitioner pointed to the reports it received sometime in October 2005 that the respondent had resumed its
operations involving counterfeit Unilever products. Notably, these significant reports, albeit supported by the subsequent seizure of large quantity of
counterfeit Unilever shampoos22in the respondent’s warehouse23 (located at No. 13 First Street Corner Sevilla Avenue, Virginia Summerville Subdivision,
Barangay Mambugan, Antipolo City), were ignored by the CA. We, however, find that this development is significant, although they were not part of the mass
of evidence considered below. Even without them and based solely on the evidentiary materials available below, we conclude that sufficient grounds exist to
indict the respondent for unfair competition.

Determination of Probable Cause

Merely Requires Probability of Guilt

or Reasonable Ground for Belief
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The determination of probable cause needs only to rest on evidence showing that more likely than not, a crime has been committed and there is enough
reason to believe that it was committed by the accused. 24 It need not be based on clear and convincing evidence of guilt, neither on evidence establishing
absolute certainty of guilt.25 What is merely required is "probability of guilt." Its determination, too, does not call for the application of rules or standards of
proof that a judgment of conviction requires after trial on the merits.26 Thus, in concluding that there is probable cause, it suffices that it is believed that the
act or omission complained of constitutes the very offense charged.

It is also important to stress that the determination of probable cause does not depend on the validity or merits of a party’s accusation or defense or on the
admissibility or veracity of testimonies presented. As previously discussed, these matters are better ventilated during the trial proper of the case. 27 As held in
Metropolitan Bank & Trust Company v. Gonzales:28

Probable cause has been defined as the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the
knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. xxx The term does not mean "actual or positive
cause" nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry
into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense
charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the charge.

Guided by this ruling, we find that the CA gravely erred in sustaining the Acting Secretary of Justice’s finding that there was no probable cause to indict the
respondent for unfair competition. The dismissal of the complaint, despite ample evidence to support a finding of probable cause, clearly constitutes grave
error that warrants judicial intervention and correction.

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petition filed by Unilever Philippines, Inc. The appealed decision dated
June 18, 2007 and the resolution dated August 16, 2007 of the Court of Appeals are ANNULLED AND SET ASIDE.

The State Prosecutor is hereby ORDERED to file the appropriate Information against Michael Tan a.k.a. Paul D. Tan.

SO ORDERED.

ARTURO D. BRION
Associate Justice

G.R. No. 180677 February 18, 2013

VICTORIO P. DIAZ, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES AND LEVI STRAUSS [PHILS.], INC., Respondents.

BERSAMIN, J.:

It is the tendency of the allegedly infringing mark to be confused with the registered trademark that is the gravamen of the offense of infringement of a
registered trademark. The acquittal of the accused should follow if the allegedly infringing mark is not likely to cause confusion. Thereby, the evidence of the
State does not satisfy the quantum of proof beyond reasonable doubt.

Accused Victorio P. Diaz (Diaz) appeals the resolutions promulgated on July 17, 2007 1 and November 22, 2007,2whereby the Court of Appeals (CA),
respectively, dismissed his appeal in C.A.-G.R. CR No. 30133 for the belated filing of the appellant's brief, and denied his motion for reconsideration. Thereby,
the decision rendered on February 13, 2006 in Criminal Case No. 00-0318 and Criminal Case No. 00-0319 by the Regional Trial Court, Branch 255, in Las Pifias
City (RTC) convicting him for two counts of infringement of trademark were affirmed. 3

Antecedents

On February 10, 2000, the Department of Justice filed two informations in the RTC of Las Piñas City, charging Diaz with violation of Section 155, in relation to
Section 170, of Republic Act No. 8293, also known as the Intellectual Property Code of the Philippines (Intellectual Property Code), to wit:

Criminal Case No. 00-0318

That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the jurisdiction of this Honorable Court, the abovenamed accused,
with criminal intent to defraud Levi’s Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully, feloniously, knowingly
and intentionally engaged in commerce by reproducing, counterfeiting, copying and colorably imitating Levi’s registered trademarks or dominant features
thereof such as the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH PATTERNED ARCUATE DESIGN, TAB AND
COMPOSITE ARCUATE/TAB/TWO HORSE PATCH, and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and jeans,
including other preparatory steps necessary to carry out the sale of said patches and jeans, which likely caused confusion, mistake, and /or deceived the
general consuming public, without the consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter of its right to the
exclusive use of its trademarks and legitimate trade, to the damage and prejudice of LEVI’S.

CONTRARY TO LAW.4

Criminal Case No. 00-0319

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That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the jurisdiction of this Honorable Court, the abovenamed accused,
with criminal intent to defraud Levi’s Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully, feloniously, knowingly
and intentionally engaged in commerce by reproducing, counterfeiting, copying and colorably imitating Levi’s registered trademarks or dominant features
thereof such as the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH PATTERNED ARCUATE DESIGN, TAB AND
COMPOSITE ARCUATE/TAB/TWO HORSE PATCH, and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and jeans,
including other preparatory steps necessary to carry out the sale of said patches and jeans, which likely caused confusion, mistake, and /or deceived the
general consuming public, without the consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter of its right to the
exclusive use of its trademarks and legitimate trade, to the damage and prejudice of LEVI’S.

CONTRARY TO LAW.5

The cases were consolidated for a joint trial. Diaz entered his pleas of not guilty to each information on June 21, 2000.6

Evidence of the Prosecution

Levi Strauss and Company (Levi’s), a foreign corporation based in the State of Delaware, United States of America, had been engaged in the apparel business. It
is the owner of trademarks and designs of Levi’s jeans like LEVI’S 501, the arcuate design, the two-horse brand, the two-horse patch, the two-horse patch with
pattern arcuate, and the composite tab arcuate. LEVI’S 501 has the following registered trademarks, to wit: (1) the leather patch showing two horses pulling a
pair of pants; (2) the arcuate pattern with the inscription "LEVI STRAUSS & CO;" (3) the arcuate design that refers to "the two parallel stitching curving
downward that are being sewn on both back pockets of a Levi’s Jeans;" and (4) the tab or piece of cloth located on the structural seam of the right back pocket,
upper left side. All these trademarks were registered in the Philippine Patent Office in the 1970’s, 1980’s and early part of 1990’s.7

Levi Strauss Philippines, Inc. (Levi’s Philippines) is a licensee of Levi’s. After receiving information that Diaz was selling counterfeit LEVI’S 501 jeans in his
tailoring shops in Almanza and Talon, Las Piñas City, Levi’s Philippines hired a private investigation group to verify the information. Surveillance and the
purchase of jeans from the tailoring shops of Diaz established that the jeans bought from the tailoring shops of Diaz were counterfeit or imitations of LEVI’S
501. Levi’s Philippines then sought the assistance of the National Bureau of Investigation (NBI) for purposes of applying for a search warrant against Diaz to
be served at his tailoring shops. The search warrants were issued in due course. Armed with the search warrants, NBI agents searched the tailoring shops of
Diaz and seized several fake LEVI’S 501 jeans from them. Levi’s Philippines claimed that it did not authorize the making and selling of the seized jeans; that
each of the jeans were mere imitations of genuine LEVI’S 501 jeans by each of them bearing the registered trademarks, like the arcuate design, the tab, and the
leather patch; and that the seized jeans could be mistaken for original LEVI’S 501 jeans due to the placement of the arcuate, tab, and two-horse leather patch.8

Evidence of the Defense

On his part, Diaz admitted being the owner of the shops searched, but he denied any criminal liability.

Diaz stated that he did not manufacture Levi’s jeans, and that he used the label "LS Jeans Tailoring" in the jeans that he made and sold; that the label "LS Jeans
Tailoring" was registered with the Intellectual Property Office; that his shops received clothes for sewing or repair; that his shops offered made-to-order jeans,
whose styles or designs were done in accordance with instructions of the customers; that since the time his shops began operating in 1992, he had received no
notice or warning regarding his operations; that the jeans he produced were easily recognizable because the label "LS Jeans Tailoring," and the names of the
customers were placed inside the pockets, and each of the jeans had an "LSJT" red tab; that "LS" stood for "Latest Style;" and that the leather patch on his jeans
had two buffaloes, not two horses.9

Ruling of the RTC

On February 13, 2006, the RTC rendered its decision finding Diaz guilty as charged, disposing thus:

WHEREFORE, premises considered, the Court finds accused Victorio P. Diaz, a.k.a. Vic Diaz, GUILTY beyond reasonable doubt of twice violating Sec. 155, in
relation to Sec. 170, of RA No. 8293, as alleged in the Informations in Criminal Case Nos. 00-0318 & 00-0319, respectively, and hereby sentences him to suffer
in each of the cases the penalty of imprisonment of TWO (2) YEARS of prision correcional, as minimum, up to FIVE (5) YEARS of prision correcional, as
maximum, as well as pay a fine of ₱50,000.00 for each of the herein cases, with subsidiary imprisonment in case of insolvency, and to suffer the accessory
penalties provided for by law.

Also, accused Diaz is hereby ordered to pay to the private complainant Levi’s Strauss (Phils.), Inc. the following, thus:
1. ₱50,000.00 in exemplary damages; and
2. ₱222,000.00 as and by way of attorney’s fees.
Costs de officio.
SO ORDERED.10

Ruling of the CA

Diaz appealed, but the CA dismissed the appeal on July 17, 2007 on the ground that Diaz had not filed his appellant’s brief on time despite being granted his
requested several extension periods.

Upon denial of his motion for reconsideration, Diaz is now before the Court to plead for his acquittal.

Issue
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Diaz submits that:

THE COURT OF APPEALS VIOLATED EXISTING LAW AND JURISPRUDENCE WHEN IT APPLIED RIGIDLY THE RULE ON TECHNICALITIES AND OVERRIDE
SUBSTANTIAL JUSTICE BY DISMISSING THE APPEAL OF THE PETITIONER FOR LATE FILING OF APPELLANT’S BRIEF. 11

Ruling

The Court first resolves whether the CA properly dismissed the appeal of Diaz due to the late filing of his appellant’s brief.

Under Section 7, Rule 44 of the Rules of Court, the appellant is required to file the appellant’s brief in the CA "within forty-five (45) days from receipt of the
notice of the clerk that all the evidence, oral and documentary, are attached to the record, seven (7) copies of his legibly typewritten, mimeographed or
printed brief, with proof of service of two (2) copies thereof upon the appellee." Section 1(e) of Rule 50 of the Rules of Court grants to the CA the discretion to
dismiss an appeal either motu proprio or on motion of the appellee should the appellant fail to serve and file the required number of copies of the appellant’s
brief within the time provided by the Rules of Court.12

The usage of the word may in Section 1(e) of Rule 50 indicates that the dismissal of the appeal upon failure to file the appellant’s brief is not mandatory, but
discretionary. Verily, the failure to serve and file the required number of copies of the appellant’s brief within the time provided by the Rules of Court does not
have the immediate effect of causing the outright dismissal of the appeal. This means that the discretion to dismiss the appeal on that basis is lodged in the CA,
by virtue of which the CA may still allow the appeal to proceed despite the late filing of the appellant’s brief, when the circumstances so warrant its liberality.
In deciding to dismiss the appeal, then, the CA is bound to exercise its sound discretion upon taking all the pertinent circumstances into due consideration.

The records reveal that Diaz’s counsel thrice sought an extension of the period to file the appellant’s brief. The first time was on March 12, 2007, the request
being for an extension of 30 days to commence on March 11, 2007. The CA granted his motion under its resolution of March 21, 2007. On April 10, 2007, the
last day of the 30-day extension, the counsel filed another motion, seeking an additional 15 days. The CA allowed the counsel until April 25, 2007 to serve and
file the appellant’s brief. On April 25, 2007, the counsel went a third time to the CA with another request for 15 days. The CA still granted such third motion for
extension, giving the counsel until May 10, 2007. Notwithstanding the liberality of the CA, the counsel did not literally comply, filing the appellant’s brief only
on May 28, 2007, which was the 18th day beyond the third extension period granted.

Under the circumstances, the failure to file the appellant’s brief on time rightly deserved the outright rejection of the appeal. The acts of his counsel bound
Diaz like any other client. It was, of course, only the counsel who was well aware that the Rules of Court fixed the periods to file pleadings and equally
significant papers like the appellant’s brief with the lofty objective of avoiding delays in the administration of justice.

Yet, we have before us an appeal in two criminal cases in which the appellant lost his chance to be heard by the CA on appeal because of the failure of his
counsel to serve and file the appellant’s brief on time despite the grant of several extensions the counsel requested. Diaz was convicted and sentenced to suffer
two indeterminate sentences that would require him to spend time in detention for each conviction lasting two years, as minimum, to five years, as maximum,
and to pay fines totaling ₱100,000.00 (with subsidiary imprisonment in case of his insolvency). His personal liberty is now no less at stake. This reality impels
us to look beyond the technicality and delve into the merits of the case to see for ourselves if the appeal, had it not been dismissed, would have been worth the
time of the CA to pass upon. After all, his appellant’s brief had been meanwhile submitted to the CA. While delving into the merits of the case, we have
uncovered a weakness in the evidence of guilt that cannot be simply ignored and glossed over if we were to be true to our oaths to do justice to everyone.

We feel that despite the CA being probably right in dismissing the excuses of oversight and excusable negligence tendered by Diaz’s counsel to justify the
belated filing of the appellant’s brief as unworthy of serious consideration, Diaz should not be made to suffer the dire consequence. Any accused in his shoes,
with his personal liberty as well as his personal fortune at stake, expectedly but innocently put his fullest trust in his counsel’s abilities and professionalism in
the handling of his appeal. He thereby delivered his fate to the hands of his counsel. Whether or not those hands were efficient or trained enough for the job of
handling the appeal was a learning that he would get only in the end. Likelier than not, he was probably even unaware of the three times that his counsel had
requested the CA for extensions. If he were now to be left to his unwanted fate, he would surely suffer despite his innocence. How costly a learning it would be
for him! That is where the Court comes in. It is most important for us as dispensers of justice not to allow the inadvertence or incompetence of any counsel to
result in the outright deprivation of an appellant’s right to life, liberty or property. 13

We do not mind if this softening of judicial attitudes be mislabeled as excessive leniency. With so much on the line, the people whose futures hang in a balance
should not be left to suffer from the incompetence, mindlessness or lack of professionalism of any member of the Law Profession. They reasonably expect a
just result in every litigation. The courts must give them that just result. That assurance is the people’s birthright. Thus, we have to undo Diaz’s dire fate.

Even as we now set aside the CA’s rejection of the appeal of Diaz, we will not remand the records to the CA for its review. In an appeal of criminal convictions,
the records are laid open for review. To avoid further delays, therefore, we take it upon ourselves to review the records and resolve the issue of guilt,
considering that the records are already before us.

Section 155 of R.A. No. 8293 defines the acts that constitute infringement of trademark, viz:

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

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

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake,
or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes
 7

place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services
using the infringing material.

The elements of the offense of trademark infringement under the Intellectual Property Code are, therefore, the following:

1. The trademark being infringed is registered in the Intellectual Property Office;

2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer;
3. The infringing mark is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark
is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods,
business or services;
4. The use or application of the infringing mark is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services
themselves or as to the source or origin of such goods or services or the identity of such business; and
5. The use or application of the infringing mark is without the consent of the trademark owner or the assignee thereof.14

As can be seen, the likelihood of confusion is the gravamen of the offense of trademark infringement. 15 There are two tests to determine likelihood of
confusion, namely: the dominancy test, and the holistic test. The contrasting concept of these tests was explained in Societes Des Produits Nestle, S.A. v. Dy, Jr.,
thus:

x x x. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion.
Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The
question is whether the use of the marks is likely to cause confusion or deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the
predominant words but also on the other features appearing on the labels. 16

As to what test should be applied in a trademark infringement case, we said in McDonald’s Corporation v. Macjoy Fastfood Corporation17 that:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must
be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is
the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

The case of Emerald Garment Manufacturing Corporation v. Court of Appeals,18 which involved an alleged trademark infringement of jeans products, is worth
referring to. There, H.D. Lee Co., Inc. (H.D. Lee), a corporation based in the United States of America, claimed that Emerald Garment’s trademark of "STYLISTIC
MR. LEE" that it used on its jeans products was confusingly similar to the "LEE" trademark that H.D. Lee used on its own jeans products. Applying the holistic
test, the Court ruled that there was no infringement.

The holistic test is applicable here considering that the herein criminal cases also involved trademark infringement in relation to jeans products. Accordingly,
the jeans trademarks of Levi’s Philippines and Diaz must be considered as a whole in determining the likelihood of confusion between them. The maong pants
or jeans made and sold by Levi’s Philippines, which included LEVI’S 501, were very popular in the Philippines. The consuming public knew that the original
LEVI’S 501 jeans were under a foreign brand and quite expensive. Such jeans could be purchased only in malls or boutiques as ready-to-wear items, and were
not available in tailoring shops like those of Diaz’s as well as not acquired on a "made-to-order" basis. Under the circumstances, the consuming public could
easily discern if the jeans were original or fake LEVI’S 501, or were manufactured by other brands of jeans. Confusion and deception were remote, for, as the
Court has observed in Emerald Garments:

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soy sauce or
soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and
discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, we
noted that:

.... Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a
person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise
as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are
normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday
purchase requiring frequent replacement are bought by the casual consumer without great care....

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis,
Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted.

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary
purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to
buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some
persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is
not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be
indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer
who has a need to supply and is familiar with the article that he seeks to purchase. 19
 8

Diaz used the trademark "LS JEANS TAILORING" for the jeans he produced and sold in his tailoring shops. His trademark was visually and aurally different
from the trademark "LEVI STRAUSS & CO" appearing on the patch of original jeans under the trademark LEVI’S 501. The word "LS" could not be confused as a
derivative from "LEVI STRAUSS" by virtue of the "LS" being connected to the word "TAILORING", thereby openly suggesting that the jeans bearing the
trademark "LS JEANS TAILORING" came or were bought from the tailoring shops of Diaz, not from the malls or boutiques selling original LEVI’S 501 jeans to
the consuming public.

There were other remarkable differences between the two trademarks that the consuming public would easily perceive. Diaz aptly noted such differences, as
follows:

The prosecution also alleged that the accused copied the "two horse design" of the petitioner-private complainant but the evidence will show that there was
no such design in the seized jeans. Instead, what is shown is "buffalo design." Again, a horse and a buffalo are two different animals which an ordinary
customer can easily distinguish. x x x.

The prosecution further alleged that the red tab was copied by the accused. However, evidence will show that the red tab used by the private complainant
indicates the word "LEVI’S" while that of the accused indicates the letters "LSJT" which means LS JEANS TAILORING. Again, even an ordinary customer can
distinguish the word LEVI’S from the letters LSJT.

In terms of classes of customers and channels of trade, the jeans products of the private complainant and the accused cater to different classes of customers
and flow through the different channels of trade. The customers of the private complainant are mall goers belonging to class A and B market group – while
that of the accused are those who belong to class D and E market who can only afford Php 300 for a pair of made-toorder pants.20 x x x.

Moreover, based on the certificate issued by the Intellectual Property Office, "LS JEANS TAILORING" was a registered trademark of Diaz. He had registered his
trademark prior to the filing of the present cases. 21 The Intellectual Property Office would certainly not have allowed the registration had Diaz’s trademark
been confusingly similar with the registered trademark for LEVI’S 501 jeans.

Given the foregoing, it should be plain that there was no likelihood of confusion between the trademarks involved. Thereby, the evidence of guilt did not
satisfy the quantum of proof required for a criminal conviction, which is proof beyond reasonable doubt. According to Section 2, Rule 133 of the Rules of Court,
proof beyond a reasonable doubt does not mean such a degree of proof as, excluding possibility of error, produces absolute certainty. Moral certainty only is
required, or that degree of proof which produces conviction in an unprejudiced mind. Consequently, Diaz should be acquitted of the charges.

WHEREFORE, the Court ACQUITS petitioner VICTORIO P. DIAZ of the crimes of infringement of trademark charged in Criminal Case No. 00-0318 and
Criminal Case No. 00-0319 for failure of the State to establish his guilt by proof beyond reasonable doubt.

No pronouncement on costs of suit.

LUCAS P. BERSAMIN
Associate Justice

G.R. No. 194062 June 17, 2013

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO REYES, FERRER SUAZO and ALVIN U. TV, Petitioners,
vs.
PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioners seeking the reversal of the Decision1 dated July 2,
2010, and Resolution2 dated October 11, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as follows:

Petitioners Petron Corporation ("Petron" for brevity) and Pilipinas Shell Petroleum Corporation ("Shell" for brevity) are two of the largest bulk suppliers and
producers of LPG in the Philippines. Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL cylinders used for its LGP products.
It is the sole entity in the Philippines authorized to allow refillers and distributors to refill, use, sell, and distribute GASUL LPG containers, products and its
trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename, trademarks, symbols or designs of its principal, Shell
International Petroleum Company Limited, including the marks SHELLANE and SHELL device in connection with the production, sale and distribution of
SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow refillers and distributors to refill, use, sell and distribute SHELLANE LGP
containers and products. Private respondents, on the other hand, are the directors and officers of Republic Gas Corporation ("REGASCO" for brevity), an entity
duly licensed to engage in, conduct and carry on, the business of refilling, buying, selling, distributing and marketing at wholesale and retail of Liquefied
Petroleum Gas ("LPG").

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron Gasul Dealers Association, Inc. and Totalgaz Dealers Association, received
reports that certain entities were engaged in the unauthorized refilling, sale and distribution of LPG cylinders bearing the registered tradenames and
trademarks of the petitioners. As a consequence, on February 5, 2004, Genesis Adarlo (hereinafter referred to as Adarlo), on behalf of the aforementioned
 9

dealers associations, filed a letter-complaint in the National Bureau of Investigation ("NBI") regarding the alleged illegal trading of petroleum products and/or
underdelivery or underfilling in the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter referred to as "De Jemil") was assigned to verify and confirm the
allegations contained in the letter-complaint. An investigation was thereafter conducted, particularly within the areas of Caloocan, Malabon, Novaliches and
Valenzuela, which showed that several persons and/or establishments, including REGASCO, were suspected of having violated provisions of Batas Pambansa
Blg. 33 (B.P. 33). The surveillance revealed that REGASCO LPG Refilling Plant in Malabon was engaged in the refilling and sale of LPG cylinders bearing the
registered marks of the petitioners without authority from the latter. Based on its General Information Sheet filed in the Securities and Exchange Commission,
REGASCO’s members of its Board of Directors are: (1) Arnel U. Ty – President, (2) Marie Antoinette Ty – Treasurer, (3) Orlando Reyes – Corporate Secretary,
(4) Ferrer Suazo and (5) Alvin Ty (hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on February 19, 2004 with the former and a confidential asset going undercover.
They brought with them four (4) empty LPG cylinders bearing the trademarks of SHELLANE and GASUL and included the same with the purchase of J&S, a
REGASCO’s regular customer. Inside REGASCO’s refilling plant, they witnessed that REGASCO’s employees carried the empty LPG cylinders to a refilling
station and refilled the LPG empty cylinders. Money was then given as payment for the refilling of the J&S’s empty cylinders which included the four LPG
cylinders brought in by De Jemil and his companion. Cash Invoice No. 191391 dated February 19, 2004 was issued as evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and the other NBI operatives proceeded to the NBI headquarters for the
proper marking of the LPG cylinders. The LPG cylinders refilled by REGASCO were likewise found later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the Regional Trial Court, Branch 24, in the City of Manila against the private
respondents and/or occupants of REGASCO LPG Refilling Plant located at Asucena Street, Longos, Malabon, Metro Manila for alleged violation of Section 2 (c),
in relation to Section 4, of B.P. 33, as amended by PD 1865. In his sworn affidavit attached to the applications for search warrants, Agent De Jemil alleged as
follows:

"4. Respondent’s REGASCO LPG Refilling Plant-Malabon is not one of those entities authorized to refill LPG cylinders bearing the marks of PSPC, Petron and
Total Philippines Corporation. A Certification dated February 6, 2004 confirming such fact, together with its supporting documents, are attached as Annex "E"
hereof.

6. For several days in the month of February 2004, the other NBI operatives and I conducted surveillance and investigation on respondents’ REGASCO LPG
refilling Plant-Malabon. Our surveillance and investigation revealed that respondents’ REGASCO LPG Refilling Plant-Malabon is engaged in the refilling and
sale of LPG cylinders bearing the marks of Shell International, PSPC and Petron.

8. The confidential asset and I, together with the other operatives of the NBI, put together a test-buy operation. On February 19, 2004, I, together with the
confidential asset, went undercover and executed our testbuy operation. Both the confidential assets and I brought with us four (4) empty LPG cylinders
branded as Shellane and Gasul. x x x in order to have a successful test buy, we decided to "ride-on" our purchases with the purchase of Gasul and Shellane LPG
by J & S, one of REGASCO’s regular customers.

9. We proceeded to the location of respondents’ REGASCO LPG Refilling Plant-Malabon and asked from an employee of REGASCO inside the refilling plant for
refill of the empty LPG cylinders that we have brought along, together with the LPG cylinders brought by J & S. The REGASCO employee, with some assistance
from other employees, carried the empty LPG cylinders to a refilling station and we witnessed the actual refilling of our empty LPG cylinders.

10. Since the REGASCO employees were under the impression that we were together with J & S, they made the necessary refilling of our empty LPG cylinders
alongside the LPG cylinders brought by J & S. When we requested for a receipt, the REGASCO employees naturally counted our LPG cylinders together with the
LPG cylinders brought by J & S for refilling. Hence, the amount stated in Cash Invoice No. 191391 dated February 19, 2004, equivalent to Sixteen Thousand
Two Hundred Eighty-Six and 40/100 (Php16,286.40), necessarily included the amount for the refilling of our four (4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from respondents’ REGASCO LPG Refilling Plant-Malabon, we left its premises
bringing with us the said LPG cylinders. Immediately, we proceeded to our headquarters and made the proper markings of the illegally refilled LPG cylinders
purchased from respondents’ REGASCO LPG Refilling Plant-Malabon by indicating therein where and when they were purchased. Since REGASCO is not an
authorized refiller, the four (4) LPG cylinders illegally refilled by respondents’ REGASCO LPG Refilling Plant-Malabon, were without any seals, and when
weighed, were underrefilled. Photographs of the LPG cylinders illegally refilled from respondents’ REGASCO LPG Refilling Plant-Malabon are attached as
Annex "G" hereof. x x x."

After conducting a personal examination under oath of Agent De Jemil and his witness, Joel Cruz, and upon reviewing their sworn affidavits and other attached
documents, Judge Antonio M. Eugenio, Presiding Judge of the RTC, Branch 24, in the City of Manila found probable cause and correspondingly issued Search
Warrants Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C. Kawada and other NBI operatives immediately proceeded to the REGASCO LPG
Refilling Station in Malabon and served the search warrants on the private respondents. After searching the premises of REGASCO, they were able to seize
several empty and filled Shellane and Gasul cylinders as well as other allied paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department of Justice against the private respondents for alleged violations of Sections
155 and 168 of Republic Act (RA) No. 8293, otherwise known as the Intellectual Property Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended the dismissal of the complaint. The prosecutor found that there was no
proof introduced by the petitioners that would show that private respondent REGASCO was engaged in selling petitioner’s products or that it imitated and
reproduced the registered trademarks of the petitioners. He further held that he saw no deception on the part of REGASCO in the conduct of its business of
refilling and marketing LPG. The Resolution issued by Assistant City Prosecutor Velasco reads as follows in its dispositive portion:
 10

"WHEREFORE, foregoing considered, the undersigned finds the evidence against the respondents to be insufficient to form a well-founded belief that they
have probably committed violations of Republic Act No. 9293. The DISMISSAL of this case is hereby respectfully recommended for insufficiency of evidence."

On appeal, the Secretary of the Department of Justice affirmed the prosecutor’s dismissal of the complaint in a Resolution dated September 18, 2008,
reasoning therein that:

"x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent specifically for refilling. Refilling the same empty cylinders is by no means
an offense in itself – it being the legitimate business of Regasco to engage in the refilling and marketing of liquefied petroleum gas. In other words, the empty
cylinders were merely filled by the employees of Regasco because they were brought precisely for that purpose. They did not pass off the goods as those of
complainants’ as no other act was done other than to refill them in the normal course of its business.

"In some instances, the empty cylinders were merely swapped by customers for those which are already filled. In this case, the end-users know fully well that
the contents of their cylinders are not those produced by complainants. And the reason is quite simple – it is an independent refilling station.

"At any rate, it is settled doctrine that a corporation has a personality separate and distinct from its stockholders as in the case of herein respondents. To
sustain the present allegations, the acts complained of must be shown to have been committed by respondents in their individual capacity by clear and
convincing evidence. There being none, the complaint must necessarily fail. As it were, some of the respondents are even gainfully employed in other business
pursuits. x x x."3

Dispensing with the filing of a motion for reconsideration, respondents sought recourse to the CA through a petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents’ certiorari petition. The fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby GRANTED. The assailed Resolution dated September 18, 2008 of the
Department of Justice in I.S. No. 2005-055 is hereby REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied by the CA in a Resolution dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the following issues for our resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied outright.

Whether sufficient evidence was presented to prove that the crimes of Trademark Infringement and Unfair Competition as defined and penalized in Section
155 and Section 168 in relation to Section 170 of Republic Act No. 8293 (The Intellectual Property Code of the Philippines) had been committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the offense charged. 5

Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a condition sine qua non before a certiorari petition may lie, its purpose being to
grant an opportunity for the court a quo to correct any error attributed to it by re-examination of the legal and factual circumstances of the case.6

However, this rule is not absolute as jurisprudence has laid down several recognized exceptions permitting a resort to the special civil action for certiorari
without first filing a motion for reconsideration, viz.:

(a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;
(b) Where the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are the same as those
raised and passed upon in the lower court.
(c) Where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or
of the petitioner or the subject matter of the petition is perishable;
(d) Where, under the circumstances, a motion for reconsideration would be useless;
(e) Where petitioner was deprived of due process and there is extreme urgency for relief;
(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable;
(g) Where the proceedings in the lower court are a nullity for lack of due process;
(h) Where the proceeding was ex parte or in which the petitioner had no opportunity to object; and,
(i) Where the issue raised is one purely of law or public interest is involved. 7

In the present case, the filing of a motion for reconsideration may already be dispensed with considering that the questions raised in this petition are the same
as those that have already been squarely argued and passed upon by the Secretary of Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue: whether probable cause exists to hold petitioners liable for the crimes of
trademark infringement and unfair competition as defined and penalized under Sections 155 and 168, in relation to Section 170 of Republic Act (R.A.) No.
8293.
 11

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement as follows:

Section 155. Remedies; Infringement. – Any person who shall, without the consent of the owner of the registered mark:

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

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake,
or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes
place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services
using the infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically clear that the mere unauthorized use of a container bearing a registered
trademark in connection with the sale, distribution or advertising of goods or services which is likely to cause confusion, mistake or deception among the
buyers or consumers can be considered as trademark infringement. 9

Here, petitioners have actually committed trademark infringement when they refilled, without the respondents’ consent, the LPG containers bearing the
registered marks of the respondents. As noted by respondents, petitioners’ acts will inevitably confuse the consuming public, since they have no way of
knowing that the gas contained in the LPG tanks bearing respondents’ marks is in reality not the latter’s LPG product after the same had been illegally refilled.
The public will then be led to believe that petitioners are authorized refillers and distributors of respondents’ LPG products, considering that they are
accepting empty containers of respondents and refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of R.A. No. 8293 describes the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

168.3 In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair
competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves
or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be
likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who
otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such
goods or any agent of any vendor engaged in selling such goods with a like purpose;

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

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business
of one person as the goods or business of another with the end and probable effect of deceiving the public. 10

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers
into buying his merchandise under the impression that they are buying that of his competitors. Thus, the defendant gives his goods the general appearance of
the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor. 11

In the present case, respondents pertinently observed that by refilling and selling LPG cylinders bearing their registered marks, petitioners are selling goods
by giving them the general appearance of goods of another manufacturer.

What's more, the CA correctly pointed out that there is a showing that the consumers may be misled into believing that the LPGs contained in the cylinders
bearing the marks "GASUL" and "SHELLANE" are those goods or products of the petitioners when, in fact, they are not. Obviously, the mere use of those LPG
cylinders bearing the trademarks "GASUL" and "SHELLANE" will give the LPGs sold by REGASCO the general appearance of the products of the petitioners.

In sum, this Court finds that there is sufficient evidence to warrant the prosecution of petitioners for trademark infringement and unfair competition,
considering that petitioner Republic Gas Corporation, being a corporation, possesses a personality separate and distinct from the person of its officers,
directors and stockholders.12Petitioners, being corporate officers and/or directors, through whose act, default or omission the corporation commits a crime,
may themselves be individually held answerable for the crime. 13 Veritably, the CA appropriately pointed out that petitioners, being in direct control and
supervision in the management and conduct of the affairs of the corporation, must have known or are aware that the corporation is engaged in the act of
refilling LPG cylinders bearing the marks of the respondents without authority or consent from the latter which, under the circumstances, could probably
constitute the crimes of trademark infringement and unfair competition. The existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide behind the cloak of the separate corporate
personality of the corporation to escape criminal liability. A corporate officer cannot protect himself behind a corporation where he is the actual, present and
efficient actor.14
 12

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision dated July 2, 2010 and Resolution dated October 11, 2010 of the Court of
Appeals in CA-G.R. SP No. 106385 are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

G.R. No. 202423 January 28, 2013

CHESTER UYCO, WINSTON UYCHIYONG, and CHERRY C. UYCO-ONG, Petitioners,

vs.
VICENTE LO, Respondent.

BRION, J.:

We resolve the motion for reconsideration1 dated October 22, 2012 filed by petitioners Chester Uyco, Winston Uychiyong and Cherry C. Uyco-Ong to set aside
the Resolution2 dated September 12, 2012 of this Court, which affirmed the decision3 dated March 9, 2012 and the resolution4 dated June 21, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 111964. The CA affirmed the resolution5 dated September 1, 2008 of the Department of Justice (DOJ). Both the CA and
the DOJ found probable cause to charge the petitioners with false designation of origin, in violation of Section 169.1, in relation with Section 170, of Republic
Act No. (RA) 8293, otherwise known as the "Intellectual Property Code of the Philippines."6

The disputed marks in this case are the "HIPOLITO & SEA HORSE & TRIANGULAR DEVICE," "FAMA," and other related marks, service marks and trade names
of Casa Hipolito S.A. Portugal appearing in kerosene burners. Respondent Vicente Lo and Philippine Burners Manufacturing Corporation (PBMC) filed a
complaint against the officers of Wintrade Industrial SalesCorporation (Wintrade), including petitioners Chester Uyco, Winston Uychiyong and Cherry Uyco-
Ong, and of National Hardware, including Mario Sy Chua, for violation of Section 169.1, in relation to Section 170, of RA 8293.

Lo claimed in his complaint that Gasirel-Industria de Comercio e Componentes para Gass, Lda. (Gasirel), the owner of the disputed marks, executed a deed of
assignment transferring these marks in his favor, to be used in all countries except for those in Europe and America. 7 In a test buy, Lo purchased from National
Hardware kerosene burners with the subject marks and the designations "Made in Portugal" and "Original Portugal" in the wrappers. These products were
manufactured by Wintrade. Lo claimed that as the assignee for the trademarks, he had not authorized Wintrade to use these marks, nor had Casa Hipolito S.A.
Portugal. While a prior authority was given to Wintrade’s predecessor-in-interest, Wonder Project & Development Corporation (Wonder), Casa Hipolito S.A.
Portugal had already revoked this authority through a letter of cancellation dated May 31, 1993. 8 The kerosene burners manufactured by Wintrade have
caused confusion, mistake and deception on the part of the buying public. Lo stated that the real and genuine burners are those manufactured by its agent,
PBMC.

In their Answer, the petitioners stated that they are the officers of Wintrade which owns the subject trademarks and their variants. To prove this assertion,
they submitted as evidence the certificates of registration with the Intellectual Property Office. They alleged that Gasirel, not Lo, was the real party-in-interest.
They allegedly derived their authority to use the marks from Casa Hipolito S.A. Portugal through Wonder, their predecessor-in-interest. Moreover, PBMC had
already ceased to be a corporation and, thus, the licensing agreement between PBMC and Lo could not be given effect, particularly because the agreement was
not notarized and did not contain the provisions required by Section 87 of RA 8293. The petitioners pointed out that Lo failed to sufficiently prove that the
burners bought from National Hardware were those that they manufactured. But at the same time, they also argued that the marks "Made in Portugal" and
"Original Portugal" are merely descriptive and refer to the source of the design and the history of manufacture.

In a separate Answer, Chua admitted that he had dealt with Wintrade for several years and had sold its products. He had not been aware that Wintrade had
lost the authority to manufacture, distribute, and deal with products containing the subject marks, and he was never informed of Wintrade’s loss of authority.
Thus, he could have not been part of any conspiracy.

After the preliminary investigation, the Chief State Prosecutor found probable cause to indict the petitioners for violation of Section 169.1, in relation with
Section 170, of RA 8293. This law punishes any person who uses in commerce any false designation of origin which is likely to cause confusion or mistake as
to the origin of the product. The law seeks to protect the public; thus, even if Lo does not have the legal capacity to sue, the State can still prosecute the
petitioners to prevent damage and prejudice to the public.

On appeal, the DOJ issued a resolution affirming the finding of probable case. It gave credence to Lo’s assertion that he is the proper assignee of the subject
marks. More importantly, it took note of the petitioners’ admission that they used the words "Made in Portugal" when in fact, these products were made in the
Philippines. Had they intended to refer to the source of the design or the history of the manufacture, they should have explicitly said so in their packaging. It
then concluded that the petitioners’ defenses would be better ventilated during the trial and that the admissions of the petitioners make up a sufficient basis
for probable cause.

The CA found no grave abuse of discretion on the part of the DOJ and affirmed the DOJ’s ruling.

When the petitioners filed their petition before us, we denied the petition for failure to sufficiently show any reversible error in the assailed judgment to
warrant the exercise of the Court’s discretionary power.

We find no reversible error on the part of the CA and the DOJ to merit reconsideration. The petitioners reiterate their argument that the products bought
during the test buy bearing the trademarks in question were not manufactured by, or in any way connected with, the petitioners and/or Wintrade. They also
allege that the words "Made in Portugal" and "Original Portugal" refer to the origin of the design and not to the origin of the goods.
 13

The petitioners again try to convince the Court that they have not manufactured the products bearing the marks "Made in Portugal" and "Original Portugal"
that were bought during the test buy. However, their own admission and the statement given by Chua bear considerable weight.

The admission in the petitioners’ Joint Affidavit is not in any way hypothetical, as they would have us believe. They narrate incidents that have happened.
They refer to Wintrade’s former association with Casa Hipolito S.A. Portugal; to their decision to produce the burners in the Philippines; to their use of the
disputed marks; and to their justification for their use. It reads as follows:

24. As earlier mentioned, the predecessor-in-interest of Wintrade was the former exclusive licensee of Casa Hipolito SA of Portugal since the 1970’s, and that
Wintrade purchased all the rights on the said trademarks prior to the closure of said company. Indeed, the burners sold by Wintrade used to be imported from
Portugal, but Wintrade later on discovered the possibility of obtaining these burners from other sources or of manufacturing the same in the Philippines.

Wintrade’s decision to procure these burners from sources other than Portugal is certainly its management prerogative. The presence of the words "made in
Portugal" and "original Portugal" on the wrappings of the burners and on the burners themselves which are manufactured by Wintrade is an allusion to the
fact that the origin of the design of said burners can be traced back to Casa Hipolito SA of Portugal, and that the history of the manufacture of said burners are
rooted in Portugal. These words were not intended to deceive or cause mistake and confusion in the minds of the buying public.9

Chua, the owner of National Hardware — the place where the test buy was conducted — admits that Wintrade has been furnishing it with kerosene burners
with the markings "Made in Portugal" for the past 20 years, to wit:

5. I hereby manifests (sic) that I had been dealing with Wintrade Industrial Sales Corporation (WINTRADE for brevity) for around 20 years now by buying
products from it. I am not however aware that WINTRADE was no longer authorized to deal, distribute or sell kerosene burner bearing the mark HIPOLITO
and SEA HORSE Device, with markings "Made in Portugal" on the wrapper as I was never informed of such by WINTRADE nor was ever made aware of any
notices posted in the newspapers informing me of such fact. Had I been informed, I would have surely stopped dealing with WINTRADE.101âwphi1

Thus, the evidence shows that petitioners, who are officers of Wintrade, placed the words "Made in Portugal" and "Original Portugal" with the disputed marks
knowing fully well — because of their previous dealings with the Portuguese company — that these were the marks used in the products of Casa Hipolito S.A.
Portugal. More importantly, the products that Wintrade sold were admittedly produced in the Philippines, with no authority from Casa Hipolito S.A. Portugal.
The law on trademarks and trade names precisely precludes a person from profiting from the business reputation built by another and from deceiving the
public as to the origins of products. These facts support the consistent findings of the State Prosecutor, the DOJ and the CA that probable cause exists to charge
the petitioners with false designation of origin. The fact that the evidence did not come from Lo, but had been given by the petitioners, is of no significance.

The argument that the words "Made in Portugal" and "Original Portugal" refer to the origin of the design and not to the origin of the goods does not negate the
finding of probable cause; at the same time, it is an argument that the petitioners are not barred by this Resolution from raising as a defense during the
hearing of the case.

WHEREFORE, premises considered, we hereby DENY the motion for reconsideration for lack of merit.

ARTURO D. BRION
Associate Justice

G.R. No. 169504 March 3, 2010

COFFEE PARTNERS, INC., Petitioner,

vs.
SAN FRANCISCO COFFEE & ROASTERY, INC., Respondent.

CARPIO, J.:

The Case

This is a petition for review1 of the 15 June 2005 Decision2 and the 1 September 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No. 80396. In its 15
June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision 4 of the Office of the Director General-Intellectual Property Office and
reinstated the 14 August 2002 Decision5 of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals
denied petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration.

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the
Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement6 with Coffee Partners Ltd. (CPL), a business entity organized and
existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as
"SAN FRANCISCO COFFEE."

Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with the SEC in May 1995. It registered the business name
"SAN FRANCISCO COFFEE & ROASTERY, INC." with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base
that included Figaro Company, Tagaytay Highlands, Fat Willy’s, and other coffee companies.
 14

In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI
engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other
commercial establishments in Metro Manila.

In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name "SAN FRANCISCO COFFEE" in Libis, Quezon City.
According to respondent, petitioner’s shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling
coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name "SAN FRANCISCO COFFEE." Respondent also filed a complaint
with the Bureau of Legal Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages.

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for
registration of the mark "SAN FRANCISCO COFFEE & DEVICE" for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be
confused with respondent’s trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the
trade name "SAN FRANCISCO COFFEE" when it formed a joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts
that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from
respondent.

Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee
shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001
with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business when one Arthur Gindang invited him
to invest in a coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop "SAN FRANCISCO COFFEE" has branches in
Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former
managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name "SAN FRANCISCO COFFEE"
from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from.

The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioner’s trademark infringed on respondent’s trade name. It ruled that the right to the exclusive use
of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the
DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected
from infringement of its trade name.

The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade
name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and
distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee
carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary.

The BLA-IPO held that petitioner’s use of the trademark "SAN FRANCISCO COFFEE" will likely cause confusion because of the exact similarity in sound,
spelling, pronunciation, and commercial impression of the words "SAN FRANCISCO" which is the dominant portion of respondent’s trade name and
petitioner’s trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioner's trademark
because greater weight is given to words – the medium consumers use in ordering coffee products.

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark "SAN FRANCISCO COFFEE"
because of the authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner.

The BLA-IPO also dismissed respondent’s claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not
even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondent’s claim of moral damages, but granted its claim of attorney’s fees.

Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages.
The BLA-IPO denied the parties’ partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office
(ODG-IPO).

The Ruling of the Office of the Director General-

Intellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioner’s use of the trademark "SAN FRANCISCO COFFEE" did not infringe
on respondent's trade name. The ODG-IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA
in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a
subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter.

The Ruling of the Court of Appeals

In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODG-IPO in so far as it ruled that there was no infringement. It
reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondent’s claim for actual damages and retained
the award of attorney’s fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s motion for reconsideration and respondent’s motion
for partial reconsideration.

The Issue
 15

The sole issue is whether petitioner’s use of the trademark "SAN FRANCISCO COFFEE" constitutes infringement of respondent’s trade name "SAN FRANCISCO
COFFEE & ROASTERY, INC.," even if the trade name is not registered with the Intellectual Property Office (IPO).

The Court’s Ruling

The petition has no merit.

Petitioner contends that when a trade name is not registered, a suit for infringement is not available. Petitioner alleges respondent has abandoned its trade
name. Petitioner points out that respondent’s registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner
opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses
respondent’s failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely
to occur between its trademark and respondent’s trade name because of a wide divergence in the channels of trade, petitioner serving ready-made coffee
while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun "San Francisco" and the generic word
"coffee" are not capable of exclusive appropriation.

Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293
(RA 8293)7 dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the
trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its
letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges
petitioner’s trademark is confusingly similar to respondent’s trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the
source, affiliation, or sponsorship of petitioner’s coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent continued to make plans and do research on the
retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found
that while respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for
which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater
force when both the quasi-judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also
settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-judicial body or tribunal, particularly if affirmed
by the Court of Appeals, the Court necessarily upholds such findings of fact. 8

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA, 9 this Court laid down what constitutes infringement of an
unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be
registered;
(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;
(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the
infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in
connection with such goods, business, or services;
(4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the
goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and
(5) It is without the consent of the trademark or trade name owner or the assignee thereof. 10 (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark.
All that is required is that the trade name is previously used in trade or commerce in the Philippines. 11

Section 22 of Republic Act No. 166,12 as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit:

Sec. 22. Infringement, what constitutes. – Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable
imitation of any registered mark or trade name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in
connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services,
or identity of such business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy,
or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods,
business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied)

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement. Section 165.2 of RA 8293 categorically states that
trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by
a third party, whether as a trade name or a trademark likely to mislead the public.1avvph!1 Thus:

SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to register trade names, such names shall be protected, even
prior to or without registration, against any unlawful act committed by third parties.

(b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a mark or collective mark, or any such use of a similar trade
name or mark, likely to mislead the public, shall be deemed unlawful. (Emphasis supplied)

It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute standard for likelihood of confusion. Only the particular, and
sometimes peculiar, circumstances of each case can determine its existence. Thus, in infringement cases, precedents must be evaluated in the light of each
particular case.13
 16

In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test. The dominancy test
focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If
the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs.
Exact duplication or imitation is not required. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the
public or to deceive consumers.14

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining
confusing similarity.15 The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both
marks in order that the observer may draw his conclusion whether one is confusingly similar to the other. 16

Applying either the dominancy test or the holistic test, petitioner’s "SAN FRANCISCO COFFEE" trademark is a clear infringement of respondent’s "SAN
FRANCISCO COFFEE & ROASTERY, INC." trade name. The descriptive words "SAN FRANCISCO COFFEE" are precisely the dominant features of respondent’s
trade name. Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in
cases where the business of one corporation is the same or substantially the same as that of another corporation. In this case, the consuming public will likely
be confused as to the source of the coffee being sold at petitioner’s coffee shops. Petitioner’s argument that "San Francisco" is just a proper name referring to
the famous city in California and that "coffee" is simply a generic term, is untenable. Respondent has acquired an exclusive right to the use of the trade name
"SAN FRANCISCO COFFEE & ROASTERY, INC." since the registration of the business name with the DTI in 1995. Thus, respondent’s use of its trade name from
then on must be free from any infringement by similarity. Of course, this does not mean that respondent has exclusive use of the geographic word "San
Francisco" or the generic word "coffee." Geographic or generic words are not, per se, subject to exclusive appropriation. It is only the combination of the
words "SAN FRANCISCO COFFEE," which is respondent’s trade name in its coffee business, that is protected against infringement on matters related to the
coffee business to avoid confusing or deceiving the public.

In Philips Export B.V. v. Court of Appeals,17 this Court held that a corporation has an exclusive right to the use of its name. The right proceeds from the theory
that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to
use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the
corporation which has given a reputation to the name. 18

This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the name and reputation so far built by respondent without
running afoul of the basic demands of fair play. Not only the law but equity considerations hold petitioner liable for infringement of respondent’s trade name.

The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the Director General-Intellectual Property Office and in
reinstating the 14 August 2002 Decision of the Bureau of Legal Affairs-Intellectual Property Office.

WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005 Decision and 1 September 2005 Resolution of the Court of Appeals in CA-G.R.
SP No. 80396.

ANTONIO T. CARPIO
Associate Justice

G.R. No. 172276 August 8, 2010

SOCIETE DES PRODUITS NESTLE, S.A., Petitioner,

vs.
MARTIN T. DY, JR., Respondent.

CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition challenges the 1 September 2005 Decision and 4 April 2006
Resolution of the Court of Appeals in CA-G.R. CV No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The Court of
Appeals reversed the 18 September 1998 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

The Facts

Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the laws of Switzerland. It manufactures food products and
beverages. As evidenced by Certificate of Registration No. R-14621 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and Technology
Transfer, Nestle owns the "NAN" trademark for its line of infant powdered milk products, consisting of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is
classified under Class 6 — "diatetic preparations for infant feeding."

Nestle distributes and sells its NAN milk products all over the Philippines. It has been investing tremendous amounts of resources to train its sales force and to
promote the NAN milk products through advertisements and press releases.

Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the powdered milk into three sizes of plastic packs bearing the
name "NANNY." The packs weigh 80, 180 and 450 grams and are sold for ₱8.90, ₱17.50 and ₱39.90, respectively. NANNY is is also classified under Class 6 —
"full cream milk for adults in [sic] all ages." Dy, Jr. distributes and sells the powdered milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of
Mindanao.
 17

In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using "NANNY" and to undertake that he would stop infringing the "NAN" trademark.
Dy, Jr. did not act on Nestle’s request. On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a complaint against Dy, Jr.
for infringement. Dy, Jr. filed a motion to dismiss alleging that the complaint did not state a cause of action. In its 4 June 1990 order, the trial court dismissed
the complaint. Nestle appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of Appeals set aside the 4 June
1990 order and remanded the case to the trial court for further proceedings.

Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion to transfer the case to the RTC, Judicial Region 7,
Branch 9, Cebu City, which was designated as a special court for intellectual property rights.

The RTC’s Ruling

In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court held:

If determination of infringement shall only be limited on whether or not the mark used would likely cause confusion or mistake in the minds of the buying
public or deceive customers, such in [sic] the most considered view of this forum would be highly unlikely to happen in the instant case. This is because upon
comparison of the plaintiff’s NAN and defendant’s NANNY, the following features would reveal the absence of any deceptive tendency in defendant’s NANNY:
(1) all NAN products are contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the labels of NAN products
are blue and white, while the predominant colors in the plastic packings of NANNY are blue and green; (3) the labels of NAN products have at the bottom
portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name "Nestle", while the plastic packs of
NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large,
formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends; and (5) all NAN products
are milk formulas intended for use of [sic] infants, while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use of the "test of dominancy" because the deceptive
tendency of the unregistered trademark NANNY is not apparent from the essential features of the registered trademark NAN.

However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug. 31, 1982, the Supreme Court took the occasion of discussing what is implied
in the definition of "infringement" when it stated: "Implicit in this definition is the concept that the goods must be so related that there is likelihood either of
confusion of goods or business. x x x But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related
that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For non-competing goods may be those
which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer.
Non-competing goods may also be those which, being entirely unrelated, could not reasonably be assumed to have a common source. In the former case of
related goods, confusion of business could arise out of the use of similar marks; in the latter case of non-related goods, it could not."

Furthermore, in said case the Supreme Court as well discussed on when goods may become so related for purposes of infringement when it stated: "Goods are
related when they belong to the same class or have same descriptive properties; when they possess the same physical attributes or essential characteristics
with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. x x x

Considering that defendant’s NANNY belongs to the same class as that of plaintiff’s NAN because both are food products, the defendant’s unregistered trade
mark NANNY should be held an infringement to plaintiff’s registered trademark NAN because defendant’s use of NANNY would imply that it came from the
manufacturer of NAN. Furthermore, since the word "nanny" means a "child’s nurse," there might result the not so remote probability that defendant’s NANNY
may be confused with infant formula NAN despite the aparent [sic] disparity between the features of the two products.

Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals.

The Court of Appeals’ Ruling

In its 1 September 2005 Decision, the Court of Appeals reversed the trial court’s 18 September 1998 Decision and found Dy, Jr. not liable for infringement. The
Court of Appeals held:

[T]he trial court appeared to have made a finding that there is no colorable imitation of the registered mark "NAN" in Dy’s use of "NANNY" for his own milk
packs. Yet it did not stop there. It continued on applying the "concept of related goods."

The Supreme Court utlilized the "concept of related goods" in the said case of Esso Standard Easter, Inc. versus Court of Appeals, et al. wherein two contending
parties used the same trademark "ESSO" for two different goods, i.e. petroleum products and cigarettes. It rules that there is infringement of trademark
involving two goods bearing the same mark or label, even if the said goods are non-competing, if and only if they are so related that the public may be, or is
actually, deceived that they originate from the one maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow through different
trade channels, and since the possibility of confusion is unlikely in the general appearances of each mark as a whole, the Court held in this case that they
cannot be so related in the context of infringement.

In applying the concept of related goods in the present case, the trial court haphazardly concluded that since plaintiff-appellee’s NAN and defendant-
appellant’s NANNY belong to the same class being food products, the unregistered NANNY should be held an infringement of Nestle’s NAN because "the use of
NANNY would imply that it came from the manufacturer of NAN." Said court went on to elaborate further: "since the word "NANNY" means a "child’s nurse,"
there might result the not so remote probability that defendant’s NANNY may be confused with infant formula NAN despite the aparent (sic) disparity
between the features of the two products as discussed above."

The trial court’s application of the doctrine laid down by the Supreme Court in the Esso Standard case aforementioned and the cases cited therein is quite
misplaced. The goods of the two contending parties in those cases bear similar marks or labels: "Esso" for petroleum products and cigarettes, "Selecta" for
 18

biscuits and milk, "X-7" for soap and perfume, lipstick and nail polish. In the instant case, two dissimilar marks are involved — plaintiff-appellee’s "NAN" and
defendant-appellant’s "NANNY." Obviously, the concept of related goods cannot be utilized in the instant case in the same way that it was used in the Esso
Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement or trademark cases in the Philippines, particularly in
ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, precedent must be studied in the light of the facts of the
particular case. Each case must be decided on its own merits. In the more recent case of Societe Des Produits Nestle S.A. Versus Court of Appeals, the High Court
further stressed that due to the peculiarity of the facts of each infringement case, a judicial forum should not readily apply a certain test or standard just
because of seeming similarities. The entire panoply of elements constituting the relevant factual landscape should be comprehensively examined.

While it is true that both NAN and NANNY are milk products and that the word "NAN" is contained in the word "NANNY," there are more glaring
dissimilarities in the entirety of their trademarks as they appear in their respective labels and also 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. Even the trial court found these glaring dissimilarities as above-quoted. We need not add
more of these factual dissimilarities.

NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations, while NANNY is a full cream milk for adults in [sic] all ages.
NAN milk products are sold in tin cans and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing 80, 180 and 450
grams and worth ₱8.90, ₱17.50 and ₱39.90 per milk pack. The labels of NAN products are of the colors blue and white and have at the bottom portion an
elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name "Nestle." On the other hand, the plastic packs
NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow-capped mountains and using the predominant colors of blue and
green. The word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters
with curved ends. With these material differences apparent in the packaging of both milk products, NANNY full cream milk cannot possibly be an infringement
of NAN infant milk.1avvphi1

Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The cheaper price of NANNY would give, at the very first
instance, a considerable warning to the ordinary purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory examination of the
packaging would confirm the striking differences between the products in question.

In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy therefore cannot be held liable for infringement.

Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied the motion for lack of merit. Hence, the present petition.

Issue

The issue is whether Dy, Jr. is liable for infringement.

The Court’s Ruling

The petition is meritorious. Section 22 of Republic Act (R.A.) No. 166, as amended, states:

Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of
any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with
which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of
such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable
imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or
services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

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

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

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

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

In Prosource International, Inc. v. Horphag Research Management SA, the Court laid down the elements of infringement under R.A. Nos. 166 and 8293:

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the following constitute the elements of trademark infringement:
 19

"(a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;]
(b) [It] is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection
with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or
identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction,
counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used
upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;]
(c) [T]he trademark is used for identical or similar goods[;] and
(d) [S]uch act is done without the consent of the trademark registrant or assignee."

On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

·The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be
registered;
·The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;
·The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the
infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in
connection with such goods, business or services;
·The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the
goods or services themselves or as to the source or origin of such goods or services or the idenity of such business; and
·It is without the consent of the trademark or trade name owner or the assignee thereof.

Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement. There are two types of confusion in trademark
infringement: confusion of goods and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, the Court
distinguished the two types of confusion:

Callman notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other." In which case, "defendant’s goods are then bought as the plaintiff’s, and the poorer quality of the
former reflects adversely on the plaintiff’s reputation." The other is the confusion of business: "Here though the goods of the parties are different, the
defendant’s product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into
the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist."

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main,
prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the
essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or
deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the
predominant words but also on the other features appearing on the labels.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be
studied in the light of the facts of each particular case. In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court held:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must
be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is
the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has
consistently applied the dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that "PCO-GENOLS" is confusingly
similar to "PYCNOGENOL." The Court held:

The trial and appellate courts applied the Dominancy Test in determining whether there was a confusing similarity between the marks PYCNOGENOL and
PCO-GENOL. Applying the test, the trial court found, and the CA affirmed, that:

"Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which on evidence, appears to be merely descriptive and furnish no
indication of the origin of the article and hence, open for trademark registration by the plaintiff through combination with another word or phrase such as
PYCNOGENOL, Exhibits "A" to "A-3." Furthermore, although the letters "Y" between P and C, "N" between O and C and "S" after L are missing in the
[petitioner’s] mark PCO-GENOLS, nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to mention that they are
both described by their manufacturers as a food supplement and thus, identified as such by their public consumers. And although there were dissimilarities in
the trademark due to the type of letters used as well as the size, color and design employed on their individual packages/bottles, still the close relationship of
the competing product’s name is sounds as they were pronounced, clearly indicates that purchasers could be misled into believing that they are the same
and/or originates from a common source and manufacturer."

We find no cogent reason to depart from such conclusion.

This is not the first time the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing
similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., cited in McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court held:

"The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will
reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and ""Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash"
 20

and Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex"
and "Femetex"; "Zuso" and Hoo Hoo." Leon Amdur, in his book "Trade-Mark Law and Practice," pp. 419-421, cities [sic], as coming within the purview of
the idem sonans rule, "Yusea" and "U-C-A," "Steinway Pianos" and "Steinberg Pianos," and "Seven-Up" and "Lemon-Up." In Co Tiong vs. Director of Patents, this
Court unequivocally said that "Celdura" and "Condura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the
name "Lusolin" is an infringement of the trademark "Sapolin," as the sound of the two names is almost the same."

In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in holding that "MACJOY" is confusingly similar to
"MCDONALD’S." The Court held:

While we agree with the CA’s detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test
is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has
consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks.

Applying the dominancy test to the instant case, the Court finds that herein petitioner’s "MCDONALD’S" and respondent’s "MACJOY" marks are are confusingly
similar with each other that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant features. x x x

For sure, it is the prefix "Mc," and abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY"
attracts attention the same way as did "McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALD’S marks which all use the
prefixes Mc and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondent’s trademark application for the
"MACJOY & DEVICE" trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque,
burgers, fries, spaghetti, etc. Likewise, the petitioner’s trademark registration for the MCDONALD’S marks in the Philippines covers goods which are similar if
not identical to those covered by the respondent’s application.

In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test in holding that "BIG MAK" is confusingly similar to "BIG MAC." The
Court held:

This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in
determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product
arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual
impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and
color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and
deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an
effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question
at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the
public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; x x x)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the "colorable
imitation of a registered mark x x x or a dominant feature thereof."

Applying the dominancy test, the Court finds that respondents’ use of the "Big Mak" mark results in likelihood of confusion. First, "Big Mak" sounds exactly the
same as "Big Mac." Second, the first word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in "Mak" are the same as
the first two letters in "Mac." Fourth, the last letter "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter
"k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan."

In Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the dominancy test in holding that "FLAVOR MASTER" is confusingly similar to
"MASTER ROAST" and "MASTER BLEND." The Court held:

While this Court agrees with the Court of Appeals’ detailed enumeration of differences between the respective trademarks of the two coffee products, this
Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of
its peculiar factual milieu.

Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be
determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in
the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not
only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that:
 21

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposer’s mark. The word MASTER is printed across
the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in
the TV and radio commercials and other advertisements made in promoting the product. x x x In due time, because of these advertising schemes the mind of
the buying public had come to learn to associate the word MASTER with the opposer’s goods.

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

Applying the dominancy test in the present case, the Court finds that "NANNY" is confusingly similar to "NAN." "NAN" is the prevalent feature of Nestle’s line
of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly,
"NANNY" contains the prevalent feature "NAN." The first three letters of "NANNY" are exactly the same as the letters of "NAN." When "NAN" and "NANNY" are
pronounced, the aural effect is confusingly similar.

In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks. In Marvex Commercial
Company, Inc. v. Petra Hawpia & Company, the Court held:

It is our considered view that the trademarks "SALONPAS" and "LIONPAS" are confusingly similar in sound.

Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the body with curative powers. "PAS," being merely
descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635,
March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase.

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will
reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and ""Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash"
and Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex"
and "Femetex"; "Zuso" and Hoo Hoo." Leon Amdur, in his book "Trade-Mark Law and Practice," pp. 419-421, cities [sic], as coming within the purview of
the idem sonans rule, "Yusea" and "U-C-A," "Steinway Pianos" and "Steinberg Pianos," and "Seven-Up" and "Lemon-Up." In Co Tiong vs. Director of Patents, this
Court unequivocally said that "Celdura" and "Condura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the
name "Lusolin" is an infringement of the trademark "Sapolin," as the sound of the two names is almost the same.

The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of protection
extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners.
Section 138 of R.A. No. 8293 states:

Certificates of Registration. — A certificate of registration of a mark shall be prima facie evidence of validity of the registration, the registrant’s ownership of
the mark, and of the registrant’s exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the
certificate. (Emphasis supplied)

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, "Non-competing goods may be those which, though they are not in actual competition, are so
related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the
use of similar marks." In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the
goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality;
and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.

NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are classified under Class 6, both are milk products, and
both are in powder form. Also, NANNY and NAN are displayed in the same section of stores — the milk section.

The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is intended for infants while NANNY is intended for
children past their infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the registered owner of the "NAN" mark, Nestle should be
free to use its mark on similar products, in different segments of the market, and at different price levels. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc.,
the Court held that the scope of protection afforded to registered trademark owners extends to market areas that are the normal expansion of business:

Even respondent’s use of the "Big Mak" mark on non-hamburger food products cannot excuse their infringement of petitioners’ registered mark, otherwise
registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price
levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner
enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name
is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential
expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphasis supplied)
 22

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

ANTONIO T. CARPIO
Associate Justice

G.R. No. 143993 August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners,

vs.
L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE
HUERTO, respondents.

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals 2 finding respondent L.C. Big Mak Burger, Inc. not liable for
trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000
denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994 Decision 3 of the Regional Trial Court of Makati, Branch 137, finding
respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of Delaware, United States. McDonald's operates, by itself or
through its franchisees, a global chain of fast-food restaurants. McDonald's4 owns a family of marks5 including the "Big Mac" mark for its "double-decker
hamburger sandwich."6McDonald's registered this trademark with the United States Trademark Registry on 16 October 1979. 7 Based on this Home
Registration, McDonald's applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and
Technology ("PBPTT"), now the Intellectual Property Office ("IPO"). Pending approval of its application, McDonald's introduced its "Big Mac" hamburger
sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the "Big Mac" mark in the Principal Register
based on its Home Registration in the United States.

Like its other marks, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its restaurants, and in its outdoor and indoor signages. From
1982 to 1990, McDonald's spent P10.5 million in advertisement for "Big Mac" hamburger sandwiches alone. 10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's Philippine franchisee. 11

Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila
and nearby provinces.12 Respondent corporation's menu includes hamburger sandwiches and other food items. 13 Respondents Francis B. Dy, Edna A. Dy, Rene
B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto ("private respondents") are the incorporators, stockholders and directors of
respondent corporation.14

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big Mak" mark for its hamburger sandwiches. McDonald's
opposed respondent corporation's application on the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same food
products. McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of the Board of Directors of respondent corporation, of its
exclusive right to the "Big Mac" mark and requested him to desist from using the "Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 ("RTC"), for
trademark infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order ("TRO") against respondents
enjoining them from using the "Big Mak" mark in the operation of their business in the National Capital Region.15 On 16 August 1990, the RTC issued a writ of
preliminary injunction replacing the TRO.16

In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for their fast-food business. Respondents claimed, however, that
McDonald's does not have an exclusive right to the "Big Mac" mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations
("Isaiyas Group") registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio ("Topacio") similarly
registered the same mark on 24 June 1983, prior to McDonald's registration on 18 July 1985. Alternatively, respondents claimed that they are not liable for
trademark infringement or for unfair competition, as the "Big Mak" mark they sought to register does not constitute a colorable imitation of the "Big Mac"
mark. Respondents asserted that they did not fraudulently pass off their hamburger sandwiches as those of petitioners' Big Mac hamburgers. 17 Respondents
sought damages in their counterclaim.

In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of the "Big Mac" mark. Petitioners asserted that while the
Isaiyas Group and Topacio did register the "Big Mac" mark ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and
such registration does not provide any protection. McDonald's disclosed that it had acquired Topacio's rights to his registration in a Deed of Assignment dated
18 May 1981.18

The Trial Court's Ruling

 23

On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation liable for trademark infringement and unfair
competition. However, the RTC dismissed the complaint against private respondents and the counterclaim against petitioners for lack of merit and
insufficiency of evidence. The RTC held:

Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as such, it is entitled [to] protection against infringement.

There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as appearing in the respective signages, wrappers and containers
of the food products of the parties. But infringement goes beyond the physical features of the questioned name and the original name. There are still
other factors to be considered.

Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat
a hamburger sandwich may not be discriminating enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]" hamburger. Once he sees a
stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a "B[ig] M[ak]" hamburger sandwich. Plaintiff McDonald's
fast-food chain has attained wide popularity and acceptance by the consuming public so much so that its air-conditioned food outlets and
restaurants will perhaps not be mistaken by many to be the same as defendant corporation's mobile snack vans located along busy streets or
highways. But the thing is that what is being sold by both contending parties is a food item – a hamburger sandwich which is for immediate
consumption, so that a buyer may easily be confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a food-
product of plaintiff McDonald's, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its
hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming
hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark "B[ig] M[ac]" has been infringed by defendant
corporation when it used the name "B[ig] M[ak]" in its signages, wrappers, and containers in connection with its food business. xxxx

Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or tradename in their signages, or in causing the name "B[ig] M[ak]"
to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark
Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive than the law concerning the infringement of trademark,
which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the
trademark by the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction between an action for
trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party
for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The
choice of "B[ig] M[ak]" as tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the
reputation, popularity and the established goodwill of plaintiff McDonald's. For, as stated in Section 29, a person is guilty of unfair competition 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
likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or
dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and
for damages.19

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big
Mak Burger, Inc., as follows:
1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent;
2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount ofP400,000.00, exemplary damages in the amount
of P100,000.00, and attorney's fees and expenses of litigation in the amount of P100,000.00;
3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well
as all counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence.20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision") reversing the RTC Decision and ordering McDonald's to pay
respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name – the whole
"L.C. B[ig] M[ak] B[urger], I[nc]." which appears on their food packages, signages and advertisements is an infringement of their trademark "B[ig]
M[ac]" which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonald's logo of umbrella
"M" stamped thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically,
plaintiffs-appellees argue that defendants-appellants' use of their corporate name is a colorable imitation of their trademark "Big Mac".

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity
exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would
likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark "B[ig]
 24

M[ac]" is being used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no
confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees'
trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the "McDonalds" logo. On the other
hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the
business name "L.C. Big Mak Burger, Inc." in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and
sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-appellants' corporate or business name appearing in the food
packages and signages are written in silhouette red-orange letters with the "b" and "m" in upper case letters. Above the words "Big Mak" are the
upper case letter "L.C.". Below the words "Big Mak" are the words "Burger, Inc." spelled out in upper case letters. Furthermore, said corporate or
business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky
who wears a red T-shirt with the upper case "m" appearing thereinand a blue lower garment. Finally, the defendants-appellants' food packages are
made of plastic material.

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the
tradename "Big Mak" is being used and presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees'
trademark and defendants-appellants' corporate name. Plaintiffs-appellees' product carrying the trademark "B[ig] M[ac]" is a double decker
sandwich (depicted in the tray mat containing photographs of the various food products xxx sold in a Styrofoam box with the "McDonald's" logo
and trademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants' comparable
food products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned "McDonald's" restaurant usually located in a nearby
commercial center, advertised and identified by its logo - the umbrella "M", and its mascot – "Ronald McDonald". A typical McDonald's restaurant
boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers with cars to make orders
without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying
a "B[ig] M[ac]", it is necessary to specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it first before he can find a
hamburger sandwich which carry the mark "Big Mac". On the other hand,defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable.

Unfair competition is defined as "the employment of deception or any other means contrary to good faith by which a person shall pass off the goods
manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar
good, business or services, or any acts calculated to produce the same result" (Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods
manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants' corporate name
with the plaintiffs-appellees' trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name
"M[ak]" in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima
and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that
the law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving
that the latter acted in bad faith or with ill motive. 21

Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE NAME "L.C. BIG MAK BURGER, INC." IS NOT A COLORABLE
IMITATION OF THE MCDONALD'S TRADEMARK "BIG MAC", SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words "Big Mak" as trademark for their products and not merely as their business or corporate name.

B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar to petitioners' "Big Mac" trademark based on the
dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK "BIG MAK" AND THE WORD
MARK "BIG MAC" AS AN INDICATION OF RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR
COMPETITION.22

Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only questions of fact. On the merits, respondents
contend that the Court of Appeals committed no reversible error in finding them not liable for trademark infringement and unfair competition and in ordering
petitioners to pay damages.

The Issues

The issues are:

 25

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45.

2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the corporate name "L.C. Big Mak Burger, Inc." but also as a trademark
for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition.23

The Court's Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 ("Section
1")24 raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a
question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25

Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on respondent corporation's non-liability for trademark
infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the
RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1. 26 We took a similar course of action
in Asia Brewery, Inc. v. Court of Appeals27 which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court
of Appeals arrived at conflicting findings.

On the Manner Respondents Used

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak Burger, Inc." appears in the packaging for respondents'
hamburger products and not the words "Big Mak" only.

The contention has merit.

The evidence presented during the hearings on petitioners' motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and
plastic bags used by respondents for their hamburger sandwiches bore the words "Big Mak." The other descriptive words "burger" and "100% pure beef"
were set in smaller type, along with the locations of branches.28 Respondents' cash invoices simply refer to their hamburger sandwiches as "Big Mak."29It is
respondents' snack vans that carry the words "L.C. Big Mak Burger, Inc."30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of
Appeals.31 Respondents' plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the
letters "L.C." and the words "Burger, Inc." in respondents' evidence were added above and below the words "Big Mak," respectively. Since petitioners'
complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual
bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this case, 32 defines trademark infringement as follows:

Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, anyreproduction, counterfeit, copy or
colorable imitation of any registered mark or trade-name in connection withthe sale, offering for sale, or advertising of any goods, business or
services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin
of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided.33

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without petitioners' consent, a colorable imitation of
the "Big Mac" mark in advertising and selling respondents' hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the
source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and
(3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion."34 Of these, it is the element of likelihood of
confusion that is the gravamen of trademark infringement. 35

On the Validity of the "Big Mac"Mark

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from registration under Section 4 36 of RA 166 ("Section 4"). However, once registered, not only the
mark's validity but also the registrant's ownership of the mark is prima facie presumed. 37
 26

Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is valid because the word "Big" is generic and descriptive
(proscribed under Section 4[e]), and thus "incapable of exclusive appropriation." 38

The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not dissected word for word, 39 is neither generic nor descriptive.
Generic marks are commonly used as the name or description of a kind ofgoods,40 such as "Lite" for beer41 or "Chocolate Fudge" for chocolate soda
drink.42 Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does
not know it exists,43 such as "Arthriticare" for arthritis medication.44 On the contrary, "Big Mac" falls under theclass of fanciful or arbitrary marks as it bears no
logical relation to the actual characteristics of the product it represents.45 As such, it is highly distinctive and thus valid. Significantly, the trademark "Little
Debbie" for snack cakes was found arbitrary or fanciful.46

The Court also finds that petitioners have duly established McDonald's exclusive ownership of the "Big Mac" mark. Although Topacio and the Isaiyas Group
registered the "Big Mac" mark ahead of McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas Group, on the
other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal Register, and thus not distinctive, has
no real protection.47 Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrant's
exclusive right to use the mark on the goods specified in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and
confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,49 the
Court distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other." xxx The other is the confusion of business: "Here though the goods
of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would
then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not
exist."

Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on "goods of a similar
kind."51 Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this
situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and
expanded its scope to include such use of the mark or its colorable imitation that is likely to result in confusion on "the source or origin of such goods or
services, or identity of such business."52 Thus, while there is confusion of goods when the products are competing, confusion of business exists when the
products are non-competing but related enough to produce confusion of affiliation. 53

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in confusion of goods, particularly with respect
to petitioners' hamburgers labeled "Big Mac." Thus, petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of plaintiffs in the McDonald's Marks, particularly the mark
"B[ig] M[ac]". Defendants' unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into believing that the products and
services offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated with,
plaintiffs.54 (Emphasis supplied)

Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that petitioners' "Big Mac" mark is used, trademark infringement
through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the same business that petitioners are engaged in, results in
confusion of business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald's nor its licensee/franchisee, plaintiff McGeorge, and in clear violation
of plaintiffs' exclusive right to use and/or appropriate the McDonald's marks, defendant Big Mak Burger acting through individual defendants, has
been operating "Big Mak Burger", a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and
other food products, and has caused to be printed on the wrapper of defendant's food products and incorporated in its signages the name "Big Mak
Burger", which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonald's mark "B[ig] M[ac]", xxx. Defendant Big Mak
Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs.xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonald's
and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's marks, and which are likely to
have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants' food products and restaurant
business, plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and
of the dilution of the distinctive quality of the McDonald's marks, in particular, the mark "B[ig] M[ac]".55 (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that petitioners sell using the "Big Mac" mark. Thus,
trademark infringement through confusion of business is also a proper issue in this case.
 27

Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while petitioners' "Big Mac" hamburgers cater to the middle and
upper income groups. Even if this is true, the likelihood of confusion of business remains, since the low-income group might be led to believe that the "Big
Mak" hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the "Big Mac" mark. On the other
hand, respondents would benefit by associating their low-end hamburgers, through the use of the "Big Mak" mark, with petitioners' high-end "Big Mac"
hamburgers, leading to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker hamburgers, while respondents use the "Big Mak" mark
on hamburgers and other products like siopao, noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam
box with the "McDonald's" logo and trademark in red, block letters at a price more expensive than the hamburgers of respondents. In contrast, respondents
sell their Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners' restaurants are air-conditioned buildings
with drive-thru service, compared to respondents' mobile vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use their "Big Mak" mark on hamburgers, the same food product
that petitioners' sell with the use of their registered mark "Big Mac." Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic
or styrofoam, it remains the same hamburger food product. Even respondents' use of the "Big Mak" mark on non-hamburger food products cannot excuse
their infringement of petitioners' registered mark, otherwise registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection
in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business
from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator
of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the
complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of
the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis supplied)

On Whether Respondents' Use of the "Big Mak"

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.57 The dominancy test focuses on the
similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the
entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of respondents' "Big Mak" mark on hamburgers, relied on the
holistic test. Thus, the Court of Appeals ruled that "it is not sufficientthat a similarity exists in both name(s), but that more importantly, the overall presentation,
or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine
article." The holistic test considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not enough to consider
their words and compare the spelling and pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing
marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the
product arising from the adoption of the dominant features of the registered mark, disregarding minor differences.59 Courts will consider more the aural and
visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled:

xxx It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size,
form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another,
and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the
infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead
Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be
likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F.
2d 588; xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry, Inc. v. Standard Brands Inc.,62 Converse Rubber
Corporation v. Universal Rubber Products, Inc.,63 and Asia Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court
of Appeals,65 the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing
similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in
controversy as they are encountered in the realities of the marketplace. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the "colorable
imitation of a registered mark xxx or a dominant feature thereof."
 28

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in likelihood of confusion. First, "Big Mak" sounds exactly the
same as "Big Mac." Second, the first word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in "Mak" are the same as
the first two letters in "Mac." Fourth, the last letter in "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the
letter "k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the
same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the
same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same.

Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the features of "Big Mac." Applied to the same food product of
hamburgers, the two marks will likely result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Thus,
in Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,66 the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947,
Vol. 1, will reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-
Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and
"Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark Law and Practice", pp. 419-
421, cities, as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up"
and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound;
this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark "Sapolin", as the sound of the
two names is almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally but also visually.

Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big Mac" or "Big Mak" hamburger advertisement over the
radio, one would not know whether the "Mac" or "Mak" ends with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it
one of the easily recognizable marks in the market today. This increases the likelihood that consumers will mistakenly associate petitioners' hamburgers and
business with those of respondents'.

Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their hamburger sandwiches indicates their intent to imitate
petitioners' "Big Mac" mark. Contrary to the Court of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first names of
respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his
parents, especially since he was allegedly driven by sentimental reasons. For one, he could have put his father's name ahead of his mother's, as is
usually done in this patriarchal society, and derived letters from said names in that order. Or, he could have taken an equal number of letters (i.e.,
two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents' choice of the word "M[ak]", especially
when taken in conjunction with the word "B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]" trademark, with
their allegedsentiment-focused "explanation" merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of
name.67

Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was fortuitous,68 the inescapable conclusion is that respondents
adopted the "Big Mak" mark to "ride on the coattails" of the more established "Big Mac" mark.69 This saves respondents much of the expense in advertising to
create market recognition of their mark and hamburgers. 70

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of trademark infringement.

On the Lack of Proof of

Actual Confusion

Petitioners' failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v.
Director of Patents,71 Section 22 requires the less stringent standard of "likelihood of confusion" only. While proof of actual confusion is the best evidence of
infringement, its absence is inconsequential.72

On the Issue of Unfair Competition

Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in
which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to
produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:
 29

(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as
to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any feature of
their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other
than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shalldeceive the public and defraud another of
his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the
services of another who has identified such services in the mind of the public; or

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

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the
public and defraud a competitor.74 The confusing similarity may or may not result from similarity in the marks, but may result from other external factors
in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered
for sale to the public.75 Actual fraudulent intent need not be shown.76

Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement
is a form of unfair competition.77 Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or
probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when
the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods
originate from the trademark owner.78

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their hamburgers as "Big Mac" hamburgers.
Petitioners add that respondents' fraudulent intent can be inferred from the similarity of the marks in question. 79

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers
into buying his merchandise under the impression that they are buying that of his competitors. 80 Thus, the defendant gives his goods the general appearance of
the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker hamburger sandwich. The packaging material is a styrofoam
box with the McDonald's logo and trademark in red with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are also in red and
block capital letters. On the other hand,defendants' "B[ig] M[ak]" script print is in orange with only the letter "B" and "M" being capitalized and the
packaging material is plastic wrapper. xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and "Ronald McDonald's", respectively,
compared to the mascot of defendant Corporation which is a chubby boy called "Macky" displayed or printed between the words "Big" and
"Mak."81 (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of petitioners' "Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give respondents' "Big Mak" hamburgers the general
appearance of petitioners' "Big Mac" hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the
"devices or words" used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their
styrofoam box. What attracts the attention of the buying public are the words "Big Mak" which are almost the same, aurally and visually, as the words "Big
Mac." The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of another manufacturer." Respondents' goods are
hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big Mak"
mark would not give their goods the general appearance of petitioners' "Big Mac" hamburgers. In such case, there is only trademark infringement but no
unfair competition. However, since respondents chose to apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big Mac" mark on
hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners' goods.

Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." Respondents introduced during the trial
plastic wrappers and bags with the words "L.C. Big Mak Burger, Inc." to inform the public of the name of the seller of the hamburgers. However, petitioners
introduced during the injunctive hearings plastic wrappers and bags with the "Big Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents'
belated presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak Burger, Inc." as the seller of the hamburgers is an after-thought designed
to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents' evidence since petitioners' complaint was based on
facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." and not those of petitioners who have
the exclusive right to the "Big Mac" mark. This clearly shows respondents' intent to deceive the public. Had respondents' placed a notice on their plastic
wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then they could validly claim that they did not intend to deceive the public. In
such case, there is only trademark infringement but no unfair competition.82 Respondents, however, did not give such notice. We hold that as found by the
RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

 30

Under Section 2383 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition
claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision
of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further
acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporation's gross
sales for three (1988-1989 and 1991) of the six years (1984-1990) respondents have used the "Big Mak" mark.84

The RTC also did not err in awarding exemplary damages by way of correction for the public good 85 in view of the finding of unfair competition where intent to
deceive the public is essential. The award of attorney's fees and expenses of litigation is also in order. 86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the Court of Appeals and its Resolution dated 11 July
2000 and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc.
liable for trademark infringement and unfair competition.

G.R. No. 198889

UFC PHILIPPINES, INC. (now merged with NUTRI-ASIA, INC., with NUTRI-ASIA, INC. as the surviving entity),Petitioner,
vs.
BARRIO FIESTA MANUFACTURING CORPORATION, Respondent.

LEONARDO-DE CASTRO, J.:

For our disposition is a petition for review on certiorari under Rule 45 seeking to annul and set aside the June 23, 2011 Decision1 and the October 4,
2011 Resolution2 of the Court of Appeals in CA-G.R. SP No. 107570, which reversed and set aside the March 26, 2008 Decision3 of the Bureau of Legal Affairs
of the Intellectual Property Office (IPO-BLA) and the January 29, 2009 Decision4 of the Director General of the IPO.

Petitioner Nutri-Asia, Inc. (petitioner) is a corporation duly organized and existing under Philippine laws. 5 It is the emergent entity in a merger with UFC
Philippines, Inc. that was completed on February 11, 2009. 6 Respondent Barrio Fiesta Manufacturing Corporation (respondent) is likewise a corporation
organized and existing under Philippine laws.

On April 4, 2002, respondent filed Application No. 4-2002-002757 for the mark "PAPA BOY & DEVICE" for goods under Class 30, specifically for "lechon
sauce."7 The Intellectual Property Office (IPO) published said application for opposition in the IP Phil. e-Gazette released on September 8, 2006. The mark
appears as follows:

On December 11, 2006, petitioner filed with the IPO-BLA a Verified Notice of Opposition to the above-mentioned application and alleged that:

1. The mark "PAPA" for use on banana catsup and other similar goods was first used [in] 1954 by Neri Papa, and thus, was taken from his surname;
2. After using the mark "PAP A" for about twenty-seven (27) years, Neri Papa subsequently assigned the mark "PAPA" to Heman D. Reyes who, on September
17, 1981, filed an application to register said mark "PAP A" for use on banana catsup, chili sauce, achara, banana chips, and instant ube powder;
3. On August 14, 1983, Heman D. Reyes was issued Certificate of Registration No. 32416;
4. [Certificate of] Registration No. 32416 was subsequently assigned to the following in successive fashion: Acres & Acres Food, Inc., Southeast Asia Food, Inc.,
Heinz-UFC Philippines, Inc., and Opposer UFC Philippines, Inc.;
5. Last October 28, 2005, Heinz-UFC Philippines, Inc. filed Application Serial No. 4-2005-010788 which, in effect, is a re-registration of Registration No. 32416
which expired on August 11, 2003;
6. Heman D. Reyes also filed on March 04, 1982 an application to register in the Supplemental Register the "PAPA BANANA CATSUP Label";
7. On August 11, 1983, Heman D. Reyes was issued Certificate of Registration No. SR-6282 which was subsequently assigned to Acres & Acres Food, Inc.,
Southeast Asia Food, Inc., Heinz-UFC Philippines, Inc.;
8. After its expiration, Opposer filed on November 15, 2006 Trademark Application Serial No. 4-2006-012346 for the re-registration of the "PAP A Label
Design";
9. The mark "PAP A KETSARAP" for use on banana sauce falling under Class 30 was also registered in favor of Acres & Acres Food, Inc. under Registration No.
34681 issued on August 23, 1985 and renewed last August 23, 2005 by Heinz-UFC Philippines, Inc. for ten (10) years;
10. On November 07, 2006, Registration No. 34681 was assigned to Opposer;
11. Opposer has not abandoned the use of the mark "PAP A" and the variations thereof as Opposer has continued their use up to the present;
12. The mark "PAPA BOY & DEVICE" is identical to the mark "PAPA" owned by Opposer and duly registered in its favor, particularly the dominant feature
thereof;
13. [With the] dominant feature of respondent-applicant's mark "PAPA BOY & DEVICE", which is Opposer's "PAPA" and the variations thereof, confusion and
deception is likely to result: The consuming public, particularly the unwary customers, will be deceived, confused, and mistaken into believing that
respondent-applicant's goods come from Opposer or are authorized by Opposer to Opposer's prejudice, which is particularly true considering that Opposer's
sister company, Southeast Asia Food, Inc., and its predecessors-in-interest have been major manufacturers and distributors of lechon sauce and other table
sauces since 1965 under its registered mark "Mang Tomas";
 31

14. Respondent-applicant's mark "PAPA BOY & DEVICE" which nearly resembles Opposer's mark "PAPA" and the variations thereof will impress upon the
gullible or unsuspecting public that it is the same or related to Opposer as to source because its dominant part is the same as Opposer's mark and, thus, will
likely be mistaken to be the mark, or related to, or a derivative or variation of, Opposer's mark;
15. The goods covered by respondent-applicant's application fall under Class 30, the same Class under which Opposer's goods enumerated in its earlier issued
registrations;
16. The test of dominancy is now explicitly incorporated into law in Section 155 .1 of the IP Code which defines infringement as the colorable imitation of a
registered mark or a dominant feature thereof, and is provided for by jurisprudence;
17. As a corporation also engaged in the food business, Respondent-applicant knew and/or ought to know that Opposer and its predecessors-in-interest have
been using the mark "PAPA" and the variations thereof for the last fifty-two (52) years while its sister company is engaged in the business of manufacturing
and distributing "lechon sauce" and other table sauces for the last forty-one (41) years;
18. The approval of the subject application will violate Opposer's right to the exclusive use of its registered mark "PAPA" and the variations thereof per
Section 138 of the IP Code;
19. The approval of the subject application has caused and will continue to cause great and irreparable damage and injury to Opposer;
20. Respondent-applicant filed the subject application fraudulently and in bad faith; and
21. Respondent-applicant is not entitled to register the subject mark in its favor. 8

In its verified opposition before the IPO, petitioner contended that "PAPA BOY & DEVICE" is confusingly similar with its "PAPA" marks inasmuch as the former
incorporates the term "PAP A," which is the dominant feature of petitioner's "PAPA" marks. Petitioner averred that respondent's use of "PAPA BOY & DEVICE"
mark for its lechon sauce product, if allowed, would likely lead the consuming public to believe that said lechon sauce product originates from or is authorized
by petitioner, and that the "PAPA BOY & DEVICE" mark is a variation or derivative of petitioner's "PAPA" marks. Petitioner argued that this was especially true
considering that petitioner's ketchup product and respondent's lechon sauce product are related articles that fall under the same Class 30. 9

Petitioner alleged that the registration of respondent's challenged mark was also likely to damage the petitioner, considering that its former sister company,
Southeast Asia Food, Inc., and the latter's predecessors-in-interest, had been major manufacturers and distributors of lechon and other table sauces since
1965, such as products employing the registered "Mang Tomas" mark.

In its Verified Answer, respondent argued that there is no likelihood of confusion between petitioner's family of "PAPA" trademarks and respondent's "PAPA
BOY & DEVICE" trademark. Respondent raised affirmative defenses and we quote the relevant ones below:

3. Opposer cites several of its following marks in support of its opposition to the application but an examination of said marks [reveals] that these have
already expired and/or that no confusing similarity exists x xx;
4. Assuming that the mark "PAPA KETSARAP" had been timely renewed on August 23, 2005 for "banana sauce" under Class 30, the same is not a hindrance to
the successful registration of the mark "PAPA BOY & DEVICE": Jurisprudence provides that a certificate of registration confers upon the trademark owner the
exclusive right to use its own symbol only to those goods specified in the certificate subject to the conditions and limitations stated therein;
5. As a result, Opposer's right to use the mark "PAPAKETSARAP" is limited to the products covered by its certificate of registration which is Class 30 for
banana sauce;
6. Contrary to Opposer's belief, the dominant features of Respondent-applicant's mark "PAPA BOY & DEVICE" are the words "PAPA BOY" and the
representation of a smiling hog-like character gesturing the thumbs-up sign and wearing a traditional Filipino hat and scarf while the dominant feature of
Opposer's mark "PAPA KETSARAP" are the words "Papa" and "Ketsarap", not the word "Papa"; and the word "Ketsarap " is more prominently printed and
displayed in the foreground than the word "Papa" for which reasons opposer's reference to the Dominancy Test fails;
7. Opposer's allegation that the registration of Respondent-applicant's mark "PAPA BOY & DEVICE" will damage and prejudice the mark "MANG TOMAS" is
irrelevant considering that Opposer's basis for filing this opposition is the alleged confusing similarity between Respondent-applicant's mark and Opposer's
mark "PAPA KETSARAP", not the mark "MANG TOMAS";
8. Respondent-applicant's mark "PAPA BOY & DEVICE" is neither identical nor confusingly similar to Opposer's mark "PAPA KETSARAP": Respondent-
applicant's mark "PAPABOY & DEVICE" is an arbitrary mark which differs in overall sound, spelling, meaning, style, configuration, presentation, and
appearance from Opposer's mark "PAPA KETSARAP";
9. The dissimilarities between the marks are so distinct, thus, confusion is very unlikely: While Opposer's mark is a plain word mark, Respondent-applicant's
mark "PAPA BOY & DEVICE" is much more intricate and distinctive such as Opposer's mark not having the words "Lechon Sauce" printed inside a blue ribbon-
like device which is illustrated below the words "PAPA BOY", Opposer's mark not having a prominent smiling hog-like character gesturing a thumbs-up sign
and wearing a Filipino hat and scarf stands beside the words "PAPA BOY", and Opposer's mark not having the words "Barrio Fiesta" albeit conspicuously
displayed above the mark, all which leave no doubt in the consumer's mind on the product that he is purchasing;
10. Aside from the fact that Respondent-applicant's mark "PAPA BOY & DEVICE" is distinct and different in appearance, spelling, sound, meaning, and style
from Opposer's mark "PAPA KETSARAP", the difference in the goods covered by both marks is obvious: Since the goods covered by Respondent-applicant's
mark is unrelated and non-competing to those covered by Opposer's mark, the doctrine allowing the registrations of marks covering unrelated and non-
competing goods as enunciated by the Supreme Court is therefore applicable in this case;
11. Respondent-applicant's mark cannot be confusingly similar to Opposer's mark considering that the products covered by these marks are different: While
Respondent-applicant's mark "PAPA BOY & DEVICE" covers lechon sauce under Class 30, Opposer's mark "PAPA KETSARAP" covers banana sauce;
12. If a consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa and as a result, the margin of error in the acquisition of one
from the other is simply remote;
13. Respondent-applicant is the exclusive owner of the mark "PAPA BOY & DEVICE" for lechon sauce under Class 30: The words "PAPA BOY" is a combination
of the nickname of Bonifacio Ongpauco who is one of Respondent-applicant's incorporators and founders" BOY"- and the word "PAPA" as Bonifacio
Ongpauco's mother, Sixta P. Evangelista, had been fondly known as "Mama Chit", making Respondent-applicant the prior adopter, user, and applicant of the
mark "PAPA BOY & DEVICE" in the Philippines;
14. To protect its ownership over the mark "PAPA BOY & DEVICE" considering that it is the first to adopt and use said mark, Respondent-applicant applied for
its registration under Application Serial No. 4-2002-002757 for Class 30, and said application was found registrable by the Examiner as. a consequence of
which the same was recommended for allowance after undergoing a thorough process of examination, which recommendation was then approved by the
Director of the Bureau of Trademarks (BOT);
15. Respondent-applicant's mark "PAPA BOY & DEVICE" has been commercially used in the Philippines;
16. Respondent-applicant's mark "PAPA BOY & DEVICE" has been promoted and advertised for a considerable duration of time and over wide geographical
areas: Respondent-applicant has invested tremendous amount of resources in the promotion of its mark "PAPA BOY & DEVICE" through various media
including print publications and promotional materials;
17. The widespread local commercial use of the subject mark by Respondent-applicant to distinguish and identify its various high-quality consumer products
has earned Respondent-applicant a well-deserved business reputation and goodwill;
 32

18. Respondent-applicant's mark is distinctive and capable of identifying its goods and distinguishing them from those offered for sale by others in the market
including Opposer's goods for which reason no confusion will result because Respondent-applicant's mark is for lechon sauce while Opposer's mark is for
banana sauce; and
19. The presence of a common prefix "PAPA" in the marks of both parties does not render said marks identical or confusingly similar: Opposer cannot
exclusively appropriate said prefix considering that other marks such as "Papa Heinz Pizza", "Papa Heinz Sausage", "Papa Beaver", "Papa Pop", "Pizza Papa
John's & Design", "Papadoods", and "Papa in Wine and Device" are valid and active. 10

Petitioner's mark and its variations appear as follows:

1. "PAPA" under Registration No. 32416 for Class 29 goods;11

2. The mark "PAPA" as it appeared upon re-registration of Certificate No. 32416, under Application No. 4-2005-010788 for Classes 29 and 30 goods;12

3. "PAPA LABEL DESIGN" under Registration No. 4-2006-012364·13 and

4. "PAPA KETSARAP" under Certificate of Registration No. 34681, for banana sauce (Class 30). 14

PROCEEDINGS BEFORE THE INTELLECTUAL PROPERTY OFFICE

The case was referred to mediation but the parties failed to arrive at an amicable settlement. The case was thus set for preliminary conference. Subsequently,
the IPO-BLA directed the parties to file their respective position papers and draft decisions.

The IPO-BLA rendered a Decision on March 26, 2008 sustaining petitioner's Opposition and rejecting respondent's application for "PAPA BOY & DEVICE."
The fallo of said decision reads as follows:

WHEREFORE, the VERIFIED NOTICE OF OPPOSITION filed by UFC Philippines, Inc. is, as it is hereby, SUSTAINED. Consequently, Application Serial No. 4-2002-
002757 for the mark "PAPA BOY & DEVICE" for lechon sauce under Class 30 filed on April 04, 2002 by Barrio Fiesta Manufacturing Corporation, is, as it is
hereby, REJECTED.

Let the file wrapper of PAPA BOY & Device subject matter of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in accordance
with this Decision.15

Respondent filed an appeal before the IPO Director General, who found it unmeritorious, and disposed of the case in the following manner:

WHEREFORE, the instant appeal is hereby DISMISSED. Let a copy of this Decision as well as the trademark application and records be furnished and returned
to the Director of the Bureau of Legal Affairs for appropriate action. Further, let also the Director of the Bureau of Trademarks and the library of the
Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes."16

DECISION OF THE COURT OF APPEALS

 33

Respondent then filed a petition with the Court of Appeals, questioning the above decision of the IPO Director General that affirmed the decision of the IPO
Bureau of Legal Affairs Director, which disallowed respondent's application for trademark registration. Respondent's arguments before the Court of Appeals
are quoted below:

A.
REGISTRATION NOS. 32416 AND 42005010788 ISSUED FOR THE "PAPA" MARK AND REGISTRATION NOS. SR-6282 AND 42006012364 ISSUED FOR THE
TRADEMARK "PAPA BANANA CATSUP LABEL/PAPA LABEL DESIGN" SHOULD NOT BE USED AS BASIS IN DETERMINING THE EXISTENCE OF CONFUSING
SIMILARITY.
B.
THERE IS NO CONFUSING SIMILARITY BETWEEN PETITIONER-APPLICANT'S "PAPA BOY & DEVICE" AND RESPONDENT'S "PAPA KETSARAP" MARK.
C.
PETITIONER-APPLICANT IS ENTITLED TO THE REGISTRATION OF THE MARK "PAPA BOY & DEVICE."
D.
THE OPPOSITION STATES NO CAUSE OF ACTION, AND HENCE, SHOULD BE DENIED OUTRIGHT. 17

As regards the first ground, the Court of Appeals held:

Records show that respondent UFC has Certificates of Registration for the trademarks PAPA, PAPA BANANA CATSUP label and PAPA KETSARAP. A closer look
at the respective Certificate[ s] of Registration of the aforementioned marks, however, reveals that at the time the trademark application of petitioner was
published in the IPO e-Gazette on September 8, 2006, the duration of the trademark registration of respondent over the marks PAPA and PAPA BANANA
CATSUP have already expired. On the other hand, the mark PAPA KETSARAP was timely renewed by respondent as shown by the Certificate of
Renewal of Registration issued on September 1, 2006 by the Director of the Bureau of Trademarks.

Under R.A. No. 8293, as amended by R.A. No. 9150, the duration of a trademark registration is 10 years, renewable for periods of 10 years each renewal. The
request for renewal must be made within 6 months before or after the expiration of the registration. Respondent's PAPA mark was not renewed within the
period provided for under RA No. 8293. Its registered term ended on August 11, 2003 but was reapplied for registration only on April 4, 2005. Meanwhile, the
mark PAPA BANANA CATSUP was registered by respondent only in the Supplemental Register, hence, was not provided any protection. x x x. It is noted that
the PAPA BANANA CATSUP label was applied for registration on November 15, 2006, over three years after the expiration of its registration in the
Supplemental Register of the Philippine Patent Office on August 11, 2003. Thus, while petitioner has a point that the marks PAPA and PAPA BANANA
CATSUP have already expired and the latter having been afforded no protection at all and should not be juxtaposed with petitioner's trademark,
respondent can still use the marks PAPA KETSARAP and PAPA BANANA CATSUP, it appearing that the Intellectual Property Office issued a
Certificate of Registration No. 4-2006-012364 for the latter on April 30, 2007, to bar the registration of petitioner's "PAPA BOY & DEVICE"
mark.18 (Emphases supplied, citations omitted.)

Anent the second ground, the Court of Appeals ruled in the following manner:

After taking into account the aforementioned doctrines and the factual circumstances of the case at bar, this Court, after considering the
trademarks involved as a whole, is of the view that petitioner's trademark "PAP A BOY & DEVICE" is not confusingly similar to respondent's "PAPA
KETSARAP" and "PAPA BANANA CATSUP" trademark. Petitioner's trademark is "PAPA BOY" as a whole as opposed to respondent's "PAPA". Although on
its label the word "PAPA" is prominent, the trademark should be taken as a whole and not piecemeal. The difference between the two marks are conspicuous
and noticeable. While respondent's products are both labeled as banana sauces, that of petitioner Barrio Fiesta is labeled as lechon sauce.

Moreover, it appears on the label of petitioner's product that the said lechon sauce is manufactured by Barrio Fiesta thus, clearly informing the public [of] the
identity of _the manufacturer of the lechon sauce. As claimed by respondent, its products have been in commercial use for decades. It is safe to assume then
that the consumers are already aware that "PAPA KETSARAP" and "PAPA BANANA CATSUP" are products of UFC and not of petitioner or the other way
around. In addition, as correctly pointed out by petitioner, if a consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa
because aside from the fact that the labels of both parties' products contain the kind of sauce they are marketing, the color of the products is visibly different.
An ordinary consumer is familiar with the fact that the color of a banana sauce is red while a lechon sauce is dark brown. There can be no deception as both
products are marketed in bottles making the distinction visible to the eye of the consumer and the likelihood of acquiring a wrong sauce, remote. Even if the
products are placed side by side, the dissimilarities between the two marks are conspicuous, noticeable and substantial enough to matter especially in the
light of the following variables that must be factored in.

Lastly, respondent avers that the word "PAPA" was coined after the surname of the person who first created and made use of the mark. Admittedly, while
"PAPA" is a surname, it is more widely known as a term of endearment for one's father. Respondent cannot, therefore, claim exclusive ownership over and
singular use of [the] term. Petitioner was able to explain that it adopted the word "PAPA" in parallel to the nickname of the founder of Barrio fiesta which is
"MAMA CHIT". "PAPA BOY" was derived from the nickname of one of the incorporators of herein petitioner, a certain Bonifacio Ongpauco, son of Mama
Chit.19 (Emphasis ours, citation omitted.)

THEORY OF PETITIONER

Thus, petitioner came to this Court, seeking the reversal of the questioned decision and resolution of the Court of Appeals, and the reinstatement of the
decision of the IPO Director General affirming the decision of the IPO-BLA. Petitioner raises the following grounds:
I.
The court a quo erred in applying the "holistic test" to determine whether there is confusing similarity between the contending marks, and in reversing the
IPO-BLA and the Director General's application of the "dominancy test."
II.
The court a quo erred in holding that there is no likelihood of confusion between the contending marks given that the "PAPA BOY & DEVICE" mark is used on
lechon sauce, as opposed to ketchup products.
III.
The court a quo erred in holding that Petitioner cannot claim exclusive ownership and use of the "PAP A" mark for its sauce products because "PAPA" is
supposedly a common term of endearment for one's father. 20
 34

Under the first ground, petitioner submitted the following arguments:

1. The findings of administrative agencies, if supported by substantial evidence, are binding upon the courts. 21

Petitioner alleges that the Court of Appeals should have respected the ruling of the IPO Director General, which was consistent with the ruling of the IPO-BLA
and supported by substantial evidence, instead of substituting its findings of fact for those of the Director General and the IPO-BLA.

2. The dominancy test should have been applied to determine if there is confusing similarity between the competing marks. 22

Petitioner points out that the Director General and the IPO-BLA found that the dominant feature of the competing marks is the word "PAP A" and the minor
additions to respondent's "PAPA BOY & DEVICE" mark do not negate likelihood of confusion caused by the latter's use of the dominant word "PAPA."
Petitioner claims that even compared solely to petitioner's "PAPA KETSARAP" mark (Registration No. 34681), which is conceded to have been timely renewed
and to have never expired, respondent's "PAPA BOY & DEVICE" would still create the likelihood of confusion. 23

According to petitioner, the Court of Appeals based its decision on Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd.,24 a case decided almost five decades ago, long
before Republic Act No. 8293 or the 1998 Intellectual Property Code was enforced. Thus, the Court of Appeals erroneously applied the holistic test since given
the nature of the products bearing the competing marks, the dominancy test should have been applied.

Petitioner claims that "[k]etchup and lechon sauce are common and inexpensive household products that are sold in groceries and regularly encountered by
the ordinary or common purchaser who is not expected to examine, scrutinize, and compare the details of the competing marks." 25

Petitioner distinguishes this case from Mead Johnson and claims that the ordinary purchaser of ketchup or lechon sauce is not likely to closely scrutinize each
mark as a whole, for the latter is "undiscemingly rash" and usually in a hurry, and cannot be expected to take note of the smiling hog-like character or the blue
ribbon-like device with the words "Lechon Sauce." Petitioner argues that under the Intellectual Property Code, it is not necessary for one to colorably imitate
the competing trademark as a whole. It is sufficient that one imitates a "dominant feature" of the mark to constitute trademark infringement.

Petitioner asserts that as the IPO-BLA and the Director General observed that the ordinary purchaser is most likely to notice the words "PAPA BOY," which, in
turn, may lead him to believe that there is a connection between respondent's lechon sauce and petitioner's ketchup products.

Under the second ground, petitioner argues that the Court of Appeals seemed to be unmindful that two kinds of confusion may arise from the use of similar or
colorable imitation marks, i.e., confusion of goods (product confusion) and confusion of business (source or origin confusion). Petitioner claims that it is
reasonable to assume that it may expand its business to producing lechon sauce, inasmuch as it already produces food sauce products and its Articles of
Incorporation authorizes it to do so.

Petitioner alleges that the IPO-BLA recognized that confusion of business may arise from respondent's use of its "PAPA BOY & DEVICE" mark for lechon sauce
products, and that the Director-General agreed with the IPO-BLA's findings on this issue.

Petitioner asserts that ketchup and lechon sauce are undeniably related goods; that they belong to the same class, i.e., Class 30 of the Nice Classifications; that
they serve practically the same purpose, i.e., to spice up dishes; and that they are sold in similar bottles in the same shelves in grocery stores. Petitioner argues
that the Court of Appeals had absolutely no basis for stating that a person who is out to buy ketchup is not likely to buy lechon sauce by mistake, as this
analysis allegedly only applies to "product confusion" and does not consider confusion of business. Petitioner alleges that "[t]here equally is actionable
confusion when a buyer purchases Respondent's 'PAPA BOY' lechon sauce believing that the said product is related to or associated with the famous 'PAPA
KETSUP' makers." Petitioner further alleges that "it is reasonable and likely for a consumer to believe that Respondent's 'PAPA BOY' lechon sauce originated
from or is otherwise connected with Petitioner's line of sauces" and that this is "the precise evil that recognition of confusion of business seeks to prevent."26

Petitioner avers that "PAPA" is a well-known mark and that it has been in commercial use as early as 1954 on banana ketchup and similar goods. The "PAPA"
mark is also registered as a trademark and in commercial use in other parts of the world such as the United States of America and the Middle East. Petitioner
claims that "[b ]eing a trademark that is registered and well-known both locally and internationally, Petitioner's 'PAPA' marks cannot be appropriated by
another person or entity not only with respect to goods similar to those with respect to which it is registered, but also with respect to goods which are not
similar to those for which the 'PAPA' marks are registered."27

Under the third ground, petitioner claims that the fact that the word "PAPA" is a known term of endearment for fathers does not preclude it from being used
as a mark to identify goods. Petitioner claims that their mark falls under a type of mark known as "arbitrary or fanciful marks," which are "marks that bear no
logical relation to the actual characteristics of the products they represent," are "highly distinctive and valid," and "are entitled to the greatest protection."28

Petitioner claims that the mark "PAPA" falls under this class of arbitrary marks, even if "PAPA" is also a common term of endearment for one's father.
Petitioner states that there is no logical connection between one's father and food sauces, such as ketchup; thus, with respect to ketchup, food sauces, and
their related products, and for the purpose of identifying its products, petitioner claims exclusive ownership of the term "PAPA" as an arbitrary mark.

Petitioner alleges that if respondent "has a good faith and proud desire to unmistakably and distinctly identify its lechon sauce product out in the market, it
should have coined a mark that departs from and is distinguished from those of its competitors." Petitioner claims that respondent, with full knowledge of the
fame and the decades-long commercial use of petitioner's "PAPA" marks, opted for "PAPA BOY & DEVICE," which obviously is just a "colorable imitation." 29

THEORY OF RESPONDENT

In its Comment,30 respondent claims that petitioner's marks have either expired and/or "that no confusing similarity exists between them and respondent's
"PAPA BOY & DEVICE' mark." Respondent alleges that under Section 15 of Republic Act No. 166, a renewal application should be filed within six months
 35

before the expiration of the period or within three months after such expiration. Respondent avers that the expiration of the 20-year term for the "PAPA"
mark under Registration No. 32416 issued on August 11, 1983 was August 11, 2003. The sixth month before August 11, 2003 was February 11, 2003 and the
third month after August 11, 2003 was November 11, 2003. Respondent claims that the application that petitioner filed on October 28, 2005 was almost two
years late. Thus, it was not a renewal application, but could only be considered a new application under the new Trademark Law, with the filing date reckoned
on October 28, 2005. The registrability of the mark under the new application was examined again, and any certificate issued for the registration of "PAPA"
could not have been a renewal certificate.

As for petitioner's other mark "PAPA BANANA CATSUP LABEL," respondent claims that its 20-year term also expired on August 11, 2003 and that petitioner
only filed its application for the new "PAPA LABEL DESIGN" on November 15, 2006. Having been filed three years beyond the renewal application deadline,
petitioner was not able to renew its application on time, and cannot claim a "continuous existence of its rights over the 'PAPA BANANA CATSUP LABEL."'
Respondent claims that the two marks are different from each other and that the registration of one is independent of the other. Respondent concludes that
the certificate of registration issued for "PAPA LABEL DESIGN" is "not and will never be a renewal certificate." 31

Respondent also avers as follows:

1.3. With regard to the two new registrations of petitioner namely: "PAPA" (Reg. No. 4-2005-010788) and "PAPA LABEL DESIGN" (Reg. No. 4-2006-012364),
these were filed on October 28, 2005 and November 15, 2006, respectively, under the Intellectual Property Code (RA 8293), which follows the "first to file"
rule, and were obviously filed later than respondent's "PAPA BOY & DEVICE" mark filed on April 4, 2002. These new marks filed much later than the opposed
"PAPA BOY & DEVICE" mark cannot, therefore, be used as basis for the opposition and should in fact, be denied outrightly.

xxxx

A search of the Online Trademark Database of Intellectual Property Office (IPO) will show that only Registration No. 34681 issued for "PAPA KETSARAP" was
properly renewed on August 23, 2005. xx x Clearly, the registrations of "PAPA" and "PAPA BANANA CATSUP LABEL" marks under registration nos. 32416 and
SR-6282 respectively, have already expired when Petitioner filed its opposition proceeding against Respondent's trademark on December 11, 2006. Having
expired, and therefore, no longer legally existing, the "PAPA" and "PAPA BANANA CATSUP LABEL" marks CANNOT BAR the registration of respondent's mark.
To allow petitioner's expired marks to prevent respondent's distinct "PAPA BOY & DEVICE" mark from being registered would be the ultimate absurdity.32

Respondent posits that the Court of Appeals did not err in reversing the decisions of the administrative agencies, alleging that "[while] it is true that the
general rule is that the factual findings of administrative bodies deserve utmost respect when supported by evidence, the same is subject to exceptions,"33 and
that the Court of Appeals had justifiable reasons to disregard the factual finding of the IPO. Here, the Court of Appeals wisely identified certain material facts
that were overlooked by the IPO-BLA and the IPO Director General which it opined, when correctly appreciated, would alter the result of the case.

Respondent alleges that the IPO-BLA erroneously considered petitioner's marks "PAPA" and "PAPA BANANA CATSUP LABEL" when it applied the dominancy
test in determining whether petitioner's marks are confusingly similar to those of respondent's mark "PAPA BOY & DEVICE."

Respondent avers that the IPO-BLA absurdly took emphasis on the mark "PAPA" to arrive at its decision and did not take into consideration that petitioner's
mark was already expired when respondent applied for the registration of its "PAPA BOY & DEVICE" mark. Respondent compares its "PAPA BOY & DEVICE"
with the only mark that respondent allegedly has, "PAPA KETSARAP," and found no confusing similarity between the two.

We quote below respondent's discussion of its application of the dominancy test to the marks in question:

Applying the Dominancy test, as correctly emphasized by the Court of Appeals, the dominant feature in respondent's mark is "PAPA BOY" and not "PAPA". It
can be gleaned from respondent's mark that the word "PAPA" was written in the same font, style and color as the word "BOY". There is also the presence of a
"smiling hog-like character" which is positioned very prominently, both in size and location in said mark, at glance (sic) even more dominant than the word
"PAPA BOY".

On the other hand, the dominant feature in petitioner's mark is "KETSARAP", not "PAPA". Even an ordinary examiner could observe that the word
"KETSARAP" in petitioner's mark is more prominently printed than the word "PAPA".

In a dominancy test, the prominent feature of the competing trademarks must be similar to cause confusion or deception. x x x.34

Verily, respondent's dominant feature "PAPA BOY" and the smiling hog-like character and petitioner's dominant feature "KETSARAP", being the word written
in a larger font, are neither confusing nor deceiving to the public. In fact, the differences between their dominant marks are very noticeable and conspicuous
to every purchaser.

Furthermore, the Supreme Court in Societe des Produits Nestle, SA. v. Dy [ 641 Phil. 345], applied the dominancy test by taking into account the aural effects of
the words and letters contained in the marks in determining the issue of confusing similarity. Obviously, petitioners' "PAPA KETSARAP" mark does not in any
way sounds (sic) like respondent's "PAPA BOY" mark. The common prefix "PAPA" does not render the marks aurally the same. As discussed above, the
dominant feature in petitioner's mark is "KETSARAP" and the dominant feature in respondent's mark is "PAPA BOY". Thus, the words "KETSARAP" and "PAP
A BOY" in petitioner's and respondent's respective marks are obviously different in sound, making "PAPA BOY & DEVICE" even more distinct from petitioner's
"PAPA KETSARAP" mark.35

Using the holistic test, respondent further discusses the differences in the marks in this wise:

Even the use of the holistic test x x x takes into consideration the entirety of the marks in question [to] be considered in resolving confusing similarity. The
differences are again very obvious. Respondent's mark has (1) the word "lechon sauce" printed inside a blue ribbon-like device which is illustrated below the
word "PAPA BOY"; (2) a prominent smiling hog-like character gesturing a thumbs-up sign and wearing a Filipino hat and scarf stands beside the word "PAPA
 36

BOY"; and the word "BARRIO FIESTA" conspicuously displayed above the said trademark which leaves no doubt in the consumer's mind on the product that
he or she is purchasing. On the other hand, petitioner's mark is the word "PAPA" enclosed by a cloud on top of the word "KETSARAP' enclosed by a
geometrical figure.

In the instant case, the respective marks are obviously different in color scheme, logo, spelling, sound, meaning and connotation. Thus, yet again, under the
holistic test there can be no confusion or deception between these marks.

It also bears stressing that petitioner's "PAPA KETSARAP" mark covers "banana catsup" while respondent's "PAPA BOY & DEVICE" covers "lechon sauce'',
thereby obliterating any confusion of products of both marks as they travel different channels of trade. If a consumer is in the market for banana catsup, he or
she will not buy lechon sauce and vice-versa. As a result, the margin of error in the acquisition of one for the other is simply remote. Lechon sauce which is
liver sauce is distinct from catsup extracted/ made from banana fruit. The flavor and taste of a lechon sauce are far from those of a banana catsup. Lechon
sauce is sauce for "lechon" while banana catsup is apparently catsup made from banana. 36

Respondent also contends that "PAPA BOY & DEVICE" mark is not confusingly similar to petitioner's trademark "PAPA KETSARAP" in terms of appearance,
sound, spelling and meaning. The difference in nature, usage, taste and appearance of products decreases the possibility of deception among buyers.37

Respondent alleges that since petitioner merely included banana catsup as its product in its certificate, it cannot claim any further right to the mark "PAPA
KETSARAP" on products other than banana catsup. Respondent also alleges that petitioner cannot raise "international notoriety of the mark" for the first time
on appeal and that there is no proof that petitioner's mark is internationally well-known.38

Furthermore, respondent argues that petitioner cannot claim exclusive ownership over the use of the word "PAPA," a term of endearment for one's father.
Respondent points out that there are several other valid and active marks owned by third parties which use the word "PAPA," even in classes of goods similar
to those of petitioner's. Respondent avers that petitioner's claim that its "PAPA" mark is an arbitrary mark is belatedly raised in the instant petition, and
cannot be allowed because the "PAPA KETSARAP" mark would immediately bring the consuming public to thinking that the product involved is catsup and the
description of said catsup is "masarap" (delicious) and due to the logical relation of the petitioner's mark to the actual product, it being descriptive or generic,
it is far from being arbitrary or fanciful.39

Lastly, respondent claims that the Court of Appeals correctly ruled that respondent's product cannot be confused as originating from the petitioner. Since it
clearly appears in the product label of the respondent that it is manufactured by Barrio Fiesta, the public is dutifully informed of the identity of the lechon
sauce manufacturer. The Court of Appeals further took into account the fact that petitioner's products have been in commercial use for decades. 40

Petitioner, in its Reply41 to respondent's Comment, contends that respondent cannot invoke a prior filing date for the "PAPA BOY" mark as against Petitioner's
"PAPA" and "PAPA BANANA CATSUP LABEL" marks, because the latter marks were still registered when respondent applied for registration of its "PAPA
BOY" mark. Thus, the IPO-BLA and Director General correctly considered them in deciding whether the "PAPA BOY" mark should be registered, using the "first
to file" rule under Section 123.l(d) of Republic Act No. 8293, or the Intellectual Property Code (IP Code).

Petitioner reiterates its argument that the Court of Appeals erred in applying the holistic test and that the proper test under the circumstances is the
dominancy test, which was correctly applied by the IPO-BLA and the Director General.42

THIS COURT'S RULING

The petition has merit.

We find that the Court of Appeals erred in applying the holistic test and in reversing and setting aside the decision of the IPO-BLA and that of the IPO Director
General, both of which rejected respondent's application for the mark "PAPA BOY & DEVICE."

In Dermaline, Inc. v. Myra Pharmaceuticals, Inc.,43 we defined a trademark as "any distinctive word, name, symbol, emblem, sign, or device, or any combination
thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others."
We held that a trademark is "an intellectual property deserving protection by law."

The rights of the trademark owner are found in the Intellectual Property Code, which provides:

Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owner's
consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of
which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or
services, a likelihood of confusion shall be presumed.

Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has identified in the mind of the public the goods he
manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of
the said goods, business or services so identified, which will be protected in the same manner as other property rights.

The guideline for courts in determining likelihood of confusion is found in A.M. No. 10-3-10-SC, or the Rules of Procedure for Intellectual Property Rights
Cases, Rule 18, which provides:

RULE 18
Evidence in Trademark Infringement and Unfair Competition Cases
 37

SECTION 1. Certificate of Registration. - A certificate of registration of a mark shall be prima facie evidence of:
a) the validity of the registration;
b) the registrant's ownership of the mark; and
c) the registrant's exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the
certificate.

SECTION 3. Presumption of Likelihood of Confusion. - Likelihood of confusion shall be presumed in case an identical sign or mark is used for identical goods or
services.

SECTION 4. Likelihood of Confusion in Other Cases. - In determining whether one trademark is confusingly similar to or is a colorable imitation of another, the
court must consider the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such
purchasers usually give in buying that class of goods. Visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy
as they are encountered in the realities of the marketplace must be taken into account. Where there are both similarities and differences in the marks, these
must be weighed against one another to see which predominates.

In determining likelihood of confusion between marks used on non-identical goods or services, several factors may be taken into account, such as, but not
limited to:

a) the strength of plaintiffs mark;

b) the degree of similarity between the plaintiffs and the defendant's marks;
c) the proximity of the products or services;
d) the likelihood that the plaintiff will bridge the gap;
e) evidence of actual confusion;
f) the defendant's good faith in adopting the mark;
g) the quality of defendant's product or service; and/or
h) the sophistication of the buyers.

"Colorable imitation" denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to
deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the other.

SECTION 5. Determination of Similar and Dissimilar Goods or Services. - Goods or services may not be considered as being similar or dissimilar to each other on
the ground that, in any registration or publication by the Office, they appear in different classes of the Nice Classification.

In this case, the findings of fact of the highly technical agency, the Intellectual Property Office, which has the expertise in this field, should have been given
great weight by the Court of Appeals. As we held in Berris Agricultural Co., Inc. v. Abyadang44:

R.A. No. 8293 defines a "mark" as any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include
a stamped or marked container of goods. It also defines a "collective mark" as any visible sign designated as such in the application for registration and
capable of distinguishing the origin or any other common characteristic, including the quality of goods or services of different enterprises which use the sign
under the control of the registered owner of the collective mark.

On the other hand, R.A. No. 166 defines a "trademark" as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted
and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by another. A trademark, being
a special property, is afforded protection by law. But for one to enjoy this legal protection, legal protection ownership of the trademark should rightly be
established.

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer. or distributor of the goods made available to the
purchasing public. Section 122 of R.A.. No. 8293 provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A
certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the registrant's ownership of the mark,
and of the registrant's exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate.
R.A. No. 8293, however, requires the applicant for registration or the registrant to file a declaration of actual use (DAU) of the mark, with evidence to that
effect, within three (3) years from the filing of the application for registration; otherwise, the application shall be refused or the mark shall be removed from
the register. In other words, the prima facie presumption brought about by the registration of a mark may be challenged and overcome, in an appropriate
action, by proof of the nullity of the registration or of non-use of the mark, except when excused. Moreover, the presumption may likewise be defeated by
evidence of prior use by another person, i.e., it will controvert a claim of legal appropriation or of ownership based on registration by a subsequent user. This
is because a trademark is a creation of use and belongs to one who first used it in trade or commerce.

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may make advertisements, issue circulars,
distribute price lists on certain goods, but these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are sold to the
public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark
in trade and commerce during a certain period of time.

Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the
goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. On this
matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling
under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great
respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or
even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to
substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence. (Emphasis added, citations omitted.)
 38

In trademark controversies, each case must be scrutinized according to its peculiar circumstances, such that jurisprudential precedents should only be made
to apply if they are specifically in point.45 The cases discussed below are mentioned only for purposes of lifting the applicable doctrines, laws, and concepts,
but not for their factual circumstances, because of the uniqueness of each case in controversies such as this one.

There are two tests used in jurisprudence to determine likelihood of confusion, namely the dominancy test used by the IPO, and the holistic test adopted by
the Court of Appeals. In Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp.,46 we held:

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

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product
confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2)
confusion of business (source or origin confusion), where, although the goods of" the parties are different, the product, the mark of which registration is
applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived
either into that belief or into the belief that there is some connection between the two parties, though inexistent.

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by respondent in its Strong rubber shoes infringes on the mark
already registered by petitioner with the IPO. While it is undisputed that petitioner's stylized "S" is within an oval design, to this Court's mind, the dominant
feature of the trademark is the stylized "S," as it is precisely the stylized "S" which catches the eye of the purchaser. Thus, even if respondent did not use an
oval design, the mere fact that it used the same stylized "S", the same being the dominant feature of petitioner's trademark, already constitutes infringement
under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be considered as highly identifiable to the products of
petitioner alone. The CA even supported its conclusion by stating that the letter "S" has been used in so many existing trademarks, the most popular of which
is the trademark "S" enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which
is that respondent had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark for. The letter "S" used in the Superman
logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA
of the letter "S" used in the Superman trademark with petitioner's stylized "S" is not appropriate to the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on the font and the size of the lettering, the stylized "S"
utilized by respondent is the very same stylized "S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner's trademark. Indubitably,
the likelihood of confusion is present as purchasers will associate the respondent's use of the stylized "S" as having been authorized by petitioner or that
respondent's product is connected with petitioner's business.

While there may be dissimilarities between the appearances of the shoes, to this Court's mind such dissimilarities do not outweigh the stark and blatant
similarities in their general features.xx x.

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it
cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it
is indubitable that respondent's products will cause confusion and mistake in the eyes of the public. Respondent's shoes may not be an exact replica of
petitioner's shoes, but the features and overall design are so similar and alike that confusion is highly likely.

Neither can the difference in price be a complete defense in trademark infringement. In McDonald's Corporation v. L.C Big Mak Burger, Inc., this Court held:

Modem law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name
is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential
expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). xx x.

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. The purchasing public might be mistaken in thinking that petitioner had ventured
into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with
petitioner's brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the
goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. While
respondent's shoes contain some dissimilarities with petitioner's shoes, this Court cannot close its eye to the fact that for all intents and purpose, respondent
had deliberately attempted to copy petitioner's mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of
infringement do not normally copy but only make colorable changes. The most successful form of copying is to employ enough points of similarity to confuse
the public, with enough points of difference to confuse the courts. (Citations omitted.)

The Court discussed the concept of confusion of business in the case of Societe Des Produits Nestle, S.A. v. Dy, Jr.,47 as quoted below:
 39

Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement. There are two types of confusion in trademark
infringement: confusion of goods and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, the Court
distinguished the two types of confusion:

Callman notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other." In which case, "defendant's goods are then bought as the plaintiff's, and the poorer quality of the
former reflects adversely on the plaintiff's reputation." The other is the confusion of business: "Here though the goods of the parties are different, the
defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into
the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist."

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main,
prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the
essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or
deceive purchasers.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be
studied in the light of the facts of each particular case. In McDonald's Corporation v. MacJoy Fastfood Corporation, the Court held:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must
be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is
the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has
consistently applied the dominancy test. x x x.

In McDonald's Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in holding that "MACJOY" is confusingly similar to
"MCDONALD'S." The Court held:

While we agree with the CA's detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test
is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has
consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks.

Applying the dominancy test to the instant case, the Court finds that herein petitioner's "MCDONALD'S" and respondent's "MACJOY" marks are confusingly
similar with each other that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant features. x x x.

For sure, it is the prefix "Mc," and abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY"
attracts attention the same way as did "McDonalds," "Mac Fries," "Mc Spaghetti," "McDo," "Big Mac" and the rest of the MCDONALD'S marks which all use the
prefixes Mc and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondent's trademark application for the
"MACJOY & DEVICE" trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque,
burgers, fries, spaghetti, etc. Likewise, the petitioner's trademark registration for the MCDONALD'S marks in the Philippines covers goods which are similar if
not identical to those covered by the respondent's application.

In McDonald's Corporation v. L. C. Big Mak Burger, Inc., the Court applied the dominancy test in holding that "BIG MAK" is confusingly similar to "BIG MAC." The
Court held:

This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in
determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product
arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual
impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and
color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and
deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an
effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question
at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the
public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber Co., 107 F. 2d 588; xx x)

The test of dominancy is now explicitly incorporated into law in Section 155.l of the Intellectual Property Code which defines infringement as the "colorable
imitation of a registered mark x x x or a dominant feature thereof."
 40

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in likelihood of confusion. First, "Big Mak" sounds exactly the
same as "Big Mac." Second, the first word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in "Mak" are the same as
the first two letters in "Mac." Fourth, the last letter "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter
"k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan."

In Societe Des Produits Nestle, SA. v. Court of Appeals, the Court applied the dominancy test in holding that "FLAVOR MASTER" is confusingly similar to
"MASTER ROAST" and "MASTER BLEND." The Court held:

While this Court agrees with the Court of Appeals' detailed enumeration of differences between the respective trademarks of the two coffee products, this
Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of
its peculiar factual milieu.

Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be
determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in
the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not
only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that:

The scope of protection afforded to registered trademark owners is not limited to protection from. infringers with identical goods.1âwphi1 The
scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the
registered trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. - A certificate of registration of a mark shall be prima facie evidence of validity of the registration, the registrant's ownership of the
mark, and of the registrant's exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the
certificate. x x x.

In Mighty Corporation v. E. & J Gallo Winery, the Court held that, "Non-competing goods may be those which, though they are not in actual competition, are so
related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the
use of similar marks." In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the
goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality;
and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.

x x x. However, as the registered owner of the "NAN" mark, Nestle should be free to use its mark on similar products, in different segments of the
market, and at different price levels. In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection afforded to registered
trademark owners extends to market areas that are the normal expansion of business:

Even respondent's use of the "Big Mak" mark on non-hamburger food products cannot excuse their infringement of petitioners' registered mark, otherwise
registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price
levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner
enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name
is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential
expansion of his business (v. 148 ALR, 77, 84; 52 Arn. Jur. 576, 577). (Emphases supplied, citations omitted.)

Again, this Court discussed the dominancy test and confusion of business in Dermaline, Inc. v. Myra Pharmaceuticals, Inc.,48 and we quote:

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception. It is applied
when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or
deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should
suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive
the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question. Given greater consideration are
the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets, and market segments.
The test of dominancy is now explicitly incorporated into law in Section 155.l of R.A. No. 8293 which provides-

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant
feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps
necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive xx x.

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product
confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2)
confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is
 41

applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived
either into that belief or into the belief that there is some connection between the two parties, though inexistent.

We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a
dominant feature with respect to trademarks applied for registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or
some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.

Further, Dermaline's stance that its product belongs to a separate and different classification from Myra's products with the registered trademark does not
eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications
pertain to treatments for the skin.

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. The Court is cognizant that the registered trademark owner enjoys protection in
product and market areas that are the normal potential expansion of his business. Thus, we have held-

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business
from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator
of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that
the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and
beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying
pharmaceutical topical applications for the skin to health and beauty services.

Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered
by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously
registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered
trademark and an established goodwill. (Citations omitted.)

Section 123.l(d) of the IP Code provides:

A mark cannot be registered if it:

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or
iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion[.]

A scrutiny of petitioner's and respondent's respective marks would show that the IPO-BLA and the IPO Director General correctly found the word "PAPA" as
the dominant feature of petitioner's mark "PAPA KETSARAP." Contrary to respondent's contention, "KETSARAP" cannot be the dominant feature of the mark
as it is merely descriptive of the product. Furthermore, it is the "PAPA" mark that has been in commercial use for decades and has established awareness and
goodwill among consumers.

We likewise agree with the IPO-BLA that the word "PAPA" is also the dominant feature of respondent's "PAPA BOY & DEVICE" mark subject of the application,
such that "the word 'PAPA' is written on top of and before the other words such that it is the first word/figure that catches the eyes." 49 Furthermore, as the
IPO Director General put it, the part of respondent's mark which appears prominently to the eyes and ears is the phrase "PAPA BOY" and that is what a
purchaser of respondent's product would immediately recall, not the smiling hog.

We quote the relevant portion of the IPO-BLA decision on this point below:

A careful examination of Opposer's and Respondent-applicant's respective marks shows that the word "PAPA" is the dominant feature: In Opposer's marks,
the word "PAPA" is either the mark by itself or the predominant word considering its stylized font and the conspicuous placement of the word "PAPA" before
the other words. In Respondent-applicant's mark, the word "PAPA" is written on top of and before the other words such that it is the first word figure that
catches the eyes. The visual and aural impressions created by such dominant word "PAPA" at the least is that the respective goods of the parties originated
from the other, or that one party has permitted or has been given license to the other to use the word "PAPA" for the other party's product, or that there is a
relation/connection between the two parties when, in fact, there is none. This is especially true considering that the products of both parties belong to the
same class and are closely related: Catsup and lechon sauce or liver sauce are both gravy-like condiments used to spice up dishes. Thus, confusion of goods
and of business may likely result.

Under the Dominancy Test, the dominant features of the competing marks are considered in determining whether these competing marks are confusingly
similar. Greater weight is given to the similarity of the appearance of the products arising from the adoption of the dominant features of the registered mark,
disregarding minor differences. The visual, aural, connotative, and overall comparisons and impressions engendered by the marks in controversy as they are
encountered in the realities of the marketplace are the main considerations (McDonald's Corporation, et al., v. L. C. Big Mak Burger, Inc., et al., G. R. No.143993,
August 18, 2004; Societe Des Produits Nestle, S. A." et al. v. Court of Appeals, et al., G. R. No. 112012, April 4, 2001). If the competing trademark contains the
main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. (Lim Hoa v. Director of Patents,
100 Phil. 214 [1956]); Co Tiong Sa v. Director of Patents, et al., G. R. No. L-5378, May 24, 1954). Duplication or imitation is not necessary; nor is it necessary
 42

that the infringing label should suggest an effort to imitate (Lim Hoa v. Director of Patents, supra, and Co Liang Sa v. Director of Patents, supra). Actual
confusion is not required: Only likelihood of confusion on the part of the buying public is necessary so as to render two marks confusingly similar so as to
deny the registration of the junior mark (Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 137 Phil. 838 [1969]).

As to the first issue of whether PAPA BOY is confusingly similar to Opposer's PAPA mark, this Bureau rules in the affirmative.

The records bear the following:

1. Registration No. 32416 issued for the mark "PAPA" under Class 29 goods was deemed expired as of February 11, 2004 (Exhibit "A" attached to
the VERIFIED NOTICE OF OPPOSITION). Application Serial No. 4-2005-010788 was filed on October 28, 2005 for the same mark "PAPA" for Class
30 goods and Registration No. 42005010788 was issued on March 19, 2007;

2. Opposer was issued for the mark "PAPA BANANA CATSUP LABEL" on August 11, 1983 Registration No. SR-6282 for Class 30 goods in the
Supplemental Register, which registration expired in 2003. Application Serial No. 4-2006-012364 was filed for the mark "PAPA LABEL DESIGN" for
Class 30 goods on November 15, 2006, and Registration No. 42006012364 was issued on April 30, 2007; and

3. Lastly, Registration No. 34681 for the mark "PAPA KETSARAP" for Class 30 goods was issued on August 23, 1985 and was renewed on August 23,
2005.

Though Respondent-applicant was first to file the subject application on April 04, 2002 vis-a-vis the mark "PAP A" the filing date of which is reckoned on
October 28, 2005, and the mark "PAPA LABEL DESIGN" the filing date of which is reckoned on November 15, 2006, Opposer was able to secure a registration
for the mark "PAPA KETSARAP" on August 23, 1985 considering that Opposer was the prior registrant and that its renewal application timely filed on August
23, 2005.

Pursuant to [Section 123 .1 (d) of the IP Code], the application for registration of the subject mark cannot be allowed considering that Opposer was earlier
registrant of the marks PAPA and PAPA KETSARAP which registrations were timely renewed upon its expiration. Respondent-applicant's mark "PAPA BOY &
DEVICE" is confusingly similar to Opposer's mark "PAPA KETSARAP" and is applied to goods that are related to Opposer's goods, but Opposer's mark "PAPA
KETSARAP" was registered on August 23, 1985 per Certificate of Registration No. 34681, which registration was renewed for a period of 10 years counted
from August 23, 2005 per Certificate of Renewal of Registration No. 34681 issued on August 23, 2005. To repeat, Opposer has already registered a mark which
Respondent-applicant's mark nearly resembles as to likely deceive or cause confusion as to origin and which is applied to goods to which respondent-
applicant's goods under Class 30 are closely related.1âwphi1

Section 138 of the IP Code provides that a certificate of registration of a mark is prima facie evidence of the validity of the registration, the registrant's
ownership of the mark, and of the registrant's exclusive right to use the same in connection with the goods and those that are related thereto specified in the
certificate.50

We agree that respondent's mark cannot be registered. Respondent's mark is related to a product, lechon sauce, an everyday all-purpose condiment and
sauce, that is not subjected to great scrutiny and care by the casual purchaser, who knows from regular visits to the grocery store under what aisle to find it, in
which bottle it is contained, and approximately how much it costs. Since petitioner's product, catsup, is also a household product found on the same grocery
aisle, in similar packaging, the public could think that petitioner had expanded its product mix to include lechon sauce, and that the "PAPA BOY" lechon sauce
is now part of the "PAPA" family of sauces, which is not unlikely considering the nature of business that petitioner is in. Thus, if allowed. registration,
confusion of business may set in, and petitioner's hard-earned goodwill may be associated to the newer product introduced by respondent, all because of the
use of the dominant feature of petitioner's mark on respondent's mark, which is the word "PAPA." The words "Barrio Fiesta" are not included in the mark, and
although printed on the label of respondent's lechon sauce packaging, still do not remove the impression that "PAPA BOY" is a product owned by the
manufacturer of "PAPA" catsup, by virtue of the use of the dominant feature. It is possible that petitioner could expand its business to include lechon sauce,
and that would be well within petitioner's rights, but the existence of a "PAPA BOY" lechon sauce would already eliminate this possibility and deprive
petitioner of its rights as an owner of a valid mark included in the Intellectual Property Code.

The Court of Appeals likewise erred in finding that "PAPA," being a common term of endearment for one's father, is a word over which petitioner could not
claim exclusive use and ownership. The Merriam-Webster dictionary defines "Papa" simply as "a person's father." True, a person's father has no logical
connection with catsup products, and that precisely makes "PAPA" as an arbitrary mark capable of being registered, as it is distinctive, coming from a family
name that started the brand several decades ago. What was registered was not the word "Papa" as defined in the dictionary, but the word "Papa" as the last
name of the original owner of the brand. In fact, being part of several of petitioner's marks, there is no question that the IPO has found "PAPA" to be a
registrable mark.

Respondent had an infinite field of words and combinations of words to choose from to coin a mark for its lechon sauce. While its claim as to the origin of the
term "PAPA BOY" is plausible, it is not a strong enough claim to overrule the rights of the owner of an existing and valid mark. Furthermore, this Court cannot
equitably allow respondent to profit by the name and reputation carefully built by petitioner without running afoul of the basic demands of fair play. 51

WHEREFORE, we hereby GRANT the petition. We SET ASIDE the June 23, 2011 Decision and the October 4, 2011 Resolution of the Court of Appeals in CA-
G.R. SP No. 107570, and REINSTATE the March 26, 2008 Decision of the Bureau of Legal Affairs of the Intellectual Property Office (IPO-BLA) and the January
29, 2009 Decision of the Director General of the IPO.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

G.R. No. 209843

 43

TAIWAN KOLIN CORPORATION, LTD., Petitioner,

vs.
KOLIN ELECTRONICS CO., INC., Respondent.

VELASCO, JR., J.:

Before the Court is a petition for review under Rule 45 of the Rules of Court interposed by petitioner Taiwan Kolin Corporation, Ltd. (Taiwan Kolin), assailing
the April 30, 2013 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 122565 and its subsequent November 6, 2013 Resolution. 2 The assailed issuances
effectively denied petitioner's trademark application for the use of "KOLIN" on its television and DVD players.

The Facts

On February 29, 1996, Taiwan Kolin filed with the Intellectual Property Office (IPO), then Bureau of Patents, Trademarks, and Technology Transfer, a
trademark application, docketed as Application No. 4-1996-106310, for the use of "KOLIN" on a combination of goods, including colored televisions,
refrigerators, window-type and split-type air conditioners, electric fans and water dispensers. Said goods allegedly fall under Classes 9, 11, and 21 of the Nice
Classification (NCL).

Application No. 4-1996-106310 would eventually be considered abandoned for Taiwan Kolin’s failure to respond to IPO’s Paper No. 5 requiring it to elect one
class of good for its coverage. However, the same application was subsequently revived through Application Serial No. 4-2002-011002,3 with petitioner
electing Class 9 as the subject of its application, particularly: television sets, cassette recorder, VCD Amplifiers, camcorders and other audio/video electronic
equipment, flat iron, vacuum cleaners, cordless handsets, videophones, facsimile machines, teleprinters, cellular phones and automatic goods vending
machine. The application would in time be duly published.4

On July 13, 2006, respondent Kolin Electronics Co., Inc. (Kolin Electronics) opposed petitioner’s revived application, docketed as Inter Partes Case No. 14-
2006-00096. As argued, the mark Taiwan Kolin seeks to register is identical, if not confusingly similar, with its "KOLIN" mark registered on November 23,
2003, covering the following products under Class 9 of the NCL: automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power
supply, step-down transformer, and PA amplified AC-DC.5

To digress a bit, Kolin Electronics’ "KOLIN" registration was, as it turns out, the subject of a prior legal dispute between the parties in Inter Partes Case No. 14-
1998-00050 beforethe IPO. In the said case, Kolin Electronics’ own application was opposed by Taiwan Kolin, being, as Taiwan Kolin claimed, the prior
registrant and user of the "KOLIN" trademark, having registered the same in Taipei, Taiwan on December 1, 1988. The Bureau of Legal Affairs of the IPO (BLA-
IPO), however, did not accord priority right to Taiwan Kolin’s Taipei registration absent evidence to prove that it has already used the said mark in the
Philippines as early as 1988. On appeal, the IPO Director General affirmed the BLA-IPO’s Decision. Taiwan Kolin elevated the case to the CA, but without
injunctive relief, Kolin Electronics was able to register the "KOLIN" trademark on November 23, 2003for its products. 6 Subsequently, the CA, on July 31, 2006,
affirmed7 the Decision of the Director General.

In answer to respondent’s opposition in Inter Partes Case No. 14-2006-00096, petitioner argued that it should be accorded the benefits of a foreign-registered
mark under Secs. 3 and 131.1 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code);8 that it has already
registered the "KOLIN" mark in the People’s Republic of China, Malaysia and Vietnam, all of which are parties to the Paris Convention for the Protection of
Industrial Property (Paris Convention) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS); and that benefits accorded to a
well-known mark should be accorded to petitioner.9

Ruling of the BLA-IPO

By Decision10 dated August 16, 2007, the BLA-IPO denied petitioner’s application disposing as follows:

In view of all the foregoing, the instant Opposition is as, it is hereby SUSTAINED. Accordingly, application bearing Serial No. 4-1996-106310 for the mark
"KOLIN" filed in the name of TAIWAN KOLIN., LTD. on February 29, 1996 for goods falling under Class 09 of the International Classification of Goods such as
cassette recorder, VCD, woofer, amplifiers, camcorders and other audio/video electronic equipment, flat iron, vacuum cleaners, cordless handsets,
videophones, facsimile machines, teleprinters, cellular phones, automatic goods vending machines and other electronic equipment is hereby REJECTED.

Let the file wrapper of "KOLIN", subject of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in accordance with this Decision.

SO ORDERED.

Citing Sec. 123(d) of the IP Code,11 the BLA-IPO held that a mark cannot be registered if it is identical with a registered mark belonging to a different
proprietor in respect of the same or closely-related goods. Accordingly, respondent, as the registered owner of the mark "KOLIN" for goods falling under Class
9 of the NCL, should then be protected against anyone who impinges on its right, including petitioner who seeks to register an identical mark to be used on
goods also belonging to Class 9 of the NCL.12 The BLA-IPO also noted that there was proof of actual confusion in the form of consumers writing numerous e-
mails to respondent asking for information, service, and complaints about petitioner’s products. 13

Petitioner moved for reconsideration but the same was denied on January 26, 2009 for lack of merit.14 Thus, petitioner appealed the above Decision to the
Office of the Director General of the IPO.

Ruling of the IPO Director General

On November 23, 2011, the IPO Director General rendered a Decision15 reversing that of the BLA-IPO in the following wise:
 44

Wherefore, premises considered, the appeal is hereby GRANTED. The Appellant’s Trademark Application No. 4-1996-106310 is hereby GIVEN DUE COURSE
subject to the use limitation or restriction for the goods "television and DVD player". Let a copy of this Decision as well as the trademark application and
records be furnished and returned to the Director of the Bureau of Legal Affairs for appropriate action. Further, let the Director of the Bureau of Trademarks
and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and
records purposes.

SO ORDERED.

In so ruling, the IPO Director General ratiocinated that product classification alone cannot serve as the decisive factor in the resolution of whether or not the
goods are related and that emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their
properties or characteristics. As held, 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. 16

Aggrieved, respondent elevated the case to the CA.

Ruling of the Court of Appeals

In its assailed Decision, the CA found for Kolin Electronics, on the strength of the following premises: (a) the mark sought to be registered by Taiwan Kolin is
confusingly similar to the one already registered in favor of Kolin Electronics; (b) there are no other designs, special shape or easily identifiable earmarks that
would differentiate the products of both competing companies; 17 and (c) the intertwined use of television sets with amplifier, booster and voltage regulator
bolstered the fact that televisions can be considered as within the normal expansion of Kolin Electronics, 18 and is thereby deemed covered by its trademark as
explicitly protected under Sec. 13819 of the IP Code.20 Resultantly, the CA granted respondent’s appeal thusly:

WHEREFORE, the appeal is GRANTED. The November 23, 2011 Decision of the Director General of the Intellectual Property Office in Inter Partes Case No. 14-
2006-0096 is REVERSED and SET ASIDE. The September 17, 2007 Decision of the Bureau of Legal Affairs of the same office is REINSTATED.

SO ORDERED.

Petitioner moved for reconsideration only to be denied by the CA through its equally assailed November 6, 2013 Resolution. Hence, the instant recourse.

The Issue

The primordial issue to be resolved boils down to whether or not petitioner is entitled to its trademark registration of "KOLIN" over its specific goods of
television sets and DVD players. Petitioner postulates, in the main, that its goods are not closely related to those of Kolin Electronics. On the other hand,
respondent hinges its case on the CA’s findings that its and petitioner’s products are closely-related. Thus, granting petitioner’s application for trademark
registration, according to respondent, would cause confusion as to the public.

The Court's Ruling

The petition is impressed with merit.

Identical marks may be registered for

products from the same classification

To bolster its opposition against petitioner’s application to register trademark "KOLIN," respondent maintains that the element of mark identity argues
against approval of such application, quoting the BLA IPO’s ruling in this regard:21

Indubitably, Respondent-Applicant’s [herein petitioner] mark is identical to the registered mark of herein Opposer [herein respondent] and the identical mark
is used on goods belonging to Class 9 to which Opposer’s goods are also classified. On this point alone, Respondent-Applicant’s application should already be
denied.

The argument is specious.

The parties admit that their respective sets of goods belong to Class 9 of the NCL, which includes the following: 22

Class 9

Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring, signalling, checking (supervision), life-saving and teaching
apparatus and instruments; apparatus and instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus
for recording, transmission or reproduction of sound or images; magneticdata carriers, recording discs; compact discs, DVDs and other digital recording
media; mechanisms for coin-operated apparatus; cash registers, calculating machines, data processing equipment, computers; computer software; fire-
extinguishing apparatus.

But mere uniformity in categorization, by itself, does not automatically preclude the registration of what appears to be an identical mark, if that be the case. In
fact, this Court, in a long line of cases, has held that such circumstance does not necessarily result in any trademark infringement. The survey of jurisprudence
cited in Mighty Corporation v. E. & J Gallo Winery 23 is enlightening on this point:
 45

(a) in Acoje Mining Co., Inc. vs. Director of Patents, 24 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,25 we upheld the Patent Director’s registration of the same trademark CAMIA
for Ng Sam’s ham under Class 47, despite Philippine Refining Company’s prior trademark registration and actual use of such mark on its lard,
butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps;

(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,26 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.

Verily, whether or not the products covered by the trademark sought to be registered by Taiwan Kolin, on the one hand, and those covered by the prior issued
certificate of registration in favor of Kolin Electronics, on the other, fall under the same categories in the NCL is not the sole and decisive factor in determining
a possible violation of Kolin Electronics’ intellectual property right should petitioner’s application be granted. It is hornbook doctrine, as held in the above-
cited cases, that emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties
or characteristics. The mere fact that one person has adopted and used a trademark on his goods would not, without more, prevent the adoption and use of
the same trademark by others on unrelated articles of a different kind.27 The CA erred in denying petitioner’s registration application

Respondent next parlays the idea of relation between products as a factor militating against petitioner’s application. Citing Esso Standard Eastern, Inc. v. Court
of Appeals,28 respondent argues that the goods covered by petitioner’s application and those covered by its registration are actually related belonging as they
do to the same class or have the same physical characteristics with reference to their form, composition, texture, or quality, or if they serve the same purpose.
Respondent likewise draws parallelisms between the present controversy and the following cases:29

(a) In Arce & Sons, Inc. vs. Selecta Biscuit Company, 30 biscuits were held related to milk because they were both food products;
(b) In Chua Che vs. Phil. Patents Office,31 soap and perfume, lipstick and nail polish are held to be similarly related because they are common
household items;
(c) In Ang vs. Teodoro,32 the trademark "Ang Tibay" for shoes and slippers was disallowed to be used for shirts and pants because they belong to
the same general class of goods; and
(d) In Khe vs. Lever Bros. Co.,33 soap and pomade, although noncompetitive, were held to be similar or belong to the same class, since both are toilet
articles.

Respondent avers that Kolin Electronics’ and Taiwan Kolin’s products are closely-related not only because both fall under Class 9 of the NCL, but mainly
because they both relate to electronic products, instruments, apparatus, or appliances. 34 Pushing the point, respondent would argue that Taiwan Kolin and
Kolin Electronics’ goods are inherently similar in that they are all plugged into electric sockets and perform a useful function.35 Furthermore, respondent
echoes the appellate court’s ratiocination in denying petitioner’s application, viz: 36

Significantly, Kolin Electronics’ goods (automatic voltage regulator; converter; recharger; stereo booster; AC-DC regulated power supply; step-down
transformer; and PA amplified AC-DC) and Taiwan Kolin’s television sets and DVD players are both classified under class 9 of the NICE agreement. At first
glance, it is also evident that all these goods are generally described as electrical devices. x x x [T]he goods of both Kolin Electronics and Taiwan Kolin will
inevitably be introduced to the public as "KOLIN" products and will be offered for sale in the same channels of trade. Contrary to Taiwan Kolin’s claim, power
supply as well as audio and stereo equipment like booster and amplifier are not only sold in hardware and electrical shops. These products are commonly
found in appliance stores alongside television sets and DVD players. With the present trend in today’s entertainment of having a home theater system, it is not
unlikely to see a stereo booster, amplifier and automatic voltage regulator displayed together with the television sets and DVD players. With the intertwined
use of these products bearing the identical "KOLIN" mark, the ordinary intelligent consumer would likely assume that they are produced by the same
manufacturer.

In sum, the intertwined use, the same classification of the products as class 9 under the NICE Agreement, and the fact that they generally flow through the
same channel of trade clearly establish that Taiwan Kolin’s television sets and DVD players are closely related to Kolin Electronics’ goods. As correctly pointed
out by the BLA-IPO, allowing Taiwan Kolin’s registration would only confuse consumers as to the origin of the products they intend to purchase. Accordingly,
protection should be afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark. 37(emphasis added)

The CA’s approach and reasoning to arrive at the assailed holding that the approval of petitioner’s application is likely to cause confusion or deceive fail to
persuade.

a. The products covered by petitioner’s application and respondent’s registration are unrelated

A certificate of trademark registration confers upon the trademark owner the exclusive right to sue those who have adopted a similar mark not only in
connection with the goods or services specified in the certificate, but also with those that are related thereto. 38

In resolving one of the pivotal issues in this case––whether or not the products of the parties involved are related––the doctrine in Mighty Corporation is
authoritative. There, the Court held that the goods should be tested against several factors before arriving at a sound conclusion on the question of
relatedness. Among these are:

(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;
(d) the nature and cost of the articles;
(e) the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality;
 46

(f) the purpose of the goods;

(g) whether the article is bought for immediate consumption, that is, day-to-day household items;
(h) the fields of manufacture;
(i) the conditions under which the article is usually purchased; and
(j) the channels of trade through which the goods flow, how they are distributed, marketed, displayed and sold. 39

As mentioned, the classification of the products under the NCL is merely part and parcel of the factors to be considered in ascertaining whether the goods are
related. It is not sufficient to state that the goods involved herein are electronic products under Class 9 in order to establish relatedness between the goods, for
this only accounts for one of many considerations enumerated in Mighty Corporation. In this case, credence is accorded to petitioner’s assertions that:40

a. Taiwan Kolin’s goods are classified as home appliances as opposed to Kolin Electronics’ goods which are power supply and audio equipment
accessories;
b. Taiwan Kolin’s television sets and DVD players perform distinct function and purpose from Kolin Electronics’ power supply and audio
equipment; and
c. Taiwan Kolin sells and distributes its various home appliance products on wholesale and to accredited dealers, whereas Kolin Electronics’ goods
are sold and flow through electrical and hardware stores.

Clearly then, it was erroneous for respondent to assume over the CA to conclude that all electronic products are related and that the coverage of one electronic
product necessarily precludes the registration of a similar mark over another. In this digital age wherein electronic products have not only diversified by leaps
and bounds, and are geared towards interoperability, it is difficult to assert readily, as respondent simplistically did, that all devices that require plugging into
sockets are necessarily related goods.

It bears to stress at this point that the list of products included in Class 9 41 can be sub-categorized into five (5) classifications, namely: (1) apparatus and
instruments for scientific or research purposes, (2) information technology and audiovisual equipment, (3) apparatus and devices for controlling the
distribution and use of electricity, (4) optical apparatus and instruments, and (5) safety equipment.42 From this sub-classification, it becomes apparent that
petitioner’s products, i.e., televisions and DVD players, belong to audio visiual equipment, while that of respondent, consisting of automatic voltage regulator,
converter, recharger, stereo booster, AC-DC regulated power supply, step-down transformer, and PA amplified AC-DC, generally fall under devices for
controlling the distribution and use of electricity.

b. The ordinarily intelligent

buyer is not likely to be
confused

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no rigid set rules can plausible be formulated. Each
case must be decided on its merits, with due regard to the goods or services involved, the usual purchaser’s character and attitude, among others. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of a particular case. That is the reason why in trademark cases,
jurisprudential precedents should be applied only to a case if they are specifically in point. 43 For a clearer perspective and as matter of record, the following
image on the left44 is the trademark applied for by petitioner, while the image juxtaposed to its right 45 is the trademark registered by respondent:

While both competing marks refer to the word "KOLIN" written in upper case letters and in bold font, the Court at once notes the distinct visual and aural
differences between them: Kolin Electronics’ mark is italicized and colored black while that of Taiwan Kolin is white in pantone red color background. The
differing features between the two, though they may appear minimal, are sufficient to distinguish one brand from the other.

It cannot be stressed enough that the products involved in the case at bar are, generally speaking, various kinds of electronic products. These are not ordinary
consumable household items, like catsup, soy sauce or soap which are of minimal cost.46 The products of the contending parties are relatively luxury items not
easily considered affordable. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his
purchase. Confusion and deception, then, is less likely. 47 As further elucidated in Del Monte Corporation v. Court of Appeals: 48

x x x Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a
person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise
as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are
normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday
purchase requiring frequent replacement are bought by the casual consumer without great care x x x. (emphasis added) Respondent has made much reliance
on Arce & Sons, Chua Che, Ang, and Khe, oblivious that they involved common household items––i.e., biscuits and milk, cosmetics, clothes, and toilet articles,
respectively–– whereas the extant case involves luxury items not regularly and inexpensively purchased by the consuming public. In accord with common
empirical experience, the useful lives of televisions and DVD players last for about five (5) years, minimum, making replacement purchases very infrequent.
The same goes true with converters and regulators that are seldom replaced despite the acquisition of new equipment to be plugged onto it. In addition, the
amount the buyer would be parting with cannot be deemed minimal considering that the price of televisions or DVD players can exceed today’s monthly
minimum wage. In light of these circumstances, it is then expected that the ordinary intelligent buyer would be more discerning when it comes to deciding
which electronic product they are going to purchase, and it is this standard which this Court applies herein in determining the likelihood of confusion should
petitioner’s application be granted.

To be sure, the extant case is reminiscent of Emerald Garment Manufacturing Corporation v. Court of Appeals, 49wherein the opposing trademarks are that of
Emerald Garment Manufacturing Corporation’s "Stylistic Mr. Lee" and H.D. Lee’s "LEE." In the said case, the appellate court affirmed the decision of the
 47

Director of Patents denying Emerald Garment’s application for registration due to confusing similarity with H.D. Lee’s trademark. This Court, however, was of
a different beat and ruled that there is no confusing similarity between the marks, given that the products covered by the trademark, i.e., jeans, were, at that
time, considered pricey, typically purchased by intelligent buyers familiar with the products and are more circumspect, and, therefore, would not easily be
deceived. As held:

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary
purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok50 is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed
to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of
some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated.
The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and
who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary
intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." 51 (emphasis added)

Consistent with the above ruling, this Court finds that the differences between the two marks, subtle as they may be, are sufficient to prevent any confusion
that may ensue should petitioner’s trademark application be granted. As held in Esso Standard Eastern, Inc.:52

Respondent court correctly ruled that considering the general appearances of each mark as a whole, the possibility of any confusion is unlikely. A comparison
of the labels of the samples of the goods submitted by the parties shows a great many differences on the trademarks used. As pointed out by respondent court
in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the color of the ‘ESSO’ used by the plaintiff for the oval design where the blue
word ESSO is contained is the distinct and unique kind of blue. In his answer to the trial court’s question, Mr. Buhay informed the court that the plaintiff never
used its trademark on any product where the combination of colors is similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr.
Tengco, testified that generally, the plaintiff’s trademark comes all in either red, white, blue or any combination of the three colors. It is to be pointed out that
not even a shade of these colors appears on the trademark of the appellant’s cigarette. The only color that the appellant uses in its trademark is green."

Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between the brand ESSO being used by the defendants and the
trademark ESSO of the plaintiff is that the former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an oval
background."

All told, We are convinced that petitioner's trademark registration not only covers unrelated good, but is also incapable of deceiving the ordinary intelligent
buyer. The ordinary purchaser must be thought of as having, and credited with, at least a modicum of intelligence to be able to see the differences between the
two trademarks in question.53

Questions of fact may still be entertained

On a final note, the policy according factual findings of courts a quo great respect, if not finality, is not binding where they have overlooked, misapprehended,
or misapplied any fact or circumstance of weight and substances. 54 So it must be here; the nature of the products involved materially affects the outcome of
the instant case. A reversal of the appellate Court's Decision is then in order.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 122565,
dated April 30, 2013 and November 6, 2013, respectively, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the Intellectual Property Office
Director General in Inter Partes Case No. 14-2006-00096, dated November 23, 2011, is hereby REINSTATED.

PRESBITERO J. VELASCO, JR.

Associate Justice

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.

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
reconsideration4and (c) the aforesaid Makati RTC decision itself.

I. The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of California,
United States of America (U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines and brandy products and sells them in many
countries under different registered trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks.
 48

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

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

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

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

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

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

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

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

On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971, respondents claim that they first introduced and sold the
GALLO and ERNEST & JULIO GALLO wines in the Philippines circa1974 within the then U.S. military facilities only. By 1979, they had expanded their
Philippine market through authorized distributors and independent outlets.16

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

II. The Legal Dispute

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

Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention) 18 and RA 166
(Trademark Law),19 specifically, Sections 22 and 23 (for trademark infringement),20 29 and 3021 (for unfair competition and false designation of origin) and 37
(for tradename infringement).22 They claimed that petitioners adopted the GALLO trademark to ride on Gallo Winery’s GALLO and ERNEST & JULIO GALLO
trademarks’ established reputation and popularity, thus causing confusion, deception and mistake on the part of the purchasing public who had always
associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winery’s wines. Respondents prayed for the issuance of a writ of preliminary injunction
and ex parte restraining order, plus P2 million as actual and compensatory damages, at least P500,000 as exemplary and moral damages, and at
least P500,000 as attorney’s fees and litigation expenses.23

In their answer, petitioners alleged, among other affirmative defenses, that: petitioner’s GALLO cigarettes and Gallo Winery’s wines were totally unrelated
products; Gallo Winery’s GALLO trademark registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines were sold through
different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items compared to Gallo Winery’s
high-priced luxury wines which cost between P98 to P242.50; the target market of Gallo Winery’s wines was the middle or high-income bracket with at
least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, laborers and other low-income workers; the dominant feature of the
GALLO cigarette mark was the rooster device with the manufacturer’s name clearly indicated as MIGHTY CORPORATION while, in the case of Gallo Winery’s
wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and conduct, respondents were
guilty of laches and estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO cigarettes.

In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit, respondent’s prayer for the issuance of a writ of preliminary injunction,25 holding
that respondent’s GALLO trademark registration certificate covered wines only, that respondents’ wines and petitioners’ cigarettes were not related goods
and respondents failed to prove material damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court.26

On August 19, 1993, the Makati RTC denied, for lack of merit, respondents’ motion for reconsideration. The court reiterated that respondents’ wines and
petitioners’ cigarettes were not related goods since the likelihood of deception and confusion on the part of the consuming public was very remote. The trial
court emphasized that it could not rely on foreign rulings cited by respondents "because the[se] cases were decided by foreign courts on the basis of unknown
facts peculiar to each case or upon factual surroundings which may exist only within their jurisdiction. Moreover, there [was] no showing that [these cases
had] been tested or found applicable in our jurisdiction."27
 49

On February 20, 1995, the CA likewise dismissed respondents’ petition for review on certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati
RTC’s denial of the application for issuance of a writ of preliminary injunction against petitioners.28

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

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

a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons acting for them or under their
instructions, from (i) using E & J’s registered trademark GALLO or any other reproduction, counterfeit, copy or colorable imitation of said
trademark, either singly or in conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing
other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under
the GALLO trademark.

b. ordering defendants to pay plaintiffs –

(i) actual and compensatory damages for the injury and prejudice and impairment of plaintiffs’ business and goodwill as a
result of the acts and conduct pleaded as basis for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO
HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the complaint until fully paid;
(ii) exemplary damages in the amount of PHP100,000.00;
(iii) attorney’s fees and expenses of litigation in the amount of PHP1,130,068.91;
(iv) the cost of suit.

SO ORDERED."29

On June 24, 1999, the Makati RTC granted respondent’s motion for partial reconsideration and increased the award of actual and compensatory damages to
10% of P199,290,000 or P19,929,000.30

On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioner’s motion for reconsideration.

III. The Issues

Petitioners now seek relief from this Court contending that the CA did not follow prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual
Property Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes and GALLO wines were identical, similar or related goods for the
reason alone that they were purportedly forms of vice; [c] both goods passed through the same channels of trade and [d] petitioners were liable for trademark
infringement, unfair competition and damages.31

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

IV. Discussion

THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE COURT TO REVIEW THE CA’S FACTUAL FINDINGS

As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of law"32 (that is, the doubt pertains to the application and
interpretation of law to a certain set of facts) and not "questions of fact" (where the doubt concerns the truth or falsehood of alleged facts), 33 otherwise, the
petition will be denied. We are not a trier of facts and the Court of Appeals’ factual findings are generally conclusive upon us. 34

This case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the factual issues concerning the goods’
similarity, identity, relation, channels of trade, and acts of trademark infringement and unfair competition is greatly dependent on the interpretation of
applicable laws. The controversy here is not simply the identity or similarity of both parties’ trademarks but whether or not infringement or unfair
competition was committed, a conclusion based on statutory interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to
review the evidence on record:35

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

(2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts;
(5) the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant
and the appellee;
(6) the findings are without citation of specific evidence on which they are based;
(7) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and
(8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted [by the evidence] on record.36

In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all factors to determine whether trademark infringement
and/or unfair competition has been committed, we conclude that both the Court of Appeals and the trial court veered away from the law and well-settled
jurisprudence.
 50

Thus, we give due course to the petition.

THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE APPLICABLE LAWS, NOT THE INTELLECTUAL PROPERTY CODE

We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair competition committed during the effectivity of the
Paris Convention and the Trademark Law.

Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the aforesaid governing laws but also under the IP Code
which took effect only on January 1, 1998,37 or about five years after the filing of the complaint:

Defendants’ unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to Section 22 of Republic Act No. 166, Section
155 of the IP Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on
the part of the purchasing public.38 (Emphasis and underscoring supplied)

The CA apparently did not notice the error and affirmed the Makati RTC decision:

In the light of its finding that appellants’ use of the GALLO trademark on its cigarettes is likely to create confusion with the GALLO trademark on
wines previously registered and used in the Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that
appellants’ acts not only violated the provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also Article 6bis of the Paris
Convention.39 (Emphasis and underscoring supplied)

We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case.

It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it has first been promulgated. A law that is not yet
effective cannot be considered as conclusively known by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of
the legislative power.40 Nova constitutio futuris formam imponere debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt
must generally be resolved against the retroactive operation of laws, whether these are original enactments, amendments or repeals.41 There are only a few
instances when laws may be given retroactive effect,42 none of which is present in this case.

The IP Code, repealing the Trademark Law,43 was approved on June 6, 1997. Section 241 thereof expressly decreed that it was to take effect only on January 1,
1998, without any provision for retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the present case within the
parameters of the Trademark Law and the Paris Convention, the laws in force at the time of the filing of the complaint.

DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION

Although the laws on trademark infringement and unfair competition have a common conception at their root, that is, a person shall not be permitted to
misrepresent his goods or his business as the goods or business of another, the law on unfair competition is broader and more inclusive than the law on
trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from the trademark adoption and registration by the
person whose goods or business is first associated with it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition,
although the two subjects are entwined with each other and are dealt with together in the Trademark Law (now, both are covered by the IP Code). Hence,
even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitor’s unfairness or fraud.
Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any
particular means should be used to this end.44

In Del Monte Corporation vs. Court of Appeals,45 we distinguished trademark infringement from unfair competition:

(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of
another.

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

(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is
not necessary.

Pertinent Provisions on Trademark Infringement under the Paris Convention and the Trademark Law

Article 6bis of the Paris Convention,46 an international agreement binding on the Philippines and the United States (Gallo Winery’s country of domicile and
origin) prohibits "the [registration] or use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark
considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to
the benefits of the [Paris] Convention and used for identical or similar goods. [This rule also applies] when the essential part of the mark constitutes a
reproduction of any such well-known mark or an imitation liable to createconfusion therewith." There is no time limit for seeking the prohibition of the use of
marks used in bad faith.47

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

(a) registration or use by another person of a trademark which is a reproduction, imitation or translation liable to create confusion,
 51

(b) of a mark considered by the competent authority of the country of registration or use 48 to be well-known in that country and is already the mark
of a person entitled to the benefits of the Paris Convention, and
(c) such trademark is used for identical or similar goods.

On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when, among others, he "uses without the consent of the
registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others
as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or
tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or services." 49 Trademark registration and actual use are material to the complaining
party’s cause of action.

Corollary to this, Section 20 of the Trademark Law50 considers the trademark registration certificate as prima facieevidence of the validity of the registration,
the registrant’s ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of
Patents51 and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-A52 of the Trademark Law emphasize the
importance of the trademark’s actual use in commerce in the Philippines prior to its registration. In the adjudication of trademark rights between contending
parties, equitable principles of laches, estoppel, and acquiescence may be considered and applied. 53

Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following constitute the elements of trademark infringement:

(a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office
(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with
which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or
identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction,
counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used
upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.

In summary, the Paris Convention protects well-known trademarks only (to be determined by domestic authorities), while the Trademark Law protects all
trademarks, whether well-known or not, provided that they have been registered and are in actual commercial use in the Philippines. Following universal
acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the Paris Convention (which is an international agreement)
and the Trademark law (which is a municipal law) the latter will prevail. 54

Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is limited only to goods identical or similar to those in
respect of which such trademark is registered and only when there is likelihood of confusion. Under both laws, the time element in commencing infringement
cases is material in ascertaining the registrant’s express or implied consent to another’s use of its trademark or a colorable imitation thereof. This is why
acquiescence, estoppel or laches may defeat the registrant’s otherwise valid cause of action.

Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of liability.

THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE TRADEMARK.

By respondents’ own judicial admission, the GALLO wine trademark was registered in the Philippines in November 1971 but the wine itself was first
marketed and sold in the country only in 1974 and only within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of
the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., Makati,
Philippines and sales invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale
and shipment of GALLO wines to the Philippines during that period. 55 Nothing at all, however, was presented to evidence the alleged sales of GALLO wines in
the Philippines in 1974 or, for that matter, prior to July 9, 1981.

On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and manufacturer’s sworn statement, it appears that petitioners
and its predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56

In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,58 Converse
Rubber Corporation vs. Universal Rubber Products, Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,60 Kabushi Kaisha Isetan
vs. Intermediate Appellate Court,61 and Philip Morris vs. Court of Appeals,62 giving utmost importance to the actual commercial useof a trademark in the
Philippines prior to its registration, notwithstanding the provisions of the Paris Convention:

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

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]):
 52

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.

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

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

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.

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is
qualified. A registration certificate serves merely as prima facieevidence. It is not conclusive but can and may be rebutted by
controverting evidence.

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

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

Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147
SCRA 154 [1987]), respectively, are instructive:

The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that
respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the
Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which
should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated
way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The
evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of
exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect
income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently
sold in the Philippines.

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
 53

Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s exclusive right to use the GALLO trademark should be limited to wines, the only
product indicated in its registration certificates. This strict statutory limitation on the exclusive right to use trademarks was amply clarified in our ruling
in Faberge, Inc. vs. Intermediate Appellate Court:64

Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private
respondent may be permitted to register the trademark "BRUTE" for briefs produced by it notwithstanding petitioner's vehement protestations of
unfair dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant, talcum powder and toilet
soap. Inasmuch as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration,
petitioner cannot and should not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is
significant that petitioner failed to annex in its Brief the so-called "eloquent proof that petitioner indeed intended to expand its mark ‘BRUT’ to
other goods" (Page 27, Brief for the Petitioner; page 202, Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may
not vest an exclusive right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section 20 of the
Trademark Law as applied to the documentary evidence adduced by petitioner, the certificate of registration issued by the Director of
Patents can confer upon petitioner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any
conditions and limitations stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining Co., Inc. vs.
Ng Sam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United States Supreme Court in American Foundries vs.
Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has adopted and used a trademark on his goods does not prevent the
adoption and use of the same trademark by others for products which are of a different description. Verily, this Court had the occasion to
observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed by the petitioner therein
since the applicant utilized the emblem "Tango" for no other product than hair pomade in which petitioner does not deal.

This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of
its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem "BRUT 33" for briefs (page
25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24
SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other
product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law
now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law in point "does not
require that the articles of manufacture of the previous user and late user of the mark should possess the same descriptive properties or should fall
into the same categories as to bar the latter from registering his mark in the principal register." (supra at page 1026).

Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as
specified in the certificate of registration following the clear message conveyed by Section 20.

How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and
Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods
produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of
registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon
the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.) 193 S.W.
1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed.,
1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol
for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken
Bayer(27 SCRA 1214 [1969]):

"Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise
whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had
never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our
Trademark Law." (1226).

NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCE OF PETITIONERS’ AND RESPONDENTS’ GOODS OR BUSINESS

A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity
of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the
particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied
in the light of each particular case. 65

There are two types of confusion in trademark infringement. The first is "confusion of goods" when an otherwise prudent purchaser is induced to purchase
one product in the belief that he is purchasing another, in which case defendant’s goods are then bought as the plaintiff’s and its poor quality reflects badly on
the plaintiff’s reputation. The other is "confusion of business" wherein the goods of the parties are different but the defendant’s product can reasonably
(though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and
defendant which, in fact, does not exist.66

In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the
trademarks are attached; [c] the likely effect on the purchaser and [d] the registrant’s express or implied consent and other fair and equitable considerations.

Petitioners and respondents both use "GALLO" in the labels of their respective cigarette and wine products. But, as held in the following cases, the use of an
identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement:

(a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered the approval of Acoje Mining’s application for registration of the trademark LOTUS
for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy
sauce, also belonged to Class 47;
 54

(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68 we upheld the Patent Director’s registration of the same trademark CAMIA for
Ng Sam’s ham under Class 47, despite Philippine Refining Company’s prior trademark registration and actual use of such mark on its lard, butter,
cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps;
(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69 we dismissed Hickok’s petition to cancel private respondent’s
HICKOK trademark registration for its Marikina shoes as against petitioner’s earlier registration of the same trademark for handkerchiefs, briefs,
belts and wallets;
(d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute resolution, we dismissed the petition for review for lack of merit and
affirmed the Patent Office’s registration of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco Corporation,
notwithstanding Shell Company’s opposition as the prior registrant of the same trademark for its gasoline and other petroleum products;
(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSO’s complaint for trademark infringement against United Cigarette
Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and
(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we affirmed the rulings of the Patent Office and the CA that NSR
Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaisha’s prior registration and use of the
same trademark for its paints, chemical products, toner and dyestuff (Class 2).

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

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

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals 76 and other cases,77 and
(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals 78 and its preceding cases.79

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

On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is
not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to
the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features
appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 81

In comparing the resemblance or colorable imitation of marks, various factors have been considered, such as the dominant color, style, size, form, meaning of
letters, words, designs and emblems used, the likelihood of deception of the mark or name's tendency to 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,"88which appears in different fonts, sizes, styles and labels, unlike
petitioners’ uniform casque-font bold-lettered GALLO mark.

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

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

WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, COMPETING OR RELATED GOODS

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

Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6 bis of the Paris Convention which proscribe trademark infringement
not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern
concept of "related goods."91Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same
maker or manufacturer, trademark infringement occurs. 92
 55

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 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
 56

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

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

xxx xxx xxx

 57

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name ‘Bailey’s’ as the mark for its cigarettes, to
capitalize upon the fame of the ‘BAILEYS’ mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found
in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in
the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson &
Robbins, 120 U.S.P.Q. at 308.

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

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

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 elementunder both the Trademark Law and the Paris
Convention.

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

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

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

"Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection
afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local
entity.

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

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

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

However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the
Director of Patents, a set of guidelines in the implementation of Article 6bis of the Treaty of Paris. These conditions are:
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).
 58

Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark
should fail." (Emphasis supplied.)

Consent of the Registrant and Other air, Just and Equitable Considerations

Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.124

Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents’ assertion is true, then
both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and
sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing,
distribution and sale of GALLO cigarettes and, on the other, respondents’ delay in enforcing their rights (not to mention implied consent, acquiescence or
negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor
of petitioners than respondents.

Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents’ goodwill in
adopting the GALLO mark for their cigarettes which are totally unrelated to respondents’ GALLO wines. Thus, we rule out trademark infringement on the part
of petitioners.

PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes off the goods
manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who commits any acts
calculated to produce said result, is guilty of unfair competition. It includes the following acts:

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

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

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

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

Costs against respondents.

G.R. No. 195956 March 11, 2015

ABS-CBN CORPORATION, Petitioner,

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

LEONEN, J.:

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

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari1 to assail the November 9, 2010 Decision2 and the March 3, 2011 Resolution3 of
the Court of Appeals. The Court of Appeals reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the withdrawal of the
Information finding probable cause for respondents’ violation of Sections 177 4 and 2115 of the Intellectual Property Code.6 Respondents are officers and
employees of GMA Network, Inc. (GMA-7). They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive Vice-President;
Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A. Soho (Soho), Director for News; Grace Dela Peña-Reyes (Dela Peña-Reyes),
Head of News and Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and others.
 59

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

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

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

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

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

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

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections 177 16 and 21117 of the Intellectual Property Code.18

On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution 19 finding probable cause to indict Dela Peña-Reyes and
Manalastas.20 Consequently, the Information21 for violation of the Intellectual Property Code was filed on December 17, 2004. It reads:

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

Contrary to law.22

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

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

Both parties moved for reconsideration of the Gonzalez Resolution. 26

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

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

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

SO ORDERED.28

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

[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption that must be proven in a full-blown trial. Disputable
presumptions may be contradicted and overcome by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and laws are evaluated
and considered. The very purpose of trial is to allow a party to present evidence to overcome the disputable presumptions involved. 31
 60

The dispositive portion of the Agra Resolution provides:

WHEREFORE, premises considered:

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

SO ORDERED.32 (Emphasis in the original)

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

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

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

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

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

The dispositive portion of the Decision reads:

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

SO ORDERED.36 (Emphasis in the original)

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

The issues for this court’s consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010 and, therefore, whether a petition for certiorari was the
proper remedy in assailing that Resolution;
Second, whether news footage is copyrightable under the law;
Third, whether there was fair use of the broadcast material;
Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright infringement;
Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual Property Code; and
Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable cause.

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

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

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

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

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

(b) There exists a prejudicial question; and

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

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

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

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

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

Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the fiscal or a review by the Secretary of Justice whereby a
motion to dismiss was submitted to the Court, the Court in the exercise of its discretion may grant the motion or deny it and require that the trial on the
merits proceed for the proper determination of the case.

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

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

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

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

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

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

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

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

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

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

Grave abuse of discretion refers to:

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

Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law[,]"54 such as a
motion for reconsideration. Generally, "a motion for reconsideration is a condition sine qua non before a petition for certiorari may lie, its purpose being to
grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a re-examination of the legal and factual circumstances of the
case."55 However, exceptions to the rule exist:

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the questions raised in the certiorari proceeding have been
duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court; (c) where there is an urgent necessity for
the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is
perishable; (d) where, under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due process and there is
extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial Court is improbable;
(g) where the proceedings in the lower court are a nullity for lack of due process; (h) where the proceedings was ex parte or in which the petitioner had no
opportunity to object; and (i) where the issue raised is one purely of law or where public interest is involved.56(Emphasis in the original, citations omitted)

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

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

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

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

III

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

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

Error of jurisdiction must be distinguished from error of judgment:

 63

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

In People v. Hon. Sandiganbayan61:

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

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

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

....

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

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

IV

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

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

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

....

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

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

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

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

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

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

....

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

In dealing with probable cause, however, as the very name implies, we deal with probabilities. These are not technical; they are the factual and practical
considerations of everyday life on which reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly correlative to what must
be proved.
 64

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The news footage is copyrightable.

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

Contrary to the old copyright law,81 the Intellectual Property Code does not require registration of the work to fully recover in an infringement suit.
Nevertheless, both copyright laws provide that copyright for a work is acquired by an intellectual creator from the moment of creation. 82
 65

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it
is claimed only as a book. x x x But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere statement of
 66

the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that of
bookkeeping.

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

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

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

....

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

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

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

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

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

The idea/expression dichotomy has long been subject to debate in the field of copyright law. Abolishing the dichotomy has been proposed, in that non-
protectibility of ideas should be re-examined, if not stricken, from decisions and the law:

If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only excuse for the continuance of the idea-expression test as a
judicial standard for determining protectibility would be that it was or could be a truly useful method of determining the proper balance between the creator’s
right to profit from his work and the public's right that the "progress of the arts not be retarded."

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

The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain material is a copy of another.101 This dichotomy would be
more relevant in determining, for instance, whether a stage play was an infringement of an author’s book involving the same characters and setting. In this
case, however, respondents admitted that the material under review — which is the subject of the controversy — is an exact copy of the original. Respondents
did not subject ABS-CBN’s footage to any editing of their own. The news footage did not undergo any transformation where there is a need to track elements
of the original.
 67

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

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright or economic rights shall consist of the exclusive right to
carry out, authorize or prevent the following acts:
177.1. Reproduction of the work or substantial portion of the work;
177.2. Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;
177.3. The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;
177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a
compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the
subject of the rental; (n)
177.5. Public display of the original or a copy of the work;
177.6. Public performance of the work; and
177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis supplied)

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

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out, authorize or
prevent any of the following acts:
211.1. The rebroadcasting of their broadcasts;
211.2. The recording in any manner, including the making of films or the use of video tape, of their broadcasts for the purpose of communication to
the public of television broadcasts of the same; and
211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D. No. 49) (Emphasis supplied)

Section 212 of the Code provides:

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts referred to in those Sections are related to:
212.1. The use by a natural person exclusively for his own personal purposes;
212.2. Using short excerpts for reporting current events;
212.3. Use solely for the purpose of teaching or for scientific research; and
212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D. No. 49a)

The Code defines what broadcasting is and who broadcasting organizations include:
202.7. "Broadcasting" means the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such
transmission by satellite is also "broadcasting" where the means for decrypting are provided to the public by the broadcasting organization or with
its consent;
202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly authorized to engage in broadcasting[.]

Developments in technology, including the process of preserving once ephemeral works and disseminating them, resulted in the need to provide a new kind of
protection as distinguished from copyright.102 The designation "neighboring rights" was abbreviated from the phrase "rights neighboring to
copyright."103 Neighboring or related rights are of equal importance with copyright as established in the different conventions covering both kinds of rights.104

Several treaties deal with neighboring or related rights of copyright. 105 The most prominent of these is the "International Convention for the Protection of
Performers, Producers of Phonograms and Broadcasting Organizations" (Rome Convention). 106

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

Article 13
Minimum Rights for Broadcasting Organizations
Broadcasting organisations shall enjoy the right to authorize or prohibit:
(a) the rebroadcasting of their broadcasts;
(b) the fixation of their broadcasts;
(c) the reproduction:
(i) of fixations, made without their consent, of their broadcasts;
(ii) of fixations, made in accordance with the provisions of Article 15, of their broadcasts, if the reproduction is made for purposes
different from those referred to in those provisions;
(d) the communication to the public of their television broadcasts if such communication is made in places accessible to the public against payment
of an entrance fee; it shall be a matter for the domestic law of the State where protection of this right is claimed to determine the conditions under
which it may be exercised.

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

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the public reception of sounds or of images or of representations
thereof; such transmission by satellite is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting organization or
with its consent."
 68

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

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

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

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

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

VI

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

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

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

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

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

In the business of television news reporting, the nature of the copyrighted work or the video footages, are such that, footage created, must be a novelty to be a
good report. Thus, when the . . . Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly affected.

Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for its own, its use can hardly be classified as fair use.

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

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

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

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

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

CHAPTER VIII
LIMITATIONS ON COPYRIGHT

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

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

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

212.2. Using short excerpts for reporting current events;

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

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

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research,
and similar purposes is not an infringement of copyright. . . . In determining whether the use made of a work in any particular case is fair use, the factors to be
considered shall include:
a. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work. Respondents allege that the news footage was only five (5)
seconds long, thus falling under fair use. ABS-CBN belies this contention and argues that the footage aired for two (2) minutes and 40
seconds.113 According to the Court of Appeals, the parties admitted that only five (5) seconds of the news footage was broadcasted by GMA-7.114

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

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual Property Code lists four (4) factors to determine if there was
fair use of a copyrighted work:
a. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.

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

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

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

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

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

Of course, in the real world there are exceptions to this perfect economic view. However, there are also many caveats with these exceptions. A common
exception is that some stations rebroadcast the news of others. The caveat is that generally, the two stations are not competing for market share. CNN, for
example, often makes news stories available to local broadcasters. First, the local broadcaster is often not affiliated with a network (hence its need for more
comprehensive programming), confining any possible competition to a small geographical area. Second, the local broadcaster is not in competition with CNN.
Individuals who do not have cable TV (or a satellite dish with decoder) cannot receive CNN; therefore there is no competition. . . . Third, CNN sells the right of
rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First Amendment freedom of access argument foremost on his mind. (Else he
 70

would give everyone free cable TV so everyone could get CNN.) He is in the business for a profit. Giving away resources does not a profit make.123 (Emphasis
supplied)

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

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

VII

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

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

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

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

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

In contrast, crimes mala in seconcern inherently immoral acts:

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime involves moral turpitude, is for the Supreme Court to
determine". In resolving the foregoing question, the Court is guided by one of the general rules that crimes mala in se involve moral turpitude, while crimes
mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:

It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by law or not. It must not be merely mala prohibita, but the
act itself must be inherently immoral. The doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude does not,
however, include such acts as are not of themselves immoral but whose illegality lies in their being positively prohibited. (Emphasis supplied)

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

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

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

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

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to knowledge of the act being done. On the other hand,
criminal intent — which is different from motive, or the moving power for the commission of the crime 137 — refers to the state of mind beyond voluntariness.
It is this intent that is being punished by crimes mala in se.
 71

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

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

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

There is a difference, however, between the required liability in civil copyright infringement and that in criminal copyright infringement in the United States.
Civil copyright infringement does not require culpability and employs a strict liability regime 144 where "lack of intention to infringe is not a defense to an
action for infringement."145

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

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

SECTION 216. Remedies for Infringement. —

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

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

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

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

d. Deliver under oath for destruction without any compensation all infringing copies or devices, as well as all plates, molds, or other
means for making such infringing copies as the court may order.

e. Such other terms and conditions, including the payment of moral and exemplary damages, which the court may deem proper, wise and
equitable and the destruction of infringing copies of the work even in the event of acquittal in a criminal case.

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

SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of Part IV of this Actor aiding or abetting such infringement
shall be guilty of a crime punishable by:
a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (₱50,000) to One hundred fifty thousand
pesos (₱150,000) for the first offense.
b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (₱150,000)
to Five hundred thousand pesos (₱500,000) for the second offense.
c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from Five hundred thousand pesos (₱500,000) to
One million five hundred thousand pesos (₱1,500,000) for the third and subsequent offenses.
d. In all cases, subsidiary imprisonment in cases of insolvency.

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

217.3. Any person who at the time when copyright subsists in a work has in his possession an article which he knows, or ought to know, to be an
infringing copy of the work for the purpose of:
 72

a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire, the article;
b. Distributing the article for purpose of trade, or for any other purpose to an extent that will prejudice the rights of the copyright owner
in the work; or
c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable on conviction to imprisonment and fine as above
mentioned. (Sec. 29, P.D. No. 49a) (Emphasis supplied)

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

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

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

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

Respondents’ arguments must fail.

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

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

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

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

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

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

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

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most importantly, in defining the contours of what it means to
willfully infringe copyright for purposes of criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not primarily about
providing the strongest possible protection for copyright owners so that they have the highest possible incentive to create more works. The control given to
copyright owners is only a means to an end: the promotion of knowledge and learning. Achieving that underlying goal of copyright law also requires access to
copyrighted works and it requires permitting certain kinds of uses of copyrighted works without the permission of the copyright owner. While a particular
 73

defendant may appear to be deserving of criminal sanctions, the standard for determining willfulness should be set with reference to the larger goals of
copyright embodied in the Constitution and the history of copyright in this country. 154

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

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

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

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

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

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

VIII

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

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

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or abetting such infringement
shall be guilty of a crime punishable by:
(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (₱50,000) to One hundred fifty thousand pesos
(₱150,000) for the first offense.
(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (₱150,000) to Five
hundred thousand pesos (₱500,000) for the second offense.
(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from five hundred thousand pesos (₱500,000) to One million
five hundred thousand pesos (₱1,500,000) for the third and subsequent offenses.
(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied) Corporations have separate and distinct personalities from
their officers or directors.157 This court has ruled that corporate officers and/or agents may be held individually liable for a crime committed under
the Intellectual Property Code:158

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

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

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

We find that the Department of Justice committed grave abuse of discretion when it resolved to file the Information against respondents despite lack of proof
of their actual participation in the alleged crime.
 74

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

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

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

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

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

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

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

4a. Contributed Content

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

Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by Reuters to its clients, including GMA-7. As in the records, the
advisory reads:

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

PHILIPPINES: HOSTAGE RETURN

**ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER

PLANNED FOR THURSDAY, JULY 22:

SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES.168

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

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the Information against all respondents despite the erroneous
piercing of the corporate veil. Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of the corporation.
 75

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

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

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

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

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

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

MARVIC M.V.F. LEONEN

Associate Justice

G.R. No. 108946 January 28, 1999

FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners,

vs.
HONORABLE FRANKLIN DRILON, GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY FRANCISCO, respondents.

MENDOZA, J.:

This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q-92-27854,
entitled "Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr.," and its resolution, dated December 3, 1992, denying petitioner
Joaquin's motion for reconsideration.

Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show
aired from 1970 to 1977.

On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the show's format and style of
presentation.

On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of It's a Date, which was
produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL,
informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airing It's a Date.

In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL,
however, continued airing It's a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned
that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action.

Meanwhile, private respondent Zosa sought to register IXL's copyright to the first episode of It's a Date for which it was issued by the National Library a
certificate of copyright August 14, 1991.

Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN
Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No.
92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the
Department of Justice.
 76

On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutor's findings and directed him to move for the
dismissal of the case against private respondents. 1

Petitioner Joaquin filed a motion for reconsideration, but his motion denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition.
Petitioners contend that:

1. The public respondent gravely abused his discretion amounting to lack of jurisdiction — when he invoked non-presentation of the master tape
as being fatal to the existence of probable cause to prove infringement, despite the fact that private respondents never raised the same as a
controverted issue.

2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of
what is copyrightable — an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding.

Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the
copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPI's copyright covers only a specific episode of Rhoda and Me and that the
formats or concepts of dating game shows are not covered by copyright protection under P.D. No. 49.

Non-Assignment of Error.

Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private
respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutor's finding of
probable cause on this ground.

A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct and control criminal
actions. 2 He is, however, subject to the control of the Secretary of Justice. Thus, Rule 112, §4 of the Revised Rules of Criminal Procedure, provides:

Sec. 4. Duty of investigating fiscal. — If the investigating fiscal finds cause to hold the respondent for trial, he shall prepare the resolution and
corresponding information. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the
complainant and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty
thereof, that the accused was informed of the complaint and of the evidence submitted against him and that he was given an opportunity to submit
controverting evidence. Otherwise, he shall recommend dismissal of the complaint.

In either case, he shall forward the records of the case to the provincial or city fiscal or chief state prosecutor within five (5) days from his
resolution. The latter shall take appropriate action thereon ten (10) days from receipt thereof, immediately informing the parties of said action.

No complaint or information may be filed or dismissed by an investigating fiscal without the prior written authority or approval of the provincial or
city fiscal or chief state prosecutor.

Where the investigating assistant fiscal recommends the dismissal of the case but his findings are reversed by the provincial or city fiscal or chief
state prosecutor on the ground that a probable cause exists, the latter may, by himself, file the corresponding information against the respondent or
direct any other assistant fiscal or state prosecutor to do so, without conducting another preliminary investigation.

If upon petition by a proper party, the Secretary of Justice reverses the resolution of the provincial or city fiscal or chief state prosecutor, he shall
direct the fiscal concerned to file the corresponding information without conducting another preliminary investigation or to dismiss or move for
dismissal of the complaint or information.

In reviewing resolutions of prosecutors, the Secretary of Justice is not precluded from considering errors, although unassigned, for the purpose of determining
whether there is probable cause for filing cases in court. He must make his own finding, of probable cause and is not confined to the issues raised by the
parties during preliminary investigation. Moreover, his findings are not subject to review unless shown to have been made with grave abuse.

Opinion of the Secretary of Justice

Petitioners contend, however, that the determination of the question whether the format or mechanics of a show is entitled to copyright protection is for the
court, and not the Secretary of Justice, to make. They assail the following portion of the resolution of the respondent Secretary of Justice:

[T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable materials as defined and enumerated in Section 2 of PD.
No. 49. Apart from the manner in which it is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a non-
copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do not fall within the class of works or materials
susceptible of copyright registration as provided in PD. No. 49. 3(Emphasis added.)

It is indeed true that the question whether the format or mechanics of petitioners television show is entitled to copyright protection is a legal question for the
court to make. This does not, however, preclude respondent Secretary of Justice from making a preliminary determination of this question in resolving
whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any grave error.

Presentation of Master Tape

 77

Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the master videotape should have been predented in order
to determine whether there was probable cause for copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals, 4 on
which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the
present case, the parties presented sufficient evidence which clearly establish "linkage between the copyright show "Rhoda and Me" and the infringing TV
show "It's a Date." 5

The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedlly selling or renting out "pirated" videotapes.
The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape.
Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of
the trial court and ruled: 6

The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of
search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the
master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or
not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes
were necessarily reproduced from master tapes that it owns.

The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out
of copyrighted films belonging to the petitioner pursuant to P.D. 49.

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

This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals 7 in which it was held:

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

In the case at bar during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective
televisions shows, on the basis of which the investigating prosecutor ruled:

As may [be] gleaned from the evidence on record, the substance of the television productions complainant's "RHODA AND ME" and
Zosa's "IT'S A DATE" is that two matches are made between a male and a female, both single, and the two couples are treated to a night
or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere
variations of the major concepts.

That there is an infringement on the copyright of the show "RHODA AND ME" both in content and in the execution of the video
presentation are established because respondent's "IT'S A DATE" is practically an exact copy of complainant's "RHODA AND ME" because
of substantial similarities as follows, to wit:

RHODA AND ME "IT'S A DATE"

Set 1 Set 1
a. Unmarried participant of one gender (searcher) appears on one side a. same
of a divider, while three (3) unmarried participants of the other gender
are on the other side of the divider. This arrangement is done to ensure
that the searcher does not see the searchees.
b. Searcher asks a question to be answered by each of the searchees. The b. same
purpose is to determine who among the searchees is the most
compatible with the searcher.
c. Searcher speculates on the match to the searchee. c. same
d. Selection is made by the use of compute (sic) methods, or by the way d. Selection is based on the answer of the Searchees.
questions are answered, or similar methods.
Set 2 Set 2
Same as above with the genders of the searcher and searchees same
interchanged. 9

Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the
presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the
existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape.
 78

To begin with the format of a show is not copyrightable. Section 2 of P.D. No. 49, 10 otherwise known as the DECREE ON INTELLECTUAL PROPERTY,
enumerates the classes of work entitled to copyright protection, to wit:

Sec. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works:
(A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers:
(B) Periodicals, including pamphlets and newspapers;
(C) Lectures, sermons, addresses, dissertations prepared for oral delivery;
(D) Letters;
(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is
fixed in writing or otherwise;
(F) Musical compositions, with or without words;
(G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of
art;
(H) Reproductions of a work of art;
(I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art;
(J) Maps, plans, sketches, and charts;
(K) Drawings or plastic works of a scientific or technical character;
(I) Photographic works and works produced by a process analogous to photography lantern slides;
(M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual
recordings;
(N) Computer programs;
(O) Prints, pictorial illustrations advertising copies, labels tags, and box wraps;
(P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or
of works of the Philippine government as herein defined, which shall be protected as provided in Section 8 of this Decree.
(Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection
and arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this
Decree.
(R) Other literary, scholarly, scientific and artistic works.

This provision is substantially the same as §172 of the INTELLECTUAL PROPERTY CODE OF PHILIPPINES (R.A. No. 8293). 11 The format or mechanics of a
television show is not included in the list of protected works in §2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to
cover them.

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not
simply a pre-existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be
obtained and enjoyed only with respect to the subjects and by the persons and on terms and conditions specified in the statute. 12

Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling within the
statutory enumeration or description. 13

Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright except that which is both
created and secured by act of Congress . . . . . 14

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea,
procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or
embodied in such work. 15 Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides:

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

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

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

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

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

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

WHEREFORE, the petition is hereby DISMISSED

 79

G.R. No. 190065 August 16, 2010

DERMALINE, INC., Petitioner,

vs.
MYRA PHARMACEUTICALS, INC. Respondent.

NACHURA, J.:

This is a petition for review on certiorari1 seeking to reverse and set aside the Decision dated August 7, 20092 and the Resolution dated October 28, 20093 of
the Court of Appeals (CA) in CA-G.R. SP No. 108627.

The antecedent facts and proceedings—

On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the Intellectual Property Office (IPO) an application for registration of the trademark
"DERMALINE DERMALINE, INC." (Application No. 4-2006011536). The application was published for Opposition in the IPO E-Gazette on March 9, 2007.

On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a Verified Opposition 4 alleging that the trademark sought to be registered by Dermaline
so resembles its trademark "DERMALIN" and will likely cause confusion, mistake and deception to the purchasing public. Myra said that the registration of
Dermaline’s trademark will violate Section 1235 of Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines). It further alleged that
Dermaline’s use and registration of its applied trademark will diminish the distinctiveness and dilute the goodwill of Myra’s "DERMALIN," registered with the
IPO way back July 8, 1986, renewed for ten (10) years on July 8, 2006. Myra has been extensively using "DERMALIN" commercially since October 31, 1977,
and said mark is still valid and subsisting.

Myra claimed that, despite Dermaline’s attempt to differentiate its applied mark, the dominant feature is the term "DERMALINE," which is practically identical
with its own "DERMALIN," more particularly that the first eight (8) letters of the marks are identical, and that notwithstanding the additional letter "E" by
Dermaline, the pronunciation for both marks are identical. Further, both marks have three (3) syllables each, with each syllable identical in sound and
appearance, even if the last syllable of "DERMALINE" consisted of four (4) letters while "DERMALIN" consisted only of three (3).

Myra also pointed out that Dermaline applied for the same mark "DERMALINE" on June 3, 2003 and was already refused registration by the IPO. By filing this
new application for registration, Dermaline appears to have engaged in a fishing expedition for the approval of its mark. Myra argued that its intellectual
property right over its trademark is protected under Section 147 6 of R.A. No. 8293.

Myra asserted that the mark "DERMALINE DERMALINE, INC." is aurally similar to its own mark such that the registration and use of Dermaline’s applied mark
will enable it to obtain benefit from Myra’s reputation, goodwill and advertising and will lead the public into believing that Dermaline is, in any way, connected
to Myra. Myra added that even if the subject application was under Classification 44 7 for various skin treatments, it could still be connected to the
"DERMALIN" mark under Classification 58 for pharmaceutical products, since ultimately these goods are very closely related.

In its Verified Answer,9 Dermaline countered that a simple comparison of the trademark "DERMALINE DERMALINE, INC." vis-à-vis Myra’s "DERMALIN"
trademark would show that they have entirely different features and distinctive presentation, thus it cannot result in confusion, mistake or deception on the
part of the purchasing public. Dermaline contended that, in determining if the subject trademarks are confusingly similar, a comparison of the words is not the
only determinant, but their entirety must be considered in relation to the goods to which they are attached, including the other features appearing in both
labels. It claimed that there were glaring and striking dissimilarities between the two trademarks, such that its trademark "DERMALINE DERMALINE, INC."
speaks for itself (Res ipsa loquitur). Dermaline further argued that there could not be any relation between its trademark for health and beauty services from
Myra’s trademark classified under medicinal goods against skin disorders.

The parties failed to settle amicably. Consequently, the preliminary conference was terminated and they were directed to file their respective position
papers.10

On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No. 2008-7011 sustaining Myra’s opposition pursuant to Section 123.1(d) of R.A. No.
8293. It disposed—

WHEREFORE, the Verified Opposition is, as it is, hereby SUSTAINED. Consequently, Application Serial No. 4-2006-011536 for the mark ‘DERMALINE,
DERMALINE, INC. Stylized Wordmark’ for Dermaline, Inc. under class 44 covering the aforementioned goods filed on 21 October 2006, is as it is hereby,
REJECTED.

Let the file wrapper of ‘DERMALINE, DERMALINE, INC. Stylized Wordmark’ subject matter of this case be forwarded to the Bureau of Trademarks (BOT) for
appropriate action in accordance with this Decision.

SO ORDERED.12

Aggrieved, Dermaline filed a motion for reconsideration, but it was denied under Resolution No. 2009-12(D)13 dated January 16, 2009.

Expectedly, Dermaline appealed to the Office of the Director General of the IPO. However, in an Order 14 dated April 17, 2009, the appeal was dismissed for
being filed out of time.
 80

Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order dated April 17, 2009 and the rejection of Dermaline’s application for
registration of trademark. The CA likewise denied Dermaline’s motion for reconsideration; hence, this petition raising the issue of whether the CA erred in
upholding the IPO’s rejection of Dermaline’s application for registration of trademark.

The petition is without merit.

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on
his goods to identify and distinguish them from those manufactured, sold, or dealt by others.15 Inarguably, it is an intellectual property deserving protection
by law. In trademark controversies, each case must be scrutinized according to its peculiar circumstances, such that jurisprudential precedents should only be
made to apply if they are specifically in point.16

As Myra correctly posits, as a registered trademark owner, it has the right under Section 147 of R.A. No. 8293 to prevent third parties from using a trademark,
or similar signs or containers for goods or services, without its consent, identical or similar to its registered trademark, where such use would result in a
likelihood of confusion.

In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test.

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception. 17 It is applied
when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or
deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should
suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive
the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question.18 Given greater consideration are
the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets, and market
segments.19 The test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides—

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

On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in
determining confusing similarity. The scrutinizing eye of the observer must focus not only on the predominant words but also on the other features appearing
in both labels so that a conclusion may be drawn as to whether one is confusingly similar to the other. 20

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz: (1) confusion of goods (product
confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2)
confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is
applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived
either into that belief or into the belief that there is some connection between the two parties, though inexistent. 21

In rejecting the application of Dermaline for the registration of its mark "DERMALINE DERMALINE, INC.," the IPO applied the Dominancy Test. It declared that
both confusion of goods and service and confusion of business or of origin were apparent in both trademarks. It also noted that, per Bureau Decision No.
2007-179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark "DERMALINE" of Dermaline under Classification 5.
The IPO also upheld Myra’s right under Section 138 of R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the
validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in connection with the goods and
those that are related thereto specified in the certificate.

We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a
dominant feature with respect to trademarks applied for registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or
some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.22

Dermaline’s insistence that its applied trademark "DERMALINE DERMALINE, INC." had differences "too striking to be mistaken" from Myra’s "DERMALIN"
cannot, therefore, be sustained. While it is true that the two marks are presented differently – Dermaline’s mark is written with the first "DERMALINE" in
script going diagonally upwards from left to right, with an upper case "D" followed by the rest of the letters in lower case, and the portion "DERMALINE, INC."
is written in upper case letters, below and smaller than the long-hand portion; while Myra’s mark "DERMALIN" is written in an upright font, with a capital "D"
and followed by lower case letters – the likelihood of confusion is still apparent. This is because they are almost spelled in the same way, except for
Dermaline’s mark which ends with the letter "E," and they are pronounced practically in the same manner in three (3) syllables, with the ending letter "E" in
Dermaline’s mark pronounced silently. Thus, when an ordinary purchaser, for example, hears an advertisement of Dermaline’s applied trademark over the
radio, chances are he will associate it with Myra’s registered mark.

Further, Dermaline’s stance that its product belongs to a separate and different classification from Myra’s products with the registered trademark does not
eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications
pertain to treatments for the skin.1avvphi1

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. The Court is cognizant that the registered trademark owner enjoys protection in
product and market areas that are the normal potential expansion of his business. Thus, we have held –

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name
 81

is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential
expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). 23 (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and
beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying
pharmaceutical topical applications for the skin to health and beauty services.

Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered
by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously
registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered
trademark and an established goodwill.24

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

WHEREFORE, the petition is DENIED. The Decision dated August 7, 2009 and the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No.
108627 are AFFIRMED. Costs against petitioner.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

G.R. No. 131522 July 19, 1999

PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners,

vs.
FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents.

PARDO, J.:

The case before us is a petition for review on certiorari1 to set aside the (a) decision or the Court of Appeals2, and (b) the resolution denying petitioners'
motion for reconsideration,3 in which the appellate court affirmed the trial court's dismissal of the complaint for infringement and/or unfair competition and
damages but deleted the award for attorney's fees.1âwphi1.nêt

The facts are as follows:

Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their
combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN
ENGLISH, Series 1.

Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled "DEVELOPING
ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them.

In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same
subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was
strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET.

After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondent's book are similar, if
not all together a copy of petitioners' book, which is a case of plagiarism and copyright infringement.

Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the
general public the infringed copies of respondent Robles' works.

However, respondents ignored the demands, hence, on July 7, 1988; petitioners filed with the Regional Trial Court, Makati, a complaint for "Infringement
and/or unfair competition with damages" 4 against private respondents.5

In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners' works, and
without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of
CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP,
without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely
affected and substantially diminished the sale of the petitioners' book and caused them actual damages by way of unrealized income.
 82

Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the
market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and
other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its
publication and sale.

Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent
Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and
caused to be published by respondent Robles with obvious connivance with one another.

On July 27, 1988, respondent Robles filed a motion for a bill of particulars 6 which the trial court approved on August 17, 1988. Petitioners complied with the
desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the
petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondent's book.

On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint 7 and alleged that petitioners had no cause of action against
Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of
petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the
manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and
held the publisher without any liability.

On November 28, 1988, respondent Robles filed her answer 8, and denied the allegations of plagiarism and copying that petitioners claimed. Respondent
stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted
book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of
Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the
authors to both works and standards and syllabus; and (3) the similarities may be due to the authors' exercise of the "right to fair use of copyrigthed
materials, as guides."

Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana
was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University.9

During the pre-trial conference, the parties agreed to a stipulation of

facts 10 and for the trial court to first resolve the issue of infringement before disposing of the claim for damages.

After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus:

WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill
Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and
defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for cost of suit.

IT IS SO ORDERED.

Done in the City of Manila this 23rd day of April, 1993.

(s/t) MARVIE R. ABRAHAM SINGSON

Assisting Judge

S. C. Adm. Order No. 124-92 11

On May 14, 1993, petitioners filed their notice of appeal with the trial court 12, and on July 19, 1993, the court directed its branch clerk of court to forward all
the records of the case to the Court of Appeals. 13

In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that
the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not
subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint. 14

On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision
state:

It must be noted, however, that similarity of the allegedly infringed work to the author's or proprietor's copyrighted work does not of
itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have
the same common source, as in this case.

Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from
foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters
claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier
books on College English, including foreign books, e.i. Edmund Burke's "Speech on Conciliation", Boerigs' "Competence in English" and
Broughton's, "Edmund Burke's Collection."
 83

xxx xxx xxx

Appellant's reliance on the last paragraph on Section II is misplaced. It must be emphasized that they failed to prove that their books
were made sources by appellee. 15

The Court of Appeals was of the view that the award of attorneys' fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in
instituting the action against respondents.

On July 12, 1997, petitioners filed a motion for reconsideration, 16 however, the Court of Appeals denied the same in a Resolution 17 dated November 25, 1997.

Hence, this petition.

In this appeal, petitioners submit that the appellate court erred in affirming the trial court's decision.

Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET,
respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the
copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writer's right to fair use, in violation
of Section 11 of Presidential Decree No. 49. 18

We find the petition impressed with merit.

The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of
intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293.
Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an
owner of a copyright as follows:

Sec. 177. Copy or Economic rights. — Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive
right to carry out, authorize or prevent the following acts:
177.1 Reproduction of the work or substanlial portion of the work;
177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work;
177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer
program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the
copy which is the subject of the rental; (n)
177.5 Public display of the original or copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work 19

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

Sec. 184.1 Limitations on copyright. — Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement
of copyright:

(a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free
of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49]

(b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the
purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the
source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49)

xxx xxx xxx

(e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is
made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if
appearing in the work is mentioned; 20

In the above quoted provisions, "work" has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific
works. 21
A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET.
On page 404 of petitioners' Book 1 of College English for Today, the authors wrote:
Items in dates and addresses:
He died on Monday, April 15, 1975.
Miss Reyes lives in 214 Taft Avenue,
Manila 22
On page 73 of respondents Book 1 Developing English Today, they wrote:
He died on Monday, April 25, 1975.
Miss Reyes address is 214 Taft Avenue Manila 23
 84

On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus:

The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless
negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the
juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace;
sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific.

— Edmund Burke, "Speech on Criticism." 24

On page 100 of the book DEP 25, also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners
acknowledged the author Edmund Burke, and respondents did not.

In several other pages 26 the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET.

We believe that respondent Robles' act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge
the same in her book is an infringement of petitioners' copyrights.

When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If
so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is
appropriated. 27

In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute
infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is
sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law
to constitute piracy. 28

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof.
Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and
infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of
the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 29

The respondents' claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between
her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction
under Sec 184 of Republic Act 8293 it is provided that:

Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright:

(c) The making of quotations from a published work if they are compatible with fair use and only to the extent
justified for the purpose, including quotations from newspaper articles and periodicals in the form of press
summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned.

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any
copyright; he at least knew that what he was copying was not his, and he copied at his peril. 30

The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some
sections of the books or large segments of the books are the same?

In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be
correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment
about the "Author Card". However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were
presented and the identical examples can not pass as similarities merely because of technical consideration.

The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective
academic experience, teaching approach and methodology are almost identical because they were of the same background.

However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an
excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this
case. How can similar/identical examples not be considered as a mark of copying?

We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of
petitioners' complaint while pharisaically denying petitioners' demand. It was further noted that when the book DEP was re-issued as a revised version, all the
pages cited by petitioners to contain portion of their book College English for Today were eliminated.

In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that respondent
Robles lifted from petitioners' book materials that were the result of the latter's research work and compilation and misrepresented them as her own. She
circulated the book DEP for commercial use did not acknowledged petitioners as her source.
 85

Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners' work as authors is the
product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give
protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published
work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the
form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned.

In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The
final product of an author's toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is
ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners
and to render decision in accordance with the evidence submitted to it.

Separate Opinions

DAVIDE, JR., C.J., dissenting opinion:

I am unable to join the majority view.

From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the Court of Appeals.

On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent
Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil
Case No. 88-1317.

HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published works College English for Today, Books
1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 1; they discovered that ROBLES' own published works, Developing English
Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as
to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of
particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished
without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's
original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES
and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the
destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to
render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of
sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and
expenses of litigation.

In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism,
incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the
latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages
GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on
the aforementioned Agreement.

In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the
segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that
"influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and
orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and
customarily understood as incapable of private and exclusive use, appropriation or copyright; and (3) her works were the result of the legitimate and
reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional
professional activities in general education, language and literature, as well as her teaching experience in graduate and post graduate education would obviate
the remotest possibility of plagiarism.

ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to
the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic
Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in
DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be
considered a copy or plagiarism of the other.

At the pre-trial conference, the parties agreed to a stipulation of facts2 and for the court to first resolve the issue of infringement before disposing of the claims
for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill
Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and
defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit.
 86

IT IS SO ORDERED. 3

Noting that the law applicable to the case was Presidential Decree No. 49, 4 the trial court found that HABANA, et al. failed to discharge their onus of proving
that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained
of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the
reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and
excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs
cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works,
mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against
GOODWILL were all dismissed for lack of factual and legal bases.

HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that
the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of Appeals, however, likewise disposed of the
controversy in favor of ROBLES and GOODWILL. 5

However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of
HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons,
HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence
and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and
sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the
damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation
of Section 11 of P.D. No. 49. 6 They invoke Laktaw v. Paglinawan 7 which, they theorize is on all fours with the case at bar. ROBLES contends that appeal
by certiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and
jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for
reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-
authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement.

The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and
sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL.

While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new intellectual property law, R.A. No.
8293, 8 nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in
which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the
diminution of such protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement
have, to a certain extent, remained the same.

A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its exclusive use and enjoyment to the
extent specified in the statute.9 Under Section 177 of R.A. No. 8293, 10 the copy or economic right (copyright and economic right are used interchangeably in
the statute) consists of the exclusive right to carry out, authorize or prevent the following acts:

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

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;
177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer
program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the
copy which is the subject of the rental;
177.5 Public display of the original or a copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work.

"The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain
protected from the moment of their creation and enumerated in Section 172.1, which includes books and other literary, scholarly, scientific and artistic
works. 11

Stripped in the meantime of its indisputable social and beneficial functions, 12 the use of intellectual property or creations should basically promote the
creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of
personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted
Manresa and explained:

He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the
land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its
economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a
book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important
form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies,
everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author
the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to
reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in the production of the
book is in no way rewarded. 13
 87

The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright
infringement. In essence, copyright infringement, known in general as "piracy," is a trespass on a domain owned and occupied by a copyright owner; it is
violation of a private right protected by law. 14 With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and
hold accountable the defrauder or usurper of said economic rights.

Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the
least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct.

To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright proprietor; 15 absent copying, there
can be no infringement of copyright. 16 In turn, a work is deemed by law an original if the author created it by his own skill, labor and judgment. 17 On its part, a
copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of
copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the other. 18 A visual comparison
of the portions of CET 19 juxtaposed against certain pages of DEP, 20 would inescapably lead to a conclusion that there is a discernible similarity between the
two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET.

Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large
portion of it, be copied, if so much is taken that the value of the original is substantially diminished, or if the labors of the original author are substantially, and
to an injurious extent, appropriated. 21 But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the
existence of substantial similarities does not of itself establish infringement, 22 mere similarities (not substantial similarities) in some sections of the books in
question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons
and/or factors.

1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers of such genre, 23 e.g., system of
book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph,
language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have,
as admitted by the protagonists here, been in existence for quite a long time. 24 As such, HABANA, et al. cannot demand monopoly, by way of example, in the
use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts
(frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject
card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or
operation, concept, principle, discovery or mere data, even if expressed, explained, illustrated or embodied in a work. 25

2. As found by respondent court, CET and DEP had common sources and materials, 26 such that the particular portions claimed to have been lifted and literally
reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana:

Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so
concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier
book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills.

A Yes, sir. We have never — all 35 words were copied from there.

Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was
copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than
yours (sic) you refused to admit that you copied?

A I would like to change the final statement now that in the case of defendant Robles you pointed out her source
very clear. She copied it from that book by Wills.

Q So, she did not copy it from yours?

A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic]. 27

3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience,
teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana
were faculty members of the Institute of English of the Far Eastern University from 1964 to 1974. 28 Both were ardent students, researchers, lecturers,
textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that
ROBLES assisted the former in the preparation of her doctoral dissertation. Given their near-identical academic and professional background, it is natural they
would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some
parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources of
information and materials and employing similar expressions and terms peculiar to the subject they are treating. 29

To illustrate, an excerpt from page 21 of CET reads:

Author Card

The author card is the main entry card. It contains

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and
death if he is no longer living;
 88

2. the title of the book, and the subtitle, if there is one;

3. the edition, if it is not the first;
4. the translator or illustrator, if there is any;
5. the imprint which includes the publisher, the place and date of publication;
6. the collation composed of the number of pages, volume, illustrations, and the size of the book;
7. the subjects with which the book deals [sic];
8. the call number on the upper left-hand corner.

Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is
true of St. and Saint.

While a portion of DEP found on page 18 which discusses the author card provides:

The author card is the main entry card containing:

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and
death if he is no longer living;
2. the title of the book, and the subtitle if there is one;
3. the edition, if it is not the first;
4. the translator or illustrator, if any;
5. the imprint which includes the publisher, the place and date of publication;
6. the collation, composed of the number of pages, volume, illustrations, and the size of the book;
7. the subject with which the book deals; and
8. the call number on the upper-left hand corner.

Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true
also of St. and Saint.

The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no
choice but to articulate the terms particular to the entries in an identical manner.

I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual
determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings
unless compelling and cogent reasons necessitate a reexamination, if not a reversal, of the same. 30 Tested against this jurisprudential canon, to subject the
challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident.

I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that
defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and
improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January
1879 on Intellectual Property. This Court anchored its decision on the following observations:

(1) [O] the 23,560 Spanish words in the defendant's

dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words
to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words;

(2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different
meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's
dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are
numerous. . .;

(3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog
are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their
meanings and equivalents in Tagalog from the plaintiff's dictionary. 31

Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of words supposedly usurped in a segment
of DEP from CET, 32 the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to
support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated,
this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent investigation or research of the original
works or authors she consulted was unrebutted; 33 for germane here is the question of whether the alleged infringer could have obtained the same
information by going to the same source by her own independent research. 34 ROBLES convinced the trial court and the Court of Appeals on this; thus, we are
bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the
infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is conceded that they are telltale signs that infringement might have
been committed. 35 However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time
apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another
person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on
intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted
materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for
criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar purposes. 36 Further, the
limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 in consonance with the principle of fair use have been
reproduced and incorporated in the new law. 37 All told, Laktaw is inapplicable.1âwphi1.nêt
 89

Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying the
theme or ideas rather than their expression. 38 No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance
with the principle that there can be no infringement if there was no copying. 39 It is only where some form of copying has been shown that it becomes
necessary to determine whether it has been carried to an "unfair," that is, illegal, extent. 40 Consequently, there is no reason to address the issue of whether
ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET.

WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals.

Separate Opinions

DAVIDE, JR., C.J., dissenting opinion:

I am unable to join the majority view. From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the
Court of Appeals.

On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent
Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil
Case No. 88-1317.

HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published works College English for Today, Books
1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 1; they discovered that ROBLES' own published works, Developing English
Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as
to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of
particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished
without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's
original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES
and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the
destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to
render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of
sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and
expenses of litigation.

In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism,
incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the
latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages
GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on
the aforementioned Agreement.

In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the
segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that
"influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and
orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and
customarily understood as incapable of private and exclusive use, appropriation or copyright; and (3) her works were the result of the legitimate and
reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional
professional activities in general education, language and literature, as well as her teaching experience in graduate and post graduate education would obviate
the remotest possibility of plagiarism.

ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to
the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic
Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in
DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be
considered a copy or plagiarism of the other.

At the pre-trial conference, the parties agreed to a stipulation of facts2 and for the court to first resolve the issue of infringement before disposing of the claims
for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill
Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and
defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit.

IT IS SO ORDERED. 3

Noting that the law applicable to the case was Presidential Decree No. 49, 4 the trial court found that HABANA, et al. failed to discharge their onus of proving
that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained
of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the
reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and
excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs
cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works,
 90

mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against
GOODWILL were all dismissed for lack of factual and legal bases.

HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that
the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of Appeals, however, likewise disposed of the
controversy in favor of ROBLES and GOODWILL. 5

However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of
HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons,
HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence
and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and
sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the
damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation
of Section 11 of P.D. No. 49. 6 They invoke Laktaw v. Paglinawan 7 which, they theorize is on all fours with the case at bar. ROBLES contends that appeal
by certiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and
jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for
reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-
authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement.

The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and
sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL.

While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new intellectual property law, R.A. No.
8293, 8 nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in
which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the
diminution of such protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement
have, to a certain extent, remained the same.

A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its exclusive use and enjoyment to the
extent specified in the statute.9 Under Section 177 of R.A. No. 8293, 10 the copy or economic right (copyright and economic right are used interchangeably in
the statute) consists of the exclusive right to carry out, authorize or prevent the following acts:

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

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;
177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer
program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the
copy which is the subject of the rental;
177.5 Public display of the original or a copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work.

"The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain
protected from the moment of their creation and enumerated in Section 172.1, which includes books and other literary, scholarly, scientific and artistic
works. 11

Stripped in the meantime of its indisputable social and beneficial functions, 12 the use of intellectual property or creations should basically promote the
creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of
personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted
Manresa and explained:

He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the
land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its
economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a
book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important
form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies,
everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author
the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to
reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in the production of the
book is in no way rewarded. 13

The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright
infringement. In essence, copyright infringement, known in general as "piracy," is a trespass on a domain owned and occupied by a copyright owner; it is
violation of a private right protected by law. 14 With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and
hold accountable the defrauder or usurper of said economic rights.

Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the
least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct.
 91

To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright proprietor; 15 absent copying, there
can be no infringement of copyright. 16 In turn, a work is deemed by law an original if the author created it by his own skill, labor and judgment. 17 On its part, a
copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of
copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the other. 18 A visual comparison
of the portions of CET 19 juxtaposed against certain pages of DEP, 20 would inescapably lead to a conclusion that there is a discernible similarity between the
two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET.

Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large
portion of it, be copied, if so much is taken that the value of the original is substantially diminished, or if the labors of the original author are substantially, and
to an injurious extent, appropriated. 21 But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the
existence of substantial similarities does not of itself establish infringement, 22 mere similarities (not substantial similarities) in some sections of the books in
question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons
and/or factors.

1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers of such genre, 23 e.g., system of
book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph,
language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have,
as admitted by the protagonists here, been in existence for quite a long time. 24 As such, HABANA, et al. cannot demand monopoly, by way of example, in the
use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts
(frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject
card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or
operation, concept, principle, discovery or mere data, even if expressed, explained, illustrated or embodied in a work. 25

2. As found by respondent court, CET and DEP had common sources and materials, 26 such that the particular portions claimed to have been lifted and literally
reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana:

Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so
concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier
book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills.

A Yes, sir. We have never — all 35 words were copied from there.

Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was
copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than
yours (sic) you refused to admit that you copied?

A I would like to change the final statement now that in the case of defendant Robles you pointed out her source
very clear. She copied it from that book by Wills.

Q So, she did not copy it from yours?

A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic]. 27

3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience,
teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana
were faculty members of the Institute of English of the Far Eastern University from 1964 to 1974. 28 Both were ardent students, researchers, lecturers,
textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that
ROBLES assisted the former in the preparation of her doctoral dissertation. Given their near-identical academic and professional background, it is natural they
would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some
parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources of
information and materials and employing similar expressions and terms peculiar to the subject they are treating. 29

To illustrate, an excerpt from page 21 of CET reads:

Author Card

The author card is the main entry card. It contains

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and
death if he is no longer living;
2. the title of the book, and the subtitle, if there is one;
3. the edition, if it is not the first;
4. the translator or illustrator, if there is any;
5. the imprint which includes the publisher, the place and date of publication;
6. the collation composed of the number of pages, volume, illustrations, and the size of the book;
7. the subjects with which the book deals [sic];
8. the call number on the upper left-hand corner.

Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is
true of St. and Saint.
 92

While a portion of DEP found on page 18 which discusses the author card provides:

The author card is the main entry card containing:

1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and
death if he is no longer living;
2. the title of the book, and the subtitle if there is one;
3. the edition, if it is not the first;
4. the translator or illustrator, if any;
5. the imprint which includes the publisher, the place and date of publication;
6. the collation, composed of the number of pages, volume, illustrations, and the size of the book;
7. the subject with which the book deals; and
8. the call number on the upper-left hand corner.

Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true
also of St. and Saint.

The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no
choice but to articulate the terms particular to the entries in an identical manner.

I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual
determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings
unless compelling and cogent reasons necessitate a reexamination, if not a reversal, of the same. 30 Tested against this jurisprudential canon, to subject the
challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident.

I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that
defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and
improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January
1879 on Intellectual Property. This Court anchored its decision on the following observations:

(1) [O] the 23,560 Spanish words in the defendant's

dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words
to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words;

(2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different
meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's
dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are
numerous. . .;

(3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog
are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their
meanings and equivalents in Tagalog from the plaintiff's dictionary. 31

Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of words supposedly usurped in a segment
of DEP from CET, 32 the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to
support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated,
this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent investigation or research of the original
works or authors she consulted was unrebutted; 33 for germane here is the question of whether the alleged infringer could have obtained the same
information by going to the same source by her own independent research. 34 ROBLES convinced the trial court and the Court of Appeals on this; thus, we are
bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the
infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is conceded that they are telltale signs that infringement might have
been committed. 35 However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time
apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another
person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on
intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted
materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for
criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar purposes. 36 Further, the
limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 in consonance with the principle of fair use have been
reproduced and incorporated in the new law. 37 All told, Laktaw is inapplicable.

Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as copying the
theme or ideas rather than their expression. 38 No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance
with the principle that there can be no infringement if there was no copying. 39 It is only where some form of copying has been shown that it becomes
necessary to determine whether it has been carried to an "unfair," that is, illegal, extent. 40 Consequently, there is no reason to address the issue of whether
ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET.1âwphi1.nêt

WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals.

G.R. No. 192294 November 21, 2012

 93

GREAT WHITE SHARK ENTERPRISES, INC., Petitioner,

vs.
DANILO M. CARALDE, JR., Respondent.

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court is the December 14, 2009 Decision 1 of the Court of Appeals (CA) in CA-
G.R. SP No. 105787, which reversed and set aside the October 6, 2008 Decision2 of the Director General of the Intellectual Property Office (IPO), and directed
him to grant the application for the mark "SHARK & LOGO" filed by respondent Danilo M. Caralde, Jr. (Caralde).

The Factual Antecedents

On July 31, 2002, Caralde filed before the Bureau of Legal Affairs (BLA), IPO a trademark application seeking to register the mark "SHARK & LOGO" for his
manufactured goods under Class 25, such as slippers, shoes and sandals. Petitioner Great White Shark Enterprises, Inc. (Great White Shark), a foreign
corporation domiciled in Florida, USA, opposed3 the application claiming to be the owner of the mark consisting of a representation of a shark in color, known
as "GREG NORMAN LOGO" (associated with apparel worn and promoted by Australian golfer Greg Norman). It alleged that, being a world famous mark which
is pending registration before the BLA since February 19, 2002, 4 the confusing similarity between the two (2) marks is likely to deceive or confuse the
purchasing public into believing that Caralde's goods are produced by or originated from it, or are under its sponsorship, to its damage and prejudice.

In his Answer,5 Caralde explained that the subject marks are distinctively different from one another and easily distinguishable. When compared, the only
similarity in the marks is in the word "shark" alone, differing in other factors such as appearance, style, shape, size, format, color, ideas counted by marks, and
even in the goods carried by the parties.

Pending the inter partes proceedings, Great White Shark’s trademark application was granted and it was issued Certificate of Registration No. 4-2002-001478
on October 23, 2006 for clothing, headgear and footwear, including socks, shoes and its components. 6

The Ruling of the BLA Director

On June 14, 2007, the BLA Director rendered a Decision7 rejecting Caralde's application, ratiocinating, as follows:

Prominent in both competing marks is the illustration of a shark.1âwphi1 The dominant feature in opposer's mark is the illustration of a shark drawn plainly.
On the other hand, the dominant feature in respondent's mark is a depiction of shark shaded darkly, with its body designed in a way to contain the letters "A"
and "R" with the tail suggestive of the letter "K." Admittedly, there are some differences between the competing marks. Respondent's mark contains additional
features which are absent in opposer's mark. Their dominant features, i.e., that of an illustration of a shark, however, are of such degree that the overall
impression it create [sic] is that the two competing marks are at least strikingly similar to each another [sic], hence, the likelihood of confusion of goods is
likely to occur. x x x x

Moreover, the goods of the competing marks falls [sic] under the same Class 25. Opposer's mark GREG NORMAN LOGO, which was applied for registration on
February 19, 2002, pertains to clothing apparel particularly hats, shirts and pants. Respondent, on the other hand, later applied for the registration of the
mark SHARK & LOGO on July 3, 2002 (should be July 31, 2002) for footwear products particularly slippers, shoes, sandals. Clearly, the goods to which the
parties use their marks belong to the same class and are related to each other." 8 (Italics ours)

The BLA Director, however, found no merit in Great White Shark's claim that its mark was famous and well-known for insufficiency of evidence.

The Ruling of the IPO Director General

On appeal, the IPO Director General affirmed9 the final rejection of Caralde's application, ruling that the competing marks are indeed confusingly similar. Great
White Shark's mark is used in clothing and footwear, among others, while Caralde's mark is used on similar goods like shoes and slippers. Moreover, Great
White Shark was first in applying for registration of the mark on February 19, 2002, followed by Caralde on July 31, 2002. Furthermore, Great White Shark’s
mark consisted of an illustration of a shark while Caralde's mark had a composite figure forming a silhouette of a shark. Thus, as to content, word, sound and
meaning, both marks are similar, barring the registration of Caralde's mark under Section 123.1(d) of Republic Act No. 8293, otherwise known as the
Intellectual Property Code (IP Code). Nonetheless, while Great White Shark submitted evidence of the registration of its mark in several other countries, the
IPO Director General considered its mark as not well-known for failing to meet the other criteria laid down under Rule 10210 of the Rules and Regulations on
Trademarks, Service Marks, Trade Names and Marked or Stamped Containers.

The Ruling of the Court of Appeals

However, on petition for review, the CA reversed and set aside the foregoing Decision and directed the IPO to grant Caralde's application for registration of the
mark "SHARK & LOGO." The CA found no confusing similarity between the subject marks notwithstanding that both contained the shape of a shark as their
dominant feature. It observed that Caralde's mark is more fanciful and colorful, and contains several elements which are easily distinguishable from that of the
Great White Shark. It further opined that considering their price disparity, there is no likelihood of confusion as they travel in different channels of trade. 11

Issues Before The Court

THE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENT'S MARK SUBJECT OF THE APPLICATION BEING OPPOSED BY THE PETITIONER IS NOT
CONFUSINGLY SIMILAR TO PETITIONER'S REGISTERED MARK THE COURT OF APPEALS ERRED IN RULING THAT THE COST OF GOODS COULD NEGATE
LIKELIHOOD OF CONFUSION THE COURT OF APPEALS ERRED IN REVERSING THE PREVIOUS RESOLUTIONS OF THE DIRECTOR GENERAL AND THE BLA 12
 94

The Court's Ruling

In the instant petition for review on certiorari, Great White Shark maintains that the two (2) competing marks are confusingly similar in appearance, shape
and color scheme because of the dominant feature of a shark which is likely to deceive or cause confusion to the purchasing public, suggesting an intention on
Caralde's part to pass-off his goods as that of Great White Shark and to ride on its goodwill. This, notwithstanding the price difference, targets market and
channels of trade between the competing products. Hence, the CA erred in reversing the rulings of the IPO Director General and the BLA Director who are the
experts in the implementation of the IP Code.

The petition lacks merit.

A trademark device is susceptible to registration if it is crafted fancifully or arbitrarily and is capable of identifying and distinguishing the goods of one
manufacturer or seller from those of another. Apart from its commercial utility, the benchmark of trademark registrability is distinctiveness.13 Thus, a generic
figure, as that of a shark in this case, if employed and designed in a distinctive manner, can be a registrable trademark device, subject to the provisions of the
IP Code.

Corollarily, Section 123.1(d) of the IP Code provides that a mark cannot be registered if it is identical with a registered mark belonging to a different
proprietor with an earlier filing or priority date, with respect to the same or closely related goods or services, or has a near resemblance to such mark as to
likely deceive or cause confusion.

In determining similarity and likelihood of confusion, case law has developed the Dominancy Test and the Holistic or Totality Test. The Dominancy Test
focuses on the similarity of the dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the ordinary
purchaser, and gives more consideration to the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like
prices, quality, sales outlets, and market segments. In contrast, the Holistic or Totality Test considers the entirety of the marks as applied to the products,
including the labels and packaging, and focuses not only on the predominant words but also on the other features appearing on both labels to determine
whether one is confusingly similar to the other14 as to mislead the ordinary purchaser. The "ordinary purchaser" refers to one "accustomed to buy, and
therefore to some extent familiar with, the goods in question."15

Irrespective of both tests, the Court finds no confusing similarity between the subject marks. While both marks use the shape of a shark, the Court noted
distinct visual and aural differences between them. In Great White Shark's "GREG NORMAN LOGO," there is an outline of a shark formed with the use of green,
yellow, blue and red16lines/strokes, to wit:

In contrast, the shark in Caralde's "SHARK & LOGO" mark17 is illustrated in l et t er s outlined in the form of a shark with the letter "S" forming the head, the
letter "H" forming the fins, the letters "A" and "R" forming the body, and the letter "K" forming the tail. In addition, the latter mark includes several more
elements such as the word "SHARK" in a different font underneath the shark outline, layers of waves, and a tree on the right side, and liberally used the color
blue with some parts in red, yellow, green and white.18 The whole design is enclosed in an elliptical shape with two linings, thus:

As may be gleaned from the foregoing, the visual dissimilarities between the two (2) marks are evident and significant, negating the possibility of confusion in
the minds of the ordinary purchaser, especially considering the distinct aural difference between the marks.

Finally, there being no confusing similarity between the subject marks, the matter of whether Great White Shark’s mark has gained recognition and acquired
becomes unnecessary.19 Besides, both the BLA Director and the IPO Director General have ruled that Great White Shark failed to meet the criteria under Rule
102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers to establish that its mark is well-known,
and the latter failed to show otherwise.

WHEREFORE, the Court resolves to DENY the instant petition and AFFIRM the assailed December 14, 2009 Decision of the Court of Appeals (CA) for failure to
show that the CA committed reversible error in setting aside the Decision of the IPO Director General and allowing the registration of the mark "SHARK &
LOGO" by respondent Danilo M. Caralde, Jr.

ESTELA M. PERLAS-BERNABE
Associate Justice

G.R. No. 169974 April 20, 2010

 95

SUPERIOR COMMERCIAL ENTERPRISES, INC., Petitioner,

vs.
KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., Respondents.

BRION, J.:

We review in this petition for review on certiorari 1 the (1) decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the
Regional Trial Court of Quezon City, Branch 85 (RTC), 3 and dismissed the petitioner Superior Commercial Enterprises, Inc.’s (SUPERIOR) complaint for
trademark infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and
Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution 4 that denied SUPERIOR’s subsequent motion for reconsideration. The RTC
decision that the CA reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to pay SUPERIOR
₱2,000,000.00 in damages, ₱500,000.00 as attorney’s fees, and costs of the suit.

THE FACTUAL ANTECEDENTS

On February 23, 1993, SUPERIOR5 filed a complaint for trademark infringement and unfair competition with preliminary injunction against KUNNAN 6 and
SPORTS CONCEPT7 with the RTC, docketed as Civil Case No. Q-93014888.

In support of its complaint, SUPERIOR first claimed to be the owner of the trademarks, trading styles, company names and business
names8 "KENNEX",9 "KENNEX & DEVICE",10 "PRO KENNEX"11 and "PRO-KENNEX" (disputed trademarks).12 Second, it also asserted its prior use of these
trademarks, presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its name. Third, SUPERIOR also alleged
that it extensively sold and advertised sporting goods and products covered by its trademark registrations. Finally, SUPERIOR presented as evidence of its
ownership of the disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982 (Distributorship Agreement) it
executed with KUNNAN, which states:

Whereas, KUNNAN intends to acquire the ownership of KENNEX trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic] Superior is
desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines." [Emphasis supplied.]13

In its defense, KUNNAN disputed SUPERIOR’s claim of ownership and maintained that SUPERIOR – as mere distributor from October 6, 1982 until December
31, 1991 – fraudulently registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation
for the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its products in different countries, including the
Philippines since 1972.14 It created and first used "PRO KENNEX," derived from its original corporate name, as a distinctive trademark for its products in 1976.
KUNNAN also alleged that it registered the "PRO KENNEX" trademark not only in the Philippines but also in 31 other countries, and widely promoted the
"KENNEX" and "PRO KENNEX" trademarks through worldwide advertisements in print media and sponsorships of known tennis players.

On October 1, 1982, after the expiration of its initial distributorship agreement with another company, 15 KUNNAN appointed SUPERIOR as its exclusive
distributor in the Philippines under a Distributorship Agreement whose pertinent provisions state:16

Whereas, KUNNAN intends to acquire ownership of KENNEX trademark registered by the Superior in the Philippines. Whereas, the Superior is desirous of
having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines.

Now, therefore, the parties hereto agree as follows:

1. KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in the Philippines, and this Agreement could
be renewed with the consent of both parties upon the time of expiration.

2. The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark, under the registration of Patent Certificate
No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its ten (10) years contract of distributorship, and it is required that the ownership of
the said trademark shall be genuine, complete as a whole and without any defects.

3. KUNNAN will guarantee to the Superior that no other third parties will be permitted to supply the KENNEX PRODUCTS in the Philippines except
only to the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX trademark shall be null and void.

4. If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the agent in the Philippines with full power
to exercise and granted the power of attorney, to pursue any case of Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the
Philippine territory.

5. The Superior will be granted from [sic] KUNNAN’s approval before making and selling any KENNEX products made in the Philippines and the
other countries, and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB as the right.

6. Without KUNNAN’s permission, the Superior cannot procure other goods supply under KENNEX brand of which are not available to supply [sic]
by KUNNAN. However, in connection with the sporting goods, it is permitted that the Superior can procure them under KENNEX brand of which are
not available to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that SUPERIOR was obligated to assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed
that the Certificate of Registration for the KENNEX trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIOR’s
President and General Manager, misled KUNNAN’s officers into believing that KUNNAN was not qualified to hold the same due to the "many requirements set
 96

by the Philippine Patent Office" that KUNNAN could not meet. 17 KUNNAN further asserted that SUPERIOR deceived it into assigning its applications for
registration of the "PRO KENNEX" trademark in favor of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent provisions
state:18

1. In consideration of the distributorship relationship between KUNNAN and Superior, KUNNAN, who is the seller in the distributorship
relationship, agrees to assign the following trademark applications owned by itself in the Philippines to Superior who is the buyer in the
distributorship relationship.

Trademark Application Number Class

PROKENNEX 49999 28

PROKENNEX 49998 25

PROKENNEX 49997 18
2. Superior shall acknowledge that KUNNAN is still the real and truthful owner of the abovementioned trademarks, and shall agree that it will not
use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN.
3. Superior agrees that it will return back the abovementioned trademarks to KUNNAN without hesitation at the request of KUNNAN at any time.
KUNNAN agrees that the cost for the concerned assignment of the abovementioned trademarks shall be compensated by KUNNAN.1avvphi1
4. Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be clean and without any incumbency.
5. Superior agrees that after the assignment of the abovementioned trademarks, it shall have no right to reassign or license the said trademarks to
any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair competition case before the RTC, KUNNAN filed with the now defunct Bureau of Patents,
Trademarks and Technology Transfer19 separate Petitions for the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and
49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial Nos. 84565 and 84566,
docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for Cancellation) involving the KENNEX and PRO KENNEX trademarks.20 In
essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and appropriated the disputed
trademarks; as mere distributor and not as lawful owner, it obtained the registrations and assignments of the disputed trademarks in violation of the terms of
the Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended.21

On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor.
Subsequently, KUNNAN also caused the publication of a Notice and Warning in the Manila Bulletin’s January 29, 1993 issue, stating that (1) it is the owner of
the disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor.
This notice prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN.22

The RTC Ruling

On March 31, 1998, the RTC issued its decision23 holding KUNNAN liable for trademark infringement and unfair competition. The RTC also issued a writ of
preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed trademarks.

The RTC found that SUPERIOR sufficiently proved that it was the first user and owner of the disputed trademarks in the Philippines, based on the findings of
the Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was "rightfully entitled to register the mark ‘KENNEX’ as user and owner
thereof." It also considered the "Whereas clause" of the Distributorship Agreement, which categorically stated that "KUNNAN intends to acquire ownership of
[the] KENNEX trademark registered by SUPERIOR in the Philippines." According to the RTC, this clause amounts to KUNNAN’s express recognition of
SUPERIOR’s ownership of the KENNEX trademarks.24

KUNNAN and SPORTS CONCEPT appealed the RTC’s decision to the CA where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained that
SUPERIOR was merely its distributor and could not be the owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use
and numerous valid registrations.

Intervening Developments:

The IPO and CA Rulings

In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a Manifestation and Motion praying that the decision of the Bureau of Legal Affairs
(BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the Consolidated Petitions for Cancellation be made of record and be considered by
the CA in resolving the case.25The BLA ruled in this decision –

In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to the mark "PRO KENNEX". It was proven that
actual use by Respondent-Registrant is not in the concept of an owner but as a mere distributor (Exhibits "I", "S" to "S-1", "P" and "P-1" and "Q" and "Q-2") and
as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, "a mere distributor of a product bearing a trademark, even if permitted to
use said trademark has no right to and cannot register the said trademark."

WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark "PRO-KENNEX",
the consolidated Petitions for Cancellation and the Notices of Opposition are hereby GRANTED. Consequently, the trademark "PRO-KENNEX" bearing
Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein Respondent-
 97

Registrant under the Principal Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark application Nos. 84565 and 84566, likewise for the
registration of the mark PRO-KENNEX are hereby REJECTED.

Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative Finance and Human Resources Development Services
Bureau (AFHRDSB) for appropriate action in accordance with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information
and update of its record.26

On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director General’s decision on appeal dated December 8, 2004,
denying SUPERIOR’s appeal, be given weight in the disposition of the case. 27 The dispositive portion of the decision reads: 28

WHEREFORE, premises considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the Bureau
of Legal Affairs. Accordingly, the instant appeal is DENIED and the appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director General’s ruling before the Court of Appeals on a petition for review under Rule 43 of the
Rules of Court, docketed as CA–G.R. SP No. 87928 (Registration Cancellation Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIOR’s
petition.29 On December 3, 2007, the CA decision was declared final and executory and entry of judgment was accordingly made. Hence, SUPERIOR’s
registration of the disputed trademarks now stands effectively cancelled.

The CA Ruling

On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTC’s decision of March 31, 1998. 30 It dismissed
SUPERIOR’s Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction on the ground that SUPERIOR failed to establish by
preponderance of evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks. The CA found the Certificates of Principal and
Supplemental Registrations and the "whereas clause" of the Distributorship Agreement insufficient to support SUPERIOR’s claim of ownership over the
disputed trademarks.

The CA stressed that SUPERIOR’s possession of the aforementioned Certificates of Principal Registration does not conclusively establish its ownership of the
disputed trademarks as dominion over trademarks is not acquired by the fact of registration alone;31 at best, registration merely raises a presumption of
ownership that can be rebutted by contrary evidence. 32 The CA further emphasized that the Certificates of Supplemental Registration issued in SUPERIOR’s
name do not even enjoy the presumption of ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of the
validity of registration or of the registrant’s exclusive right to use the trademarks in connection with the goods, business, or services specified in the
certificate.33

In contrast with the failure of SUPERIOR’s evidence, the CA found that KUNNAN presented sufficient evidence to rebut SUPERIOR’s presumption of ownership
over the trademarks. KUNNAN established that SUPERIOR, far from being the rightful owner of the disputed trademarks, was merely KUNNAN’s exclusive
distributor. This conclusion was based on three pieces of evidence that, to the CA, clearly established that SUPERIOR had no proprietary interest over the
disputed trademarks.

First, the CA found that the Distributorship Agreement, considered in its entirety, positively confirmed that SUPERIOR sought to be the KUNNAN’s exclusive
distributor. The CA based this conclusion on the following provisions of the Distributorship Agreement:

(1) that SUPERIOR was "desirous of [being] appointed as the sole distributor by KUNNAN in the territory of the Philippines;"

(2) that "KUNNAN will appoint the sole distributorship right to Superior in the Philippines;" and

(3) that "no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only to Superior."

The CA thus emphasized that the RTC erred in unduly relying on the first whereas clause, which states that "KUNNAN intends to acquire ownership of [the]
KENNEX trademark registered by SUPERIOR in the Philippines" without considering the entirety of the Distributorship Agreement indicating that SUPERIOR
had been merely appointed by KUNNAN as its distributor.

Second, the CA also noted that SUPERIOR made the express undertaking in the Assignment Agreement to "acknowledge that KUNNAN is still the real and
truthful owner of the [PRO KENNEX] trademarks," and that it "shall agree that it will not use the right of the abovementioned trademarks to do anything
which is unfavourable or harmful to KUNNAN." To the CA, these provisions are clearly inconsistent with SUPERIOR’s claim of ownership of the disputed
trademarks. The CA also observed that although the Assignment Agreement was a private document, its authenticity and due execution was proven by the
similarity of Mr. Tan Bon Diong’s signature in the Distributorship Agreement and the Assignment Agreement.

Third, the CA also took note of SUPERIOR’s Letter dated November 12, 1986 addressed to Brig. Gen. Jose Almonte, identifying itself as the "sole and exclusive
licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX products." Attached to the letter was an agreement with KUNNAN, identifying
the latter as the "foreign manufacturer of all KENNEX products." The CA concluded that in this letter, SUPERIOR acknowledged its status as a distributor in its
dealings with KUNNAN, and even in its transactions with third persons.

Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and had no right to the registration of the disputed trademarks since the right to
register a trademark is based on ownership. Citing Section 4 of Republic Act No. 166 34 and established jurisprudence,35 the CA held that SUPERIOR – as an
exclusive distributor – did not acquire any proprietary interest in the principal’s (KUNNAN’s) trademark.

The CA denied SUPERIOR’s motion for reconsideration for lack of merit in its Resolution dated October 4, 2005.
 98

THE PETITION

In the present petition, SUPERIOR raises the following issues:

I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL OWNER OF THE
TRADEMARKS "KENNEX" AND "PRO-KENNEX" IN THE PHILIPPINES
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT
KUNNAN IN THE PHILIPPINES
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF
QUEZON CITY IN CIVIL CASE NO. Q-93-14888, LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT
AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY INJUNCTION

THE COURT’S RULING

We do not find the petition meritorious.

On the Issue of Trademark Infringement

We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decision - rendered after the CA
decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) - states:

As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently established the fraudulent
registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register)
for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the
Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis
enthusiasts since 1976. Riding on the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew fully well that it
did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with
the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines.

While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment by the latter
as its exclusive distributor, Superior however breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior,
through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to
Superior its (Kunnan’s) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the
PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any incumbency when requested
by the latter.

In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling
the registration of the questioned marks in the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not
the rightful owner of the subject marks.

WHEREFORE, the foregoing considered, the petition is DISMISSED.

The CA decided that the registration of the "KENNEX" and "PRO KENNEX" trademarks should be cancelled because SUPERIOR was not the owner of, and could
not in the first place have validly registered these trademarks. Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations
were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks.

Section 22 of Republic Act No. 166, as amended ("RA 166"),36 the law applicable to this case, defines trademark infringement as follows:

Section 22. Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or
colorable imitation of any registered mark or trade-name in connection withthe sale, offering for sale, or advertising of any goods, business or services on or in
connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services,
or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit,
copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such
goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that
any right conferred upon the registrant under the provisions of RA 166 37terminates when the judgment or order of cancellation has become final, viz:

Section 19. Cancellation of registration. - If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration.
The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order
or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of
cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement
from the moment judgment or order of cancellation has become final. 38
 99

In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect of SUPERIOR’s case has been rendered moot and
academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any cause of action for trademark
infringement since the cancellation of registration of a trademark deprived it of protection from infringement from the moment judgment or order of
cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by
its certificate of registration.39 With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIOR’s case for
trademark infringement lost its legal basis and no longer presented a valid cause of action.

Even assuming that SUPERIOR’s case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by
KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the
cancellation of the registration of the disputed trademarks, SUPERIOR – as a mere distributor and not the owner – cannot assert any protection from
trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of
any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire
proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary
relationship does not terminate before application for registration is filed. 40 Thus, the CA in the Registration Cancellation Case correctly held:

As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule
that the right to register a trademark should be based on ownership. When the applicant is not the owner of the trademark being applied for, he has no right
to apply for the registration of the same. Under the Trademark Law, only the owner of the trademark, trade name or service mark used to distinguish his
goods, business or service from the goods, business or service of others is entitled to register the same. An exclusive distributor does not acquire any
proprietary interest in the principal’s trademark and cannot register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIOR’s present case for trademark infringement. The doctrine of res judicata embraces two
(2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph
(c) thereof.

In the present case, the second concept – conclusiveness of judgment – applies. Under the concept of res judicata by conclusiveness of judgment, a final
judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and
matters determined in the former suit.41 Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future
case between the same parties, even if the latter suit may involve a different cause of action. 42 This second branch of the principle of res judicata bars the re-
litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action. 43

Because the Registration Cancellation Case and the present case involve the same parties, litigating with respect to and disputing the same trademarks, we are
bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation
of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration
Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case.

To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark; and
(3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion."44

Based on these elements, we find it immediately obvious that the second element – the plaintiff’s ownership of the mark – was what the Registration
Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but
was not conclusive on, the issue of ownership.45

In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the
owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the ruling the CA arrived at in the present
petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the
final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of
the issue of ownership – although the current CA ruling is legally correct and can stand on its own merits – becomes a pointless academic discussion.

On the Issue of Unfair Competition

Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint,
SUPERIOR alleged that:46

17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors,
Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark "PRO-KENNEX." For this reason, on January 20, 1993, the plaintiff,
through counsel, wrote the defendant Sports Concept and Distributor’s Inc. advising said defendant that the trademark "PRO-KENNEX" was registered and
owned by the plaintiff herein.

18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public
that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and
sporting goods and equipment bearing the trademarks "KENNEX and "PRO-KENNEX" which trademarks are owned by and registered in the name of plaintiff
herein as alleged hereinabove.

27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with the commercial activities of
plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiff’s business and the defendant’s acts
are likely to discredit the commercial activities and future growth of plaintiff’s business.
 100

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business
of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition47 are
(1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor. 48

Jurisprudence also formulated the following "true test" of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated
to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the
essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to
recover can exist.49

In the present case, no evidence exists showing that KUNNAN ever attempted to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as
those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR
failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the
manufacturer of the goods sold. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc.,50 we held that there can be trademark infringement without unfair
competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being
deceived that the goods originate from the trademark owner. In this case, no issue of confusion arises because the same manufactured products are sold; only
the ownership of the trademarks is at issue. Furthermore, KUNNAN’s January 29, 1993 notice by its terms prevents the public from being deceived that the
goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the trademarks "KENNEX" and
"PRO KENNEX." This notice states in full:51

NOTICE AND WARNING

Kunnan Enterprises Ltd. is the owner and first user of the internationally-renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting
goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31
countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO
KENNEX trademarks.

Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with Superior Commercial Enterprises, Inc. on
December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and sporting goods and equipment
manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX.

In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and
equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only
from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured by Kunnan Enterprises Ltd. [Emphasis
supplied.]

Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by
KUNNAN under trademarks registered in SUPERIOR’s name, the latter is left with no effective right to make a claim. In other words, with the CA’s final ruling
in the Registration Cancellation Case, SUPERIOR’s case no longer presents a valid cause of action. For this reason, the unfair competition aspect of the
SUPERIOR’s case likewise falls.

WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.’s petition for review on certiorari for lack of merit. Cost against petitioner
Superior Commercial Enterprises, Inc.

ARTURO D. BRION
Associate Justice

G.R. NO. 175278

GSIS FAMILY BANK - THRIFT BANK [Formerly Inc.], Petitioner,

vs.
BPI FAMILY BANK, Respondent.

JARDELEZA, J.:

This is a Petition for Review on Certiorari filed by GSIS Family Bank - Thrift Bank1 assailing the Court of Appeals Decision2 dated March 29, 2006 (Decision)
and Resolution3 dated October 23, 2006 which denied petitioner's petition for review of the Securities and Ex.change Commission Decision dated February 22,
2005 (SEC En Banc Decision). The SEC En Banc Decision4 prohibited petitioner from using the word "Family" as part of its corporate name and ordered
petitioner to delete the word from its name.5

Facts

Petitioner was originally organized as Royal Savings Bank and started operations in 1971. Beginning 1983 and 1984, petitioner encountered liquidity
problems. On July 9, 1984, it was placed under receivership and later temporarily closed by the Central Bank of the Philippines. Two (2) months after its
closure, petitioner reopened and was renamed Comsavings Bank, Inc. under the management of the Commercial Bank of Manila. 6

In 1987, the Government Service Insurance System (GSIS) acquired petitioner from the Commercial Bank of Manila. Petitioner's management and control was
thus transferred to GSIS.7 To improve its marketability to the public, especially to the members of the GSIS, petitioner sought Securities and Exchange
Commission (SEC) approval to change its corporate name to "GSIS Family Bank, a Thrift Bank." 8 Petitioner likewise applied with the Department of Trade and
 101

Industry (DTI) and Bangko Sentral ng Pilpinas (BSP) for authority to use "GSIS Family Bank, a Thrift Bank" as its business name. The DTI and the BSP
approved the applications.9 Thus, petitioner operates under the corporate name "GSIS Family Bank – a Thrift Bank," pursuant to the DTI Certificate of
Registration No. 741375 and the Monetary Board Circular approval. 10

Respondent BPI Family Bank was a product of the merger between the Family Bank and Trust Company (FBTC) and the Bank of the Philippine Islands
(BPI).11 On June 27, 1969, the Gotianum family registered with the SEC the corporate name "Family First Savings Bank," which was amended to "Family
Savings Bank," and then later to "Family Bank and Trust Company."12 Since its incorporation, the bank has been commonly known as "Family Bank." In 1985,
Family Bank merged with BPI, and the latter acquired all the rights, privileges, properties, and interests of Family Bank, including the right to use names, such
as "Family First Savings Bank,"

"Family Bank," and "Family Bank and Trust Company." BPI Family Savings Bank was registered with the SEC as a wholly-owned subsidiary of BPI. BPI Family
Savings Bank then registered with the Bureau of Domestic Trade the trade or business name "BPI Family Bank," and acquired a reputation and goodwill under
the name.13

Proceedings before the SEC

Eventually, it reached respondent’s attention that petitioner is using or attempting to use the name "Family Bank." Thus, on March 8, 2002, respondent
petitioned the SEC Company Registration and Monitoring Department (SEC CRMD) to disallow or prevent the registration of the name "GSIS Family Bank" or
any other corporate name with the words "Family Bank" in it. Respondent claimed exclusive ownership to the name "Family Bank," having acquired the name
since its purchase and merger with Family Bank and Trust Company way back 1985. 14 Respondent also alleged that through the years, it has been known as
"BPI Family Bank" or simply "Family Bank" both locally and internationally. As such, it has acquired a reputation and goodwill under the name, not only with
clients here and abroad, but also with correspondent and competitor banks, and the public in general. 15

Respondent prayed the SEC CRMD to disallow or prevent the registration of the name "GSIS Family Bank" or any other corporate name with the words
"Family Bank" should the same be presented for registration.

Respondent likewise prayed the SEC CRMD to issue an order directing petitioner or any other corporation to change its corporate name if the names have
already been registered with the SEC.16

The SEC CRMD was thus confronted with the issue of whether the names BPI Family Bank and GSIS Family Bank are confusingly similar as to require the
amendment of the name of the latter corporation.

The SEC CRMD declared that upon the merger of FBTC with the BPI in 1985, the latter acquired the right to the use of the name of the absorbed corporation.
Thus, BPI Family Bank has a prior right to the use of the name

Family Bank in the banking industry, arising from its long and extensive nationwide use, coupled with its registration with the Intellectual Property Office
(IPO) of the name "Family Bank" as its trade name. Applying the rule of "priority in registration" based on the legal maxim first in time, first in right, the SEC
CRMD concluded that BPI has the preferential right to the use of the name "Family Bank." More, GSIS and Comsavings Bank were then fully aware of the
existence and use of the name "Family Bank" by FBTC prior to the latter's merger with BPI. 17

The SEC CRMD also held that there exists a confusing similarity between the corporate names BPI Family Bank and GSIS Family Bank. It explained that
although not identical, the corporate names are indisputably similar, as to cause confusion in the public mind, even with the exercise of reasonable care and
observation, especially so since both corporations are engaged in the banking business. 18

In a decision19 dated May 19, 2003, the SEC CRMD said, PREMISES CONSIDERED respondent GSIS FAMILY BANK is hereby directed to refrain from using the
word "Family" as part of its name and make good its commitment to change its name by deleting or dropping the subject word from its corporate name within
[thirty (30) days] from the date of actual receipt hereof. 20

Petitioner appealed21 the decision to the SEC En Banc, which denied the appeal, and upheld the SEC CRMD in the SEC En Banc Decision. 22 Petitioner elevated
the SEC En Banc Decision to the Court of Appeals, raising the following issues:

1. Whether the use by GSIS Family Bank of the words "Family Bank" is deceptively and confusingly similar to the name BPI Family Bank;
2. Whether the use by Comsavings Bank of "GSIS Family Bank" as its business constitutes unfair competition;
3. Whether BPI Family Bank is guilty of forum shopping;
4. Whether the approval of the DTI and the BSP of petitioner's application to use the name GSIS Family Bank constitutes its authority to the lawful
and valid use of such trade name or trade mark;
5. Whether the application of respondent BPI Family Bank for the exclusive use of the name "Family Bank," a generic name, though not yet
approved by IPO of the Bureau of Patents, has barred the GSIS Family Bank from using such trade mark or name. 23

Court of Appeals Ruling

The Court of Appeals ruled that the approvals by the BSP and by the DTI of petitioner’s application to use the name "GSIS Family Bank" do not constitute
authority for its lawful and valid use. It said that the SEC has absolute jurisdiction, supervision and control over all corporations. 24 The Court of Appeals held
that respondent was entitled to the exclusive use of the corporate name because of its prior adoption of the name "Family Bank" since 1969. 25There is
confusing similarity in the corporate names because "[c]onfusion as to the possible association with GSIS might arise if we were to allow Comsavings Bank to
add its parent company’s acronym, ‘GSIS’ to ‘Family Bank.’ This is true especially considering both companies belong to the banking industry. Proof of actual
confusion need not be shown. It suffices that confusion is probably or likely to occur."26The Court of Appeals also ruled out forum shopping because not all the
requirements of litis pendentia are present.27
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The dispositive portion of the decision read,

WHEREFORE, the instant petition for review is hereby DISMISSED for lack of merit. 28

After its Motion for Reconsideration was denied,29 petitioner brought the decision to this Court via a Petition for Review on Certiorari. 30

Issues in the Petition

Petitioner raised the following issues in its petition:

I. The Court of Appeals gravely erred in affirming the SEC Resolution finding the word "Family" not generic despite its unregistered status with the
IPO of the Bureau of Patents and the use by GSIS-Family Bank in its corporate name of the words "[F]amily [B]ank" as deceptive and [confusingly
similar] to the name BPI Family Bank;31
II. The Court of Appeals gravely erred when it ruled that the respondent is not guilty of forum shopping despite the filing of three (3) similar
complaints before the DTI and BSP and with the SEC without the requisite certification of non-forum shopping attached thereto;32
III. The Court of Appeals gravely erred when it completely disregarded the opinion of the Banko Sentral ng Pilipinas that the use by the herein
petitioner of the trade name GSIS Family Bank – Thrift Bank is not similar or does not deceive or likely cause any deception to the public. 33

Court's Ruling

We uphold the decision of the Court of Appeals.

Section 18 of the Corporation Code provides,

Section 18. Corporate name. – No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively
or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to
existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended
name.

In Philips Export B.V. v. Court of Appeals,34 this Court ruled that to fall within the prohibition of the law on the right to the exclusive use of a corporate name,
two requisites must be proven, namely:

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and
(2) the proposed name is either
(a) identical or
(b) deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law; or
(c) patently deceptive, confusing or contrary to existing law. 35

These two requisites are present in this case. On the first requisite of a prior right, Industrial Refractories Corporation of the Philippines v. Court of Appeals
(IRCP case)36 is instructive. In that case, Refractories Corporation of the Philippines (RCP) filed before the SEC a petition to compel Industrial Refractories
Corporation of the Philippines (IRCP) to change its corporate name on the ground that its corporate name is confusingly similar with that of RCP’s such that
the public may be confused into believing that they are one and the same corporation. The SEC and the Court of Appeals found for petitioner, and ordered
IRCP to delete or drop from its corporate name the word "Refractories." Upon appeal of IRCP, this Court upheld the decision of the CA.

Applying the priority of adoption rule to determine prior right, this Court said that RCP has acquired the right to use the word "Refractories" as part of its
corporate name, being its prior registrant. In arriving at this conclusion, the Court considered that RCP was incorporated on October 13, 1976 and since then
continuously used the corporate name "Refractories Corp. of the Philippines." Meanwhile, IRCP only started using its corporate name "Industrial Refractories
Corp. of the Philippines" when it amended its Articles of Incorporation on August 23, 1985. 37

In this case, respondent was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank. Petitioner, on the other hand, was incorporated as
GSIS Family – Thrift Bank only in 2002,38 or at least seventeen (17) years after respondent started using its name. Following the precedent in the IRCP case,
we rule that respondent has the prior right over the use of the corporate name.

The second requisite in the Philips Export case likewise obtains on two points: the proposed name is (a) identical or (b) deceptive or confusingly similar to
that of any existing corporation or to any other name already protected by law.

On the first point (a), the words "Family Bank" present in both petitioner and respondent's corporate name satisfy the requirement that there be identical
names in the existing corporate name and the proposed one.

Respondent cannot justify its claim under Section 3 of the Revised Guidelines in the Approval of Corporate and Partnership Names,39 to wit:

3. The name shall not be identical, misleading or confusingly similar to one already registered by another corporation or partnership with the Commission or
a sole proprietorship registered with the Department of Trade and Industry.

If the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the
company already registered.
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Section 3 states that if there be identical, misleading or confusingly similar name to one already registered by another corporation or partnership with the
SEC, the proposed name must contain at least one distinctive word different from the name of the company already registered. To show contrast with
respondent's corporate name, petitioner used the words "GSIS" and "thrift." But these are not sufficiently distinct words that differentiate petitioner's
corporate name from respondent's. While "GSIS" is merely an acronym of the proper name by which petitioner is identified, the word "thrift" is simply a
classification of the type of bank that petitioner is. Even if the classification of the bank as "thrift" is appended to petitioner's proposed corporate name, it will
not make the said corporate name distinct from respondent's because the latter is likewise engaged in the banking business.

This Court used the same analysis in Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. v. Iglesia ng Dios Kay Cristo Jesus,
Haligi at Suhay ng Katotohanan.40 In that case, Iglesia ng Dios Kay Cristo Jesus filed a case before the SEC to compel Ang mga Kaanib sa Iglesia ng Dios Kay
Kristo Hesus to change its corporate name, and to prevent it from using the same or similar name on the ground that the same causes confusion among their
members as well as the public. Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus claimed that it complied with SEC Memorandum Circular No. 14-2000 by
adding not only two, but eight words to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which effectively distinguished it
from Iglesia ng Dios Kay Cristo Jesus. This Court rejected the argument, thus:

The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed by the SEC, merely
descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in the Philippines. These words can hardly
serve as an effective differentiating medium necessary to avoid confusion or difficulty in distinguishing petitioner from respondent. This is
especially so, since both petitioner and respondent corporations are using the same acronym – H.S.K.; not to mention the fact that both are
espousing religious beliefs and operating in the same place. Xxx41

On the second point (b), there is a deceptive and confusing similarity between petitioner's proposed name and respondent's corporate name, as found by the
SEC.42 In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary
care and discrimination.43 And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to
occur.44

Petitioner's corporate name is "GSIS Family Bank—A Thrift Bank" and respondent's corporate name is "BPI Family Bank." The only words that distinguish the
two are "BPI," "GSIS," and "Thrift." The first two words are merely the acronyms of the proper names by which the two corporations identify themselves; and
the third word simply describes the classification of the bank. The overriding consideration in determining whether a person, using ordinary care and
discrimination, might be misled is the circumstance that both petitioner and respondent are engaged in the same business of banking. "The likelihood of
confusion is accentuated in cases where the goods or business of one corporation are the same or substantially the same to that of another corporation." 45

Respondent alleged that upon seeing a Comsavings Bank branch with the signage "GSIS Family Bank" displayed at its premises, some of the respondent’s
officers and their clients began asking questions. These include whether GSIS has acquired Family Bank; whether there is a joint arrangement between GSIS
and Family Bank; whether there is a joint arrangement between BPI and GSIS regarding Family Bank; whether Comsavings Bank has acquired Family Bank;
and whether there is there an arrangement among Comsavings Bank, GSIS, BPI, and Family Bank regarding BPI Family Bank and GSIS Family Bank.46 The SEC
made a finding that "[i]t is not a remote possibility that the public may entertain the idea that a relationship or arrangement indeed exists between BPI and
GSIS due to the use of the term ‘Family Bank’ in their corporate names."47

Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect and even finality by this Court, if supported by substantial evidence, in
recognition of their expertise on the specific matters under their consideration, more so if the same has been upheld by the appellate court, as in this case.48

Petitioner cannot argue that the word "family" is a generic or descriptive name, which cannot be appropriated exclusively by respondent. "Family," as used in
respondent's corporate name, is not generic. Generic marks are commonly used as the name or description of a kind of goods, such as "Lite" for beer or
"Chocolate Fudge" for chocolate soda drink. Descriptive marks, on the other hand, convey the characteristics, function, qualities or ingredients of a product to
one who has never seen it or does not know it exists, such as "Arthriticare" for arthritis medication. 49

Under the facts of this case, the word "family" cannot be separated from the word "bank." 50 In asserting their claims before the SEC up to the Court of Appeals,
both petitioner and respondent refer to the phrase "Family Bank" in their submissions. This coined phrase, neither being generic nor descriptive, is merely
suggestive and may properly be regarded as arbitrary. Arbitrary marks are "words or phrases used as a mark that appear to be random in the context of its
use. They are generally considered to be easily remembered because of their arbitrariness. They are original and unexpected in relation to the products they
endorse, thus, becoming themselves distinctive."51 Suggestive marks, on the other hand, "are marks which merely suggest some quality or ingredient of goods.
xxx The strength of the suggestive marks lies on how the public perceives the word in relation to the product or service." 52

In Ang v. Teodoro,53 this Court ruled that the words "Ang Tibay" is not a descriptive term within the meaning of the Trademark Law but rather a fanciful or
coined phrase.54 In so ruling, this Court considered the etymology and meaning of the Tagalog words, "Ang Tibay" to determine whether they relate to the
quality or description of the merchandise to which respondent therein applied them as trademark, thus:

We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a descriptive term, i.e., whether
they relate to the quality or description of the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite article
meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How
beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a root word from which are derived the verb magpatibay (to strengthen); the nouns pagkamatibay
(strength, durability), katibayan (proof, support, strength), katibaytibayan (superior strength); and the adjectives matibay (strong, durable, lasting),
napakatibay (very strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting admiration of
strength or durability. For instance, one who tries hard but fails to break an object exclaims, "Ang tibay!" ("How strong!") It may also be used in a sentence
thus, "Ang tibay ng sapatos mo!" ("How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or describe an object. One does
not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay."

From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but rather a fanciful or coined phrase which
may properly and legally be appropriated as a trade-mark or trade-name. xxx55 (Underscoring supplied).
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The word "family" is defined as "a group consisting of parents and children living together in a household" or "a group of people related to one another by
blood or marriage."56 Bank, on the other hand, is defined as "a financial establishment that invests money deposited by customers, pays it out when requested,
makes loans at interest, and exchanges currency."57 By definition, there can be no expected relation between the word "family" and the banking business of
respondent. Rather, the words suggest that respondent’s bank is where family savings should be deposited. More, as in the Ang case, the phrase "family bank"
cannot be used to define an object.

Petitioner’s argument that the opinion of the BSP and the certificate of registration granted to it by the DTI constitute authority for it to use "GSIS Family
Bank" as corporate name is also untenable.

The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate names is lodged exclusively in the SEC. The jurisdiction of the
SEC is not merely confined to the adjudicative functions provided in Section 5 of the SEC Reorganization Act, 58 as amended.59 By express mandate, the SEC has
absolute jurisdiction, supervision and control over all corporations.60 It is the SEC’s duty to prevent confusion in the use of corporate names not only for the
protection of the corporations involved, but more so for the protection of the public. It has authority to de-register at all times, and under all circumstances
corporate names which in its estimation are likely to generate confusion. 61

The SEC62 correctly applied Section 18 of the Corporation Code, and Section 15 of SEC Memorandum Circular No. 14-2000, pertinent portions of which
provide:

In implementing Section 18 of the Corporation Code of the Philippines (BP 69), the following revised guidelines in the approval of corporate and partnership
names are hereby adopted for the information and guidance of all concerned:

xxx

15. Registrant corporations or partnership shall submit a letter undertaking to change their corporate or partnership name in case another person or firm has
acquired a prior right to the use of the said firm name or the same is deceptively or confusingly similar to one already registered unless this undertaking is
already included as one of the provisions of the articles of incorporation or partnership of the registrant.

The SEC, after finding merit in respondent's claims, can compel petitioner to abide by its commitment "to change its corporate name in the event that another
person, firm or entity has acquired a prior right to use of said name or one similar to it." 63

Clearly, the only determination relevant to this case is that one made by the SEC in the exercise of its express mandate under the law. The BSP opinion invoked
by petitioner even acknowledges that "the issue on whether a proposed name is identical or deceptively similar to that of any of existing corporation is matter
within the official jurisdiction and competence of the SEC."64

Judicial notice65 may also be taken of the action of the IPO in approving respondent’s registration of the trademark "BPI Family Bank" and its logo on October
17, 2008. The certificate of registration of a mark shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark, and of
the registrant’s exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. 66

Finally, we uphold the Court of Appeals' finding that the issue of forum shopping was belatedly raised by petitioner and, thus, cannot anymore be considered
at the appellate stage of the proceedings. Petitioner raised the issue of forum shopping for the first time only on appeal. 67 Petitioner argued that the
complaints filed by respondent did not contain certifications against non-forum shopping, in violation of Section 5, Rule 7 of the Rules of Court.68

In S.C. Megaworld Construction and Development Corporation vs. Parada, 69 this Court said that objections relating to non-compliance with the verification and
certification of non-forum shopping should be raised in the proceedings below, and not for the first time on appeal. In that case, S.C. Megaworld argued that
the complaint for collection of sum of money should have been dismissed outright by the trial court on account of an invalid nonforum shopping certification.
It alleged that the Special Power of Attorney granted to Parada did not specifically include an authority for the latter to sign the verification and certification of
non-forum shopping, thus rendering the complaint defective for violation of Sections 4 and 5 of Rule 7 of the Rules of Court. On motion for reconsideration of
the decision of the Court of Appeals, petitioner raised for the first time, the issue of forum shopping. The Court ruled against S.C. Megaworld, thus:

It is well-settled that no question will be entertained on appeal unless it has been raised in the proceedings below. Points of law, theories, issues and
arguments not brought to the attention of the lower court, administrative agency or quasi-judicial body, need not be considered by a reviewing court, as they
cannot be raised for the first time at that late stage. Basic considerations of fairness and due process impel this rule. Any issue raised for the first time on
appeal is barred by estoppel.70

In this case, the fact that respondent filed a case before the DTI was made known to petitioner71 long before the SEC rendered its decision. Yet, despite its
knowledge, petitioner failed to question the alleged forum shopping before the SEC. The exceptions to the general rule that forum shopping should be raised
in the earliest opportunity, as explained in the cited case of Young v. Keng Seng, 72 do not obtain in this case.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals dated March 29, 2006 is hereby AFFIRMED.

FRANCIS H. JARDELEZA
Associate Justice

G.R. No. 185917 June 1, 2011

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FREDCO MANUFACTURING CORPORATION Petitioner,

vs.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), Respondents.

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009 Resolution3of the Court of Appeals in CA-G.R. SP No.
103394.

The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing under the laws of the Philippines, filed a
Petition for Cancellation of Registration No. 56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President
and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States of America. The
case was docketed as Inter Partes Case No. 14-2005-00094.

Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark "Harvard Veritas Shield Symbol" for decals,
tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and
Services. Fredco alleged that the mark "Harvard" for t-shirts, polo shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2 January 1982
by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and Fredco’s predecessor-in-interest. On 24 January
1985, New York Garments filed for trademark registration of the mark "Harvard" for goods under Class 25. The application matured into a registration and a
Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration was later assigned
to Romeo Chuateco, a member of the family that owned New York Garments.

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November 1995 and had since then handled the
manufacture, promotion and marketing of "Harvard" clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard
University, New York Garments had already registered the mark "Harvard" for goods under Class 25. Fredco alleged that the registration was cancelled on 30
July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the right to the mark
"Harvard" remained with its predecessor New York Garments and now with Fredco.

Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark "Harvard" in numerous countries worldwide, including the
Philippines. Among the countries where Harvard University has registered its name and mark "Harvard" are:

1. Argentina 26. South Korea

2. Benelux4 27. Malaysia

3. Brazil 28. Mexico

4. Canada 29. New Zealand

5. Chile 30. Norway

6. China P.R. 31. Peru

7. Colombia 32. Philippines

8. Costa Rica 33. Poland

9. Cyprus 34. Portugal

10. Czech Republic 35. Russia

11. Denmark 36. South Africa

12. Ecuador 37. Switzerland

13. Egypt 38. Singapore

14. Finland 39. Slovak Republic

15. France 40. Spain

16. Great Britain 41. Sweden

17. Germany 42. Taiwan

18. Greece 43. Thailand

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19. Hong Kong 44. Turkey

20. India 45. United Arab Emirates

21. Indonesia 46. Uruguay

22. Ireland 47. United States of America

23. Israel 48. Venezuela

24. Italy 49. Zimbabwe

25. Japan 50. European Community5

The name and mark "Harvard" was adopted in 1639 as the name of Harvard College6 of Cambridge, Massachusetts, U.S.A. The name and mark "Harvard" was
allegedly used in commerce as early as 1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United
States and throughout the world. Harvard University promotes, uses, and advertises its name "Harvard" through various publications, services, and products
in foreign countries, including the Philippines. Harvard University further alleged that the name and the mark have been rated as one of the most famous
brands in the world, valued between US $750,000,000 and US $1,000,000,000.

Harvard University alleged that in March 2002, it discovered, through its international trademark watch program, Fredco’s website www.harvard-usa.com.
The website advertises and promotes the brand name "Harvard Jeans USA" without Harvard University’s consent. The website’s main page shows an oblong
logo bearing the mark "Harvard Jeans USA®," "Established 1936," and "Cambridge, Massachusetts." On 20 April 2004, Harvard University filed an
administrative complaint against Fredco before the IPO for trademark infringement and/or unfair competition with damages.lawphi1

Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are:

1. Trademark Registration No. 56561 issued on 25 November 1993 for "Harvard Veritas Shield Design" for goods and services in Classes 16, 18, 21,
25 and 28 (decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International Classification of Goods and Services;

2. Trademark Registration No. 57526 issued on 24 March 1994 for "Harvard Veritas Shield Symbol" for services in Class 41; Trademark
Registration No. 56539 issued on 25 November 1998 for "Harvard" for services in Class 41; and

3. Trademark Registration No. 66677 issued on 8 December 1998 for "Harvard Graphics" for goods in Class 9. Harvard University further alleged
that it filed the requisite affidavits of use for the mark "Harvard Veritas Shield Symbol" with the IPO.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for "Harvard Medical International & Shield Design" for services in
Classes 41 and 44. In 1989, Harvard University established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark
Licensing, to oversee and manage the worldwide licensing of the "Harvard" name and trademarks for various goods and services. Harvard University stated
that it never authorized or licensed any person to use its name and mark "Harvard" in connection with any goods or services in the Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO cancelled Harvard University’s registration of
the mark "Harvard" under Class 25, as follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently, Trademark Registration Number 56561 for the
trademark "HARVARD VE RI TAS ‘SHIELD’ SYMBOL" issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD
UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand, considering that the goods of Respondent-
Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioner’s goods, the Respondent-Registrant has acquired vested right
over the same and therefore, should not be cancelled.

Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the trademark "HARVARD VE RI TAS ‘SHIELD’ SYMBOL",
subject matter of this case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action.

SO ORDERED.8

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision 9 dated 21 April 2008, the Office of the Director General,
IPO reversed the decision of the Bureau of Legal Affairs, IPO.

The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the owner of the mark sought to be registered.
The Director General ruled that the right to register a trademark is based on ownership and when the applicant is not the owner, he has no right to register
the mark. The Director General noted that the mark covered by Harvard University’s Registration No. 56561 is not only the word "Harvard" but also the logo,
emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its predecessor New York Garments came up with the
mark "Harvard." In addition, there was no evidence that Fredco or New York Garments was licensed or authorized by Harvard University to use its name in
commerce or for any other use.

The dispositive portion of the decision of the Office of the Director General, IPO reads:
 107

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. Let a copy of this Decision as
well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the
Directors of the Bureau of Trademarks and the Administrative, Financial and Human Resources Development Services Bureau, and the library of the
Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes.

SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set aside the cancellation by the Director of
the Bureau of Legal Affairs of Harvard University’s trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to
substantiate that it appropriated and used the marks "Harvard" and "Harvard Veritas Shield Symbol" in Class 25 way ahead of Fredco and its predecessor New
York Garments. The Court of Appeals also ruled that the records failed to disclose any explanation for Fredco’s use of the name and mark "Harvard" and the
words "USA," "Established 1936," and "Cambridge, Massachusetts" within an oblong device, "US Legend" and "Europe’s No. 1 Brand." Citing Shangri-La
International Hotel Management, Ltd. v. Developers Group of Companies, Inc.,11 the Court of Appeals ruled:

One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be
coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely
take advantage of the goodwill established by the true owner. 12

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-
07-09 Inter Partes Case No. 14-2005-00094 is hereby AFFIRMED.

SO ORDERED.13

Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit.

Hence, this petition before the Court.

The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO.

The Ruling of this Court

The petition has no merit.

There is no dispute that the mark "Harvard" used by Fredco is the same as the mark "Harvard" in the "Harvard Veritas Shield Symbol" of Harvard University.
It is also not disputed that Harvard University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge,
Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark "Harvard" in commerce since 1872. It is also established that
Harvard University has been using the marks "Harvard" and "Harvard Veritas Shield Symbol" for Class 25 goods in the United States since 1953. Further, there
is no dispute that Harvard University has registered the name and mark "Harvard" in at least 50 countries.

On the other hand, Fredco’s predecessor-in-interest, New York Garments, started using the mark "Harvard" in the Philippines only in 1982. New York
Garments filed an application with the Philippine Patent Office in 1985 to register the mark "Harvard," which application was approved in 1988. Fredco insists
that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for
not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks
abroad for a long time, it did not have actual prior use in the Philippines of the mark "Harvard Veritas Shield Symbol" before its application for registration of
the mark "Harvard" with the then Philippine Patents Office. However, Harvard University’s registration of the name "Harvard" is based on home registration
which is allowed under Section 37 of R.A. No. 166.15 As pointed out by Harvard University in its Comment:

Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been
actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark
sought to be registered has already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the
commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have
used the mark or trade name in this country.16
 108

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard University’s registration "is based on ‘home registration’ for the
mark ‘Harvard Veritas Shield’ for Class 25."17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 "[m]arks registered under Republic Act No. 166 shall remain in force but shall
be deemed to have been granted under this Act x x x," which does not require actual prior use of the mark in the Philippines. Since the mark "Harvard
Veritas Shield Symbol" is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the Philippines has been
cured by Section 239.2.19 In addition, Fredco’s registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for
the fifth anniversary of the mark’s registration. Hence, at the time of Fredco’s filing of the Petition for Cancellation before the Bureau of Legal Affairs of the
IPO, Fredco was no longer the registrant or presumptive owner of the mark "Harvard."

There are two compelling reasons why Fredco’s petition must fail.

First, Fredco’s registration of the mark "Harvard" and its identification of origin as "Cambridge, Massachusetts" falsely suggest that Fredco or its goods are
connected with Harvard University, which uses the same mark "Harvard" and is also located in Cambridge, Massachusetts. This can easily be gleaned from the
following oblong logo of Fredco that it attaches to its clothing line:

Fredco’s registration of the mark "Harvard" should not have been allowed because Section 4(a) of R.A. No. 166 prohibits the registration of a mark "which may
disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x." Section 4(a) of R.A. No. 166 provides:

Section 4. Registration of trade-marks, trade-names and service- marks on the principal register. ‒ There is hereby established a register of trade-mark, trade-
names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his
goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:

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

(b) x x x (emphasis supplied)

Fredco’s use of the mark "Harvard," coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false connection with Harvard
University. On this ground alone, Fredco’s registration of the mark "Harvard" should have been disallowed.

Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor
New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of
Appeals or to the IPO why it used the mark "Harvard" on its oblong logo with the words "Cambridge, Massachusetts," "Established in 1936," and "USA." Fredco
now claims before this Court that it used these words "to evoke a ‘lifestyle’ or suggest a ‘desirable aura’ of petitioner’s clothing lines." Fredco’s belated
justification merely confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and popularity of Harvard
University, and thus appropriating part of Harvard University’s goodwill without the latter’s consent.

Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act, 20 the trademark law of the United States. These provisions are intended to protect
the right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by others. 21 What Fredco has done in using the
mark "Harvard" and the words "Cambridge, Massachusetts," "USA" to evoke a "desirable aura" to its products is precisely to exploit commercially the goodwill
of Harvard University without the latter’s consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c) 22 of R.A. No. 166, such violation
is a ground for cancellation of Fredco’s registration of the mark "Harvard" because the registration was obtained in violation of Section 4 of R.A. No. 166.

Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris
Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state:

ARTICLE 6bis

(i) The countries of the Union undertake either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel
the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion or a mark
considered by the competent authority of the country as being already the mark of a person entitled to the benefits of the present Convention and used
for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-
known mark or an imitation liable to create confusion therewith.

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark.
(Emphasis supplied)

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective
protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar
protection to Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:
 109

Section 37. Rights of foreign registrants. — Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in
any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to
which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential
to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs
of this section.

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

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a
trademark, is protected "without the obligation of filing or registration."

"Harvard" is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention,
as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name "Harvard" even without registration of
such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name "Harvard" without the consent of Harvard
University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark "Harvard," that its products or
services are authorized, approved, or licensed by, or sourced from, Harvard University without the latter’s consent.

Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two directives of the then Ministry (now Department)
of Trade, which directives were upheld by this Court in several cases. 25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a
Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine registration of signature and
other world-famous trademarks by applicants other than their original owners. 26 The Memorandum states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending
applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if
any, to avoid suits for damages and other legal action by the trademarks’ foreign or local owners or original users.

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

For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte.
Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines’ obligations under the Paris Convention,
thus:

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

x x x x28 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the trademark to be protected must be "well-
known" in the country where protection is sought.29 The Court declared that the power to determine whether a trademark is well-known lies in the competent
authority of the country of registration or use. 30 The Court then stated that the competent authority would either be the registering authority if it has the
power to decide this, or the courts of the country in question if the issue comes before the courts. 31
 110

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be registered or used in the Philippines. 32 All
that is required is that the mark is well-known internationally and in the Philippines for identical or similar goods, whether or not the mark is registered or
used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33

The fact that respondent’s marks are neither registered nor used in the Philippines is of no moment. The scope of protection initially afforded by
Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known
Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a
well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof
provides:

(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark:
(i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect
of, the Member State:
(ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in
respect of, any jurisdiction other than the Member State; or
(iii) that the mark is well known by the public at large in the Member State. 34 (Italics in the original decision; boldface supplied)

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that "a mark which is considered by the competent authority of the Philippines to be well-
known internationally and in the Philippines, whether or not it is registered here," cannot be registered by another in the Philippines. Section 123.1(e)
does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of
the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides:

Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is well-known, the following criteria or any combination
thereof may be taken into account:
(a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of
the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;
(b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies;
(c) the degree of the inherent or acquired distinction of the mark;
(d) the quality-image or reputation acquired by the mark;
(e) the extent to which the mark has been registered in the world;
(f) the exclusivity of registration attained by the mark in the world;
(g) the extent to which the mark has been used in the world;
(h) the exclusivity of use attained by the mark in the world;
(i) the commercial value attributed to the mark in the world;
(j) the record of successful protection of the rights in the mark;
(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and
(l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by
persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied)

Since "any combination" of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in
commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection,
internationally well-known marks are the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that:

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher
learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as "the new college," the institution was named "Harvard College" on 13 March
1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard
bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred
pounds. The earliest known official reference to Harvard as a "university" rather than "college" occurred in the new Massachusetts Constitution of 1780.

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

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

Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is
located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate.

The mark "Harvard College" was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and
training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000
and it was registered on October 16, 2001. The marks "Harvard" and "Harvard Ve ri tas ‘Shield’ Symbol" were first used in commerce in the the United States
on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts,
shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996,
the mark "Harvard" was registered on December 9, 1997 and the mark "Harvard Ve ri tas ‘Shield’ Symbol" was registered on September 30, 1997. 36
 111

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard University and Streetward International, Inc., 38 the
Bureau of Legal Affairs of the IPO ruled that the mark "Harvard" is a "well-known mark." This Decision, which cites among others the numerous trademark
registrations of Harvard University in various countries, has become final and executory.

There is no question then, and this Court so declares, that "Harvard" is a well-known name and mark not only in the United States but also internationally,
including the Philippines. The mark "Harvard" is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been
used and promoted extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard
University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A.,
internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark
"Harvard" in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris
Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark "which may disparage or falsely suggest a
connection with persons, living or dead, institutions, beliefs x x x."

WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CA-G.R. SP No.
103394.

ANTONIO T. CARPIO
Associate Justice

G.R. No. 184850 October 20, 2010

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners,

vs.
SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., Respondent.

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21, 2008 Decision 1and the October 6, 2008
Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 99356 entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales, Inc. and
Engracio Yap.

The assailed decision reversed the Decision dated May 25, 20073 issued by the Director General of the Intellectual Property Office (IPO) in Inter Partes Case
No. 14-2004-00084. The IPO Director General upheld Certificate of Registration (COR) No. 4-1999-005393 issued by the IPO for the trademark "VESPA" in
favor of petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered the cancellation of COR No. 4-1997-121492, also for the trademark "VESPA," issued in favor of
respondent Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar). The Decision of the IPO Director General, in effect, affirmed the Decision dated May 29,
20064 issued by the Director of the Bureau of Legal Affairs (BLA) of the IPO.

The Facts

EYIS is a domestic corporation engaged in the production, distribution and sale of air compressors and other industrial tools and equipment. 5 Petitioner
Engracio Yap is the Chairman of the Board of Directors of EYIS. 6

Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of air compressors. 7

Both companies claimed to have the right to register the trademark "VESPA" for air compressors.

From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales contracts. In the Sales Contract dated April 20, 2002,8 for example, Shen Dar
would supply EYIS in one (1) year with 24 to 30 units of 40-ft. containers worth of air compressors identified in the Packing/Weight Lists simply as SD-23, SD-
29, SD-31, SD-32, SD-39, SD-67 and SD-68. In the corresponding Bill of Ladings, the items were described merely as air compressors. 9 There is no
documentary evidence to show that such air compressors were marked "VESPA."

On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492 with the IPO for the mark "VESPA, Chinese Characters and Device" for use
on air compressors and welding machines.10

On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393, also for the mark "VESPA," for use on air compressors. 11 On January 18, 2004,
the IPO issued COR No. 4-1999-005393 in favor of EYIS.12 Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-1997-121492.13

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS’ COR with the BLA.14 In the Petition, Shen Dar primarily argued that the
issuance of the COR in favor of EYIS violated Section 123.1 paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the Intellectual
Property Code (IP Code), having first filed an application for the mark. Shen Dar further alleged that EYIS was a mere distributor of air compressors bearing
the mark "VESPA" which it imported from Shen Dar. Shen Dar also argued that it had prior and exclusive right to the use and registration of the mark "VESPA"
in the Philippines under the provisions of the Paris Convention. 15

In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark "VESPA" being the sole assembler and fabricator of air
compressors since the early 1990s. They further alleged that the air compressors that Shen Dar allegedly supplied them bore the mark "SD" for Shen Dar and
 112

not "VESPA." Moreover, EYIS argued that Shen Dar, not being the owner of the mark, could not seek protection from the provisions of the Paris Convention or
the IP Code.16

Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor of EYIS and against Shen Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition for Cancellation is, as it is hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for
the mark "VESPA" granted in the name of E.Y. Industrial Sales, Inc. on 9 January 2007 is hereby upheld.

Let the filewrapper of VESPA subject matter of this case be forwarded to the Administrative, Financial and Human Resource Development Services Bureau for
issuance and appropriate action in accordance with this DECISION and a copy thereof furnished to the Bureau of Trademarks for information and update of its
records.

SO ORDERED.17

Shen Dar appealed the decision of the BLA Director to the Director General of the IPO. In the appeal, Shen Dar raised the following issues:

1. Whether the BLA Director erred in ruling that Shen Dar failed to present evidence;
2. Whether the registration of EYIS’ application was proper considering that Shen Dar was the first to file an application for the mark; and
3. Whether the BLA Director correctly ruled that EYIS is the true owner of the mark. 18

Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the COR issued in favor of EYIS while cancelling the COR of Shen Dar, the
dispositive portion of which reads:

WHEREFORE, premises considered, the appeal is DENIED. Certificate of Registration No. 4-1999-005393 for the mark VESPA for air compressor issued in
favor of Appellee is hereby upheld. Consequently, Certificate of Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters & Device for goods
air compressor and spot welding machine issued in favor of Appellant is hereby ordered cancelled.

Let a copy of this Decision as well as the records of this case be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action.
Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the
Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes.19

Shen Dar appealed the above decision of the IPO Director General to the CA where Shen Dar raised the following issues:
1. Whether Shen Dar is guilty of forum shopping;
2. Whether the first-to-file rule applies to the instant case;
3. Whether Shen Dar presented evidence of actual use;
4. Whether EYIS is the true owner of the mark "VESPA";
5. Whether the IPO Director General erred in cancelling Shen Dar’s COR No. 4-1997-121492 without a petition for cancellation; and
6. Whether Shen Dar sustained damages.20

In the assailed decision, the CA reversed the IPO Director General and ruled in favor of Shen Dar. The dispositive portion states:

WHEREFORE, premises considered, the petition is GRANTED. Consequently, the assailed decision of the Director General of the Intellectual Property Office
dated May 25, 2007 is hereby REVERSED and SET ASIDE. In lieu thereof, a new one is entered: a) ordering the cancellation of Certificate of Registration No. 4-
1999-005393 issued on January 19, 2004 for the trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering the restoration of the validity of Certificate
of Registration No. 4-1997-121492 for the trademark VESPA in favor of Shen Dar Electricity and Machinery Co., Ltd. No pronouncement as to costs.

SO ORDERED.21

In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not formally offer its evidence before the BLA, such evidence was properly attached
to the Petition for Cancellation. As such, Shen Dar’s evidence may be properly considered. The CA also enunciated that the IPO failed to properly apply the
provisions of Sec. 123.1(d) of RA 8293, which prohibits the registration of a trademark in favor of a party when there is an earlier filed application for the
same mark. The CA further ruled that Shen Dar should be considered to have prior use of the mark based on the statements made by the parties in their
respective Declarations of Actual Use. The CA added that EYIS is a mere importer of the air compressors with the mark "VESPA" as may be gleaned from its
receipts which indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be considered an owner of the mark.22

EYIS filed a motion for reconsideration of the assailed decision which the CA denied in the assailed resolution. Hence, the instant appeal.

Issues

EYIS and Yap raise the following issues in their petition:

A. Whether the Director General of the IPO correctly upheld the rights of Petitioners over the trademark VESPA.
B. Whether the Director General of the IPO can, under the circumstances, order the cancellation of Respondent’s certificate of registration for
VESPA, which has been fraudulently obtained and erroneously issued.
C. Whether the Honorable Court of Appeals was justified in reversing the findings of fact of the IPO, which affirm the rights of Petitioner EYIS over
the trademark VESPA and when such findings are supported by the evidence on record.
D. Whether this Honorable Court may review questions of fact considering that the findings of the Court of Appeals and the IPO are in conflict and
the conclusions of the appellee court are contradicted by the evidence on record. 23
 113

The Ruling of the Court

The appeal is meritorious.

First Issue:

Whether this Court may review the questions of fact presented

Petitioners raise the factual issue of who the true owner of the mark is. As a general rule, this Court is not a trier of facts. However, such rule is subject to
exceptions. In New City Builders, Inc. v. National Labor Relations Commission, 24 the Court ruled that:

We are very much aware that the rule to the effect that this Court is not a trier of facts admits of exceptions. As we have stated in Insular Life Assurance
Company, Ltd. vs. CA:

[i]t is a settled rule that in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and
binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the
trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as
well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion. (Emphasis supplied.)

In the instant case, the records will show that the IPO and the CA made differing conclusions on the issue of ownership based on the evidence presented by the
parties. Hence, this issue may be the subject of this Court’s review.

Second Issue:

Whether evidence presented before the BLA must be formally offered

Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce evidence in support of its allegations as required under Office Order No. 79,
Series of 2005, Amendments to the Regulations on Inter Partes Proceedings, having failed to formally offer its evidence during the proceedings before it. The
BLA ruled:

At the outset, we note petitioner’s failure to adduce any evidence in support of its allegations in the Petition for Cancellation. Petitioner did not file nor submit
its marked evidence as required in this Bureau’s Order No. 2006-157 dated 25 January 2006 in compliance with Office Order No. 79, Series of 2005,
Amendments to the Regulations on Inter Partes Proceedings.25 x x x

In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No. 03, Series of 2005, which states:

Section 2.4. In all cases, failure to file the documentary evidences in accordance with Sections 7 and 8 of the rules on summary proceedings shall be construed
as a waiver on the part of the parties. In such a case, the original petition, opposition, answer and the supporting documents therein shall constitute the entire
evidence for the parties subject to applicable rules.

The CA concluded that Shen Dar needed not formally offer its evidence but merely needed to attach its evidence to its position paper with the proper
markings,26 which it did in this case.

The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall establish the procedure for the application for the registration of a
trademark, as well as the opposition to it:

Section 10. The Bureau of Legal Affairs.¾The Bureau of Legal Affairs shall have the following functions:

10.3. The Director General may by Regulations establish the procedure to govern the implementation of this Section.

Thus, the Director General issued Office Order No. 79, Series of 2005 amending the regulations on Inter Partes Proceedings, Sec. 12.1 of which provides:

Section 12. Evidence for the Parties¾

12.1. The verified petition or opposition, reply if any, duly marked affidavits of the witnesses, and the documents submitted, shall constitute the entire
evidence for the petitioner or opposer. The verified answer, rejoinder if any, and the duly marked affidavits and documents submitted shall constitute the
evidence for the respondent. Affidavits, documents and other evidence not submitted and duly marked in accordance with the preceding sections shall not be
admitted as evidence.
 114

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and 9 which, in turn, provide:

Section 7. Filing of Petition or Opposition¾

7.1. The petition or opposition, together with the affidavits of witnesses and originals of the documents and other requirements, shall be filed with the Bureau,
provided, that in case of public documents, certified copies shall be allowed in lieu of the originals. The Bureau shall check if the petition or opposition is in
due form as provided in the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5, Section 3; Rule 6, Section 9; Rule 7, Sections 3 and 5; Rule 8,
Sections 3 and 4. For petition for cancellation of layout design (topography) of integrated circuits, Rule 3, Section 3 applies as to the form and requirements.
The affidavits, documents and other evidence shall be marked consecutively as "Exhibits" beginning with the letter "A".

Section 8. Answer¾

8.1. Within three (3) working days from receipt of the petition or opposition, the Bureau shall issue an order for the respondent to file an answer together
with the affidavits of witnesses and originals of documents, and at the same time shall notify all parties required to be notified in the IP Code and these
Regulations, provided, that in case of public documents, certified true copies may be submitted in lieu of the originals. The affidavits and documents shall be
marked consecutively as "Exhibits" beginning with the number "1".

Section 9. Petition or Opposition and Answer must be verified¾ Subject to Rules 7 and 8 of these regulations, the petition or opposition and the answer must
be verified. Otherwise, the same shall not be considered as having been filed.

In other words, as long as the petition is verified and the pieces of evidence consisting of the affidavits of the witnesses and the original of other documentary
evidence are attached to the petition and properly marked in accordance with Secs. 7.1 and 8.1 abovementioned, these shall be considered as the evidence of
the petitioner. There is no requirement under the abovementioned rules that the evidence of the parties must be formally offered to the BLA.

In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes Proceedings, the BLA is not bound by technical rules of
procedure. The evidence attached to the petition may, therefore, be properly considered in the resolution of the case.

Third Issue:

Whether the IPO Director General can validly cancel Shen Dar’s Certificate of Registration

In his Decision, the IPO Director General stated that, despite the fact that the instant case was for the cancellation of the COR issued in favor of EYIS, the
interests of justice dictate, and in view of its findings, that the COR of Shen Dar must be cancelled. The Director General explained:

Accordingly, while the instant case involves a petition to cancel the registration of the Appellee’s trademark VESPA, the interest of justice requires that
Certificate of Registration No. 4-1997-121492 be cancelled. While the normal course of proceedings should have been the filing of a petition for cancellation of
Certificate of Registration No. 4-1997-121492, that would involve critical facts and issues that have already been resolved in this case. To allow the Applicant
to still maintain in the Trademark Registry Certificate of Registration No. 4-1997-121492 would nullify the exclusive rights of Appellee as the true and
registered owner of the mark VESPA and defeat the purpose of the trademark registration system. 27

Shen Dar challenges the propriety of such cancellation on the ground that there was no petition for cancellation as required under Sec. 151 of RA 8293.

Office Order No. 79, Series of 2005, provides under its Sec. 5 that:

Section 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases.¾The rules of procedure herein contained primarily apply in the
conduct of hearing of Inter Partes cases. The Rules of Court may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure
and evidence but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is consistent with the requirements of fair play and
conducive to the just, speedy and inexpensive disposition of cases, and which will give the Bureau the greatest possibility to focus on the contentious issues
before it. (Emphasis supplied.)

The above rule reflects the oft-repeated legal principle that quasi-judicial and administrative bodies are not bound by technical rules of procedure. Such
principle, however, is tempered by fundamental evidentiary rules, including due process. Thus, we ruled in Aya-ay, Sr. v. Arpaphil Shipping Corp.:28

That administrative quasi-judicial bodies like the NLRC are not bound by technical rules of procedure in the adjudication of cases does not mean that the basic
rules on proving allegations should be entirely dispensed with. A party alleging a critical fact must still support his allegation with substantial evidence. Any
decision based on unsubstantiated allegation cannot stand as it will offend due process.

x x x The liberality of procedure in administrative actions is subject to limitations imposed by basic requirements of due process. As this Court said in Ang
Tibay v. CIR, the provision for flexibility in administrative procedure "does not go so far as to justify orders without a basis in evidence having rational
probative value." More specifically, as held in Uichico v. NLRC:

It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases. However,
this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules.

This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis: 29

 115

While it is true that administrative or quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases, this
procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules. The evidence presented must at least have a modicum
of admissibility for it to have probative value. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial.
Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.
Thus, even though technical rules of evidence are not strictly complied with before the LA and the NLRC, their decision must be based on evidence that must,
at the very least, be substantial.

The fact that no petition for cancellation was filed against the COR issued to Shen Dar does not preclude the cancellation of Shen Dar’s COR. It must be
emphasized that, during the hearing for the cancellation of EYIS’ COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the true owner of the
mark "VESPA" and, thus, entitled to have it registered. Shen Dar had more than sufficient opportunity to present its evidence and argue its case, and it did. It
was given its day in court and its right to due process was respected. The IPO Director General’s disregard of the procedure for the cancellation of a registered
mark was a valid exercise of his discretion.

Fourth Issue:

Whether the factual findings of the IPO are binding on the CA

Next, petitioners challenge the CA’s reversal of the factual findings of the BLA that Shen Dar and not EYIS is the prior user and, therefore, true owner of the
mark. In arguing its position, petitioners cite numerous rulings of this Court where it was enunciated that the factual findings of administrative bodies are
given great weight if not conclusive upon the courts when supported by substantial evidence.

We agree with petitioners that the general rule in this jurisdiction is that the factual findings of administrative bodies deserve utmost respect when supported
by evidence. However, such general rule is subject to exceptions.

In Fuentes v. Court of Appeals,30 the Court established the rule of conclusiveness of factual findings of the CA as follows:

Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals x x x is limited to the review and
revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive. As such this Court is not duty-bound to
analyze and weigh all over again the evidence already considered in the proceedings below. This rule, however, is not without exceptions." The findings of fact
of the Court of Appeals, which are as a general rule deemed conclusive, may admit of review by this Court:
(1) when the factual findings of the Court of Appeals and the trial court are contradictory;
(2) when the findings are grounded entirely on speculation, surmises, or conjectures;
(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation of facts;
(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both
appellant and appellee;
(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;
(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence
on record. (Emphasis supplied.)

Thereafter, in Villaflor v. Court of Appeals,31 this Court applied the above principle to factual findings of quasi-judicial bodies, to wit:

Proceeding by analogy, the exceptions to the rule on conclusiveness of factual findings of the Court of Appeals, enumerated in Fuentes vs. Court of Appeals, can
also be applied to those of quasi-judicial bodies x x x. (Emphasis supplied.)

Here, the CA identified certain material facts that were allegedly overlooked by the BLA and the IPO Director General which it opined, when correctly
appreciated, would alter the result of the case. An examination of the IPO Decisions, however, would show that no such evidence was overlooked.

First, as to the date of first use of the mark by the parties, the CA stated:

To begin with, when respondents-appellees filed its application for registration of the VESPA trademark on July 28, 1999, they stated under oath, as found in
their DECLARATION OF ACTUAL USE, that their first use of the mark was on December 22, 1998. On the other hand, [Shen Dar] in its application dated June
09, 1997 stated, likewise under oath in their DECLARATION OF ACTUAL USE, that its first use of the mark was in June 1996. This cannot be made any clearer.
[Shen Dar] was not only the first to file an application for registration but likewise first to use said registrable mark.32

Evidently, the CA anchors its finding that Shen Dar was the first to use the mark on the statements of the parties in their respective Declarations of Actual Use.
Such conclusion is premature at best. While a Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact of
first use of a mark. The declaration must be accompanied by proof of actual use as of the date claimed. In a declaration of actual use, the applicant must,
therefore, present evidence of such actual use.

The BLA ruled on the same issue, as follows:

More importantly, the private respondent’s prior adoption and continuous use of the mark ‘VESPA’ on air compressors is bolstered by numerous documentary
evidence consisting of sales invoices issued in the name of E.Y. Industrial and Bill of Lading (Exhibits ‘4’ to ‘375’). Sales Invoice No. 12075 dated March 27,
1995 antedates petitioner’s date of first use on January 1, 1997 indicated in its trademark application filed on June 9, 1997 as well as the date of first use in
 116

June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit ‘385’). The use by respondent registrant in the concept of
owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors. Private respondents have sold the
air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990’s. We carefully inspected
the evidence consisting of three hundred seventy-one (371) invoices and shipment documents which show that VESPA air compressors were sold not only in
Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City, to name a few. There is no doubt that
it is through private respondents’ efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the Philippines for
which it has validly acquired trademark rights. Respondent E.Y. Industrial’s right has been preserved until the passage of RA 8293 which entitles it to register
the same.33

Comparatively, the BLA’s findings were founded upon the evidence presented by the parties. An example of such evidence is Invoice No. 12075 dated March
29, 199534 where EYIS sold four units of VESPA air compressors to Veteran Paint Trade Center. Shen Dar failed to rebut such evidence. The truth, as supported
by the evidence on record, is that EYIS was first to use the mark.

Moreover, the discrepancy in the date provided in the Declaration of Actual Use filed by EYIS and the proof submitted was appropriately considered by the
BLA, ruling as follows:

On the contrary, respondent EY Industrial was able to prove the use of the mark "VESPA" on the concept of an owner as early as 1991. Although Respondent
E.Y. indicated in its trademark application that its first use was in December 22, 1998, it was able to prove by clear and positive evidence of use prior to such
date.

In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23 November 1966, the High Court clarified: Where an applicant for registration of a
trademark states under oath the date of his earliest use, and later on he wishes to carry back his first date of use to an earlier date, he then takes on the greater
burden of presenting "clear and convincing evidence" of adoption and use as of that earlier date. (B.R. Baker Co. vs. Lebrow Bros., 150 F. 2d 580.)35

The CA further found that EYIS is not a manufacturer of air compressors but merely imports and sells them as a wholesaler and retailer. The CA reasoned:

Conversely, a careful perusal of appellees’ own submitted receipts shows that it is not manufacturer but an importer, wholesaler and retailer. This fact is
corroborated by the testimony of a former employee of appellees. Admittedly too, appellees are importing air compressors from [Shen Dar] from 1997 to
2004. These matters, lend credence to [Shen Dar’s] claim that the letters SD followed by a number inscribed in the air compressor is only to describe its type,
manufacturer business name and capacity. The VESPA mark is in the sticker which is attached to the air compressors. The ruling of the Supreme Court, in the
case of UNNO Commercial Enterprises, Inc. vs. General Milling Corporation et al., is quite enlightening, thus We quote:

"The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such
importer is actually the owner thereof in the country from which the goods are imported. Thus, this Court, has on several occasions ruled that where the
applicant’s alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise
covered by said trademark, its application cannot be granted."36

This is a non sequitur. It does not follow. The fact that EYIS described itself in its sales invoice as an importer, wholesaler and retailer does not preclude its
being a manufacturer. Sec. 237 of the National Internal Revenue Code states:

Section 237. Issuance of Receipts or Sales or Commercial Invoices.¾All persons subject to an internal revenue tax shall, for each sale and transfer of
merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sale or commercial invoices, prepared at
least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the
receipt is issued to cover payment made as rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall show the name,
business style, if any, and address of the purchaser, customer or client.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or
in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in
which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section.
(Emphasis supplied.)

Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the Bureau of Internal Revenue defined a Sales Invoice and identified its required
information as follows:

Sales Invoices (SI)/Cash Invoice (CI) – is written account of goods sold or services rendered and the prices charged therefor used in the ordinary course of
business evidencing sale and transfer or agreement to sell or transfer of goods and services. It contains the same information found in the Official Receipt.

Official Receipt (OR) – is a receipt issued for the payment of services rendered or goods sold. It contains the following information:
a. Business name and address;
b. Taxpayer Identification Number;
c. Name of printer (BIR Permit No.) with inclusive serial number of booklets and date of issuance of receipts.

There is no requirement that a sales invoice should accurately state the nature of all the businesses of the seller. There is no legal ground to state that EYIS’
"declaration" in its sales invoices that it is an importer, wholesaler and retailer is restrictive and would preclude its being a manufacturer.
 117

From the above findings, there was no justifiable reason for the CA to disregard the factual findings of the IPO. The rulings of the IPO Director General and the
BLA Director were supported by clear and convincing evidence. The facts cited by the CA and Shen Dar do not justify a different conclusion from that of the
IPO. Hence, the findings of the BLA Director and the IPO Director General must be deemed as conclusive on the CA.

Fifth Issue:

Whether EYIS is the true owner of the mark "VESPA"

In any event, given the length of time already invested by the parties in the instant case, this Court must write finis to the instant controversy by determining,
once and for all, the true owner of the mark "VESPA" based on the evidence presented.

RA 8293 espouses the "first-to-file" rule as stated under Sec. 123.1(d) which states:

Section 123. Registrability. - 123.1. A mark cannot be registered if it:

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of:
(i) The same goods or services, or
(ii) Closely related goods or services, or
(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion. (Emphasis supplied.)

Under this provision, the registration of a mark is prevented with the filing of an earlier application for registration. This must not, however, be interpreted to
mean that ownership should be based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing of
an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes
sufficient evidence to oppose the registration of a mark.

Sec. 134 of the IP Code provides that "any person who believes that he would be damaged by the registration of a mark x x x" may file an opposition to the
application. The term "any person" encompasses the true owner of the mark¾the prior and continuous user.

Notably, the Court has ruled that the prior and continuous use of a mark may even overcome the presumptive ownership of the registrant and be held as the
owner of the mark. As aptly stated by the Court in Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc.: 37

Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima
facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another
can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case.

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a
mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly
entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of
ownership.

By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply
for registration of the same. Registration merely creates a prima facie presumption of the validity of the registration, of the registrant’s ownership of the
trademark and of the exclusive right to the use thereof. Such presumption, just like the presumptive regularity in the performance of official functions, is
rebuttable and must give way to evidence to the contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the parties, is that EYIS is the prior user of the mark. The exhaustive discussion
on the matter made by the BLA sufficiently addresses the issue:

Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation engaged in buying, importing, selling, industrial machineries and tools,
manufacturing, among others since its incorporation in 1988. (Exhibit "1"). Indeed private respondents have submitted photographs (Exhibit "376", "377",
"378", "379") showing an assembly line of its manufacturing or assembly process.1avvphi1

More importantly, the private respondent’s prior adoption and continuous use of the mark "VESPA" on air compressors is bolstered by numerous
documentary evidence consisting of sales invoices issued in the name of respondent EY Industrial and Bills of Lading. (Exhibits "4" to "375"). Sales Invoice No.
12075 dated March 27, 1995 antedates petitioner’s date of first use in January 1, 1997 indicated in its trademark application filed in June 9, 1997 as well as
the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit "385"). The use by respondent-
registrant in the concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors.
Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the
early 1990’s. We carefully inspected the evidence consisting of three hundred seventy one (371) invoices and shipment documents which show that "VESPA"
air compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City
to name a few. There is no doubt that it is through private respondents’ efforts that the mark "VESPA" used on air compressors has gained business goodwill
and reputation in the Philippines for which it has validly acquired trademark rights. Respondent EY Industrial’s right has been preserved until the passage of
RA 8293 which entitles it to register the same. x x x38

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its decision. More importantly, Shen Dar failed to present sufficient evidence to
prove its own prior use of the mark "VESPA." We cite with approval the ruling of the BLA:
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[Shen Dar] avers that it is the true and rightful owner of the trademark "VESPA" used on air compressors. The thrust of [Shen Dar’s] argument is that
respondent E.Y. Industrial Sales, Inc. is a mere distributor of the "VESPA" air compressors. We disagree.

This conclusion is belied by the evidence. We have gone over each and every document attached as Annexes "A", "A" 1-48 which consist of Bill of Lading and
Packing Weight List. Not one of these documents referred to a "VESPA" air compressor. Instead, it simply describes the goods plainly as air compressors which
is type "SD" and not "VESPA". More importantly, the earliest date reflected on the Bill of Lading was on May 5, 1997. (Annex – "A"-1). [Shen Dar] also attached
as Annex "B" a purported Sales Contract with respondent EY Industrial Sales dated April 20, 2002. Surprisingly, nowhere in the document does it state that
respondent EY Industrial agreed to sell "VESPA" air compressors. The document only mentions air compressors which if genuine merely bolsters respondent
Engracio Yap’s contention that [Shen Dar] approached them if it could sell the "Shen Dar" or "SD" air compressor. (Exhibit "386") In its position paper, [Shen
Dar] merely mentions of Bill of Lading constituting respondent as consignee in 1993 but never submitted the same for consideration of this Bureau. The
document is also not signed by [Shen Dar]. The agreement was not even drafted in the letterhead of either [Shen Dar] nor [sic] respondent – registrant. Our
only conclusion is that [Shen Dar] was not able to prove to be the owner of the VESPA mark by appropriation. Neither was it able to prove actual commercial
use in the Philippines of the mark VESPA prior to its filing of a trademark application in 9 June 1997. 39

As such, EYIS must be considered as the prior and continuous user of the mark "VESPA" and its true owner. Hence, EYIS is entitled to the registration of the
mark in its name.

WHEREFORE, the petition is hereby GRANTED. The CA’s February 21, 2008 Decision and October 6, 2008 Resolution in CA-G.R. SP No. 99356 are hereby
REVERSED and SET ASIDE. The Decision dated May 25, 2007 issued by the IPO Director General in Inter Partes Case No. 14-2004-00084 and the Decision
dated May 29, 2006 of the BLA Director of the IPO are hereby REINSTATED.

G.R. No. 122174 October 3, 2002

INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.

Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP No. 35056,
denying due course and dismissing the petition filed by Industrial Refractories Corp. of the Philippines (IRCP).

Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976 for the purpose of engaging in the business
of manufacturing, producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it
registered its corporate and business name with the Bureau of Domestic Trade.

Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing Corporation". It amended its
Articles of Incorporation on August 23, 1985 to change its corporate name to "Industrial Refractories Corp. of the Philippines". It is engaged in the business of
manufacturing all kinds of ceramics and other products, except paints and zincs.

Both companies are the only local suppliers of monolithic gunning mix.1

Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with the Securities and Exchange Commission (SEC) a
petition to compel petitioner to change its corporate name on the ground that its corporate name is confusingly similar with that of petitioner’s such that the
public may be confused or deceived into believing that they are one and the same corporation. 2

The SEC decided in favor of respondent RCP and rendered judgment on July 23, 1993 with the following dispositive portion:

"WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the respondent declaring the latter’s corporate name ‘Industrial
Refractories Corporation of the Philippines’ as deceptively and confusingly similar to that of petitioner’s corporate name ‘Refractories Corporation of the
Philippines’. Accordingly, respondent is hereby directed to amend its Articles of Incorporation by deleting the name ‘Refractories Corporation of the
Philippines’ in its corporate name within thirty (30) days from finality of this Decision. Likewise, respondent is hereby ordered to pay the petitioner the sum
of P50,000.00 as attorney’s fees."3

Petitioner appealed to the SEC En Banc, arguing that it does not have any jurisdiction over the case, and that respondent RCP has no right to the exclusive use
of its corporate name as it is composed of generic or common words.4

In its Decision dated July 23, 1993, the SEC En Banc modified the appealed decision in that petitioner was ordered to delete or drop from its corporate name
only the word "Refractories".5

Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on certiorari to the Court of Appeals which then rendered the herein
assailed decision. The appellate court upheld the jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent
RCP are confusingly or deceptively similar, and that respondent RCP has established its prior right to use the word "Refractories" as its corporate name.6 The
appellate court also found that the petition was filed beyond the reglementary period.7

Hence, herein petition which we must deny.

Petitioner contends that the petition before the Court of Appeals was timely filed. It must be noted that at the time the SEC En Banc rendered its decision on
May 10, 1994, the governing rule on appeals from quasi-judicial agencies like the SEC was Supreme Court Circular No. 1-91. As provided therein, the
 119

remedy should have been a petition for review filed before the Court of Appeals within fifteen (15) days from notice, raising questions of fact, of law, or mixed
questions of fact and law.8 A motion for reconsideration suspends the running of the period. 9

In the case at bench, there is a discrepancy between the dates provided by petitioner and respondent. Petitioner alleges the following dates of receipt and
filing:10

June 10, 1994 Receipt of SEC’s Decision dated May 10, 1994

June 20, 1994 Filing of Motion for Reconsideration

September 1, 1994 Receipt of SEC’s Order dated August 3, 1994 denying petitioner’s motion for reconsideration

September 2, 1994 Filing of Motion for extension of time

September 6, 1994 Filing of Petition

Respondent RCP, however, asserts that the foregoing dates are incorrect as the certifications issued by the SEC show that petitioner received the SEC’s
Decision dated May 10, 1994 on June 9, 1994, filed the motion for reconsideration via registered mail on June 25, 1994, and received the Order dated August 3,
1994 on August 15, 1994.11 Thus, the petition was filed twenty-one (21) days beyond the reglementary period provided in Supreme Court Circular No. 1-91.12

If reckoned from the dates supplied by petitioner, then the petition was timely filed. On the other hand, if reckoned from the dates provided by respondent
RCP, then it was filed way beyond the reglementary period. On this score, we agree with the appellate court’s finding that petitioner failed to rebut respondent
RCP’s allegations of material dates of receipt and filing.13 In addition, the certifications were executed by the SEC officials based on their official
records14 which enjoy the presumption of regularity.15 As such, these are prima facie evidence of the facts stated therein. 16 And based on such dates, there is
no question that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. On this ground alone, the instant petition should be
denied as the SEC En Banc’s decision had already attained finality and the SEC’s findings of fact, when supported by substantial evidence, is final.17

Nevertheless, to set the matters at rest, we shall delve into the other issues posed by petitioner.

Petitioner’s arguments, substantially, are as follows: (1) jurisdiction is vested with the regular courts as the present case is not one of the instances provided
in P.D. 902-A; (2) respondent RCP is not entitled to use the generic name "refractories"; (3) there is no confusing similarity between their corporate names;
and (4) there is no basis for the award of attorney’s fees. 18

Petitioner’s argument on the SEC’s jurisdiction over the case is utterly myopic. The jurisdiction of the SEC is not merely confined to the adjudicative functions
provided in Section 5 of P.D. 902-A, as amended.19 By express mandate, it has absolute jurisdiction, supervision and control over all corporations. 20 It also
exercises regulatory and administrative powers to implement and enforce the Corporation Code, 21 one of which is Section 18, which provides:

"SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively
or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to
existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended
name."

It is the SEC’s duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection
of the public, and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate
confusion.22 Clearly therefore, the present case falls within the ambit of the SEC’s regulatory powers. 23

Likewise untenable is petitioner’s argument that there is no confusing or deceptive similarity between petitioner and respondent RCP’s corporate
names. Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or deceptively or confusingly similar to that
of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws". The policy behind
the foregoing prohibition is to avoid fraud upon the public that will have occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporation. 24

Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names25 specifically requires that: (1) a corporate name shall not be
identical, misleading or confusingly similar to one already registered by another corporation with the Commission; 26 and (2) if the proposed name is similar to
the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the company already registered. 27

As held in Philips Export B.V. vs. Court of Appeals,28 to fall within the prohibition of the law, two requisites must be proven, to wit:

(1) that the complainant corporation acquired a prior right over the use of such corporate name;

and

(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already
protected by law; or (c) patently deceptive, confusing or contrary to existing law.
 120

As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is
determined by priority of adoption.29 In this case, respondent RCP was incorporated on October 13, 1976 and since then has been using the corporate name
"Refractories Corp. of the Philippines". Meanwhile, petitioner was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing
Corporation". It only started using the name "Industrial Refractories Corp. of the Philippines" when it amended its Articles of Incorporation on August 23,
1985, or nine (9) years after respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the right to use the word
"Refractories" as part of its corporate name.

Anent the second requisite, in determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a
person using ordinary care and discrimination and the Court must look to the record as well as the names themselves. 30 Petitioner’s corporate name is
"Industrial Refractories Corp. of the Phils.", while respondent’s is "Refractories Corp. of the Phils." Obviously, both names contain the identical words
"Refractories", "Corporation" and "Philippines". The only word that distinguishes petitioner from respondent RCP is the word "Industrial" which merely
identifies a corporation’s general field of activities or operations. We need not linger on these two corporate names to conclude that they are patently similar
that even with reasonable care and observation, confusion might arise. 31 It must be noted that both cater to the same clientele, i.e.¸ the steel industry. In fact,
the SEC found that there were instances when different steel companies were actually confused between the two, especially since they also have similar
product packaging.32 Such findings are accorded not only great respect but even finality, and are binding upon this Court, unless it is shown that it had
arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly
appreciated. 33 And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.34

Refractory materials are described as follows:

"Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are supplied mainly in the form of brick of standard sizes
and of special shapes. Refractories also include refractory cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk materials
such as dead-burned grain magneside, chrome or ground ganister and special clay."35

While the word "refractories" is a generic term, its usage is not widespread and is limited merely to the industry/trade in which it is used, and its continuous
use by respondent RCP for a considerable period has made the term so closely identified with it. 36 Moreover, as held in the case of Ang Kaanib sa Iglesia ng
Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng Katotohanan,petitioner’s appropriation
of respondent's corporate name cannot find justification under the generic word rule. 37 A contrary ruling would encourage other corporations to adopt
verbatim and register an existing and protected corporate name, to the detriment of the public.38

Finally, we find the award of P50,000.00 as attorney's fees to be fair and reasonable. Article 2208 of the Civil Code allows the award of such fees when its
claimant is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In this case, despite its undertaking to change its
corporate name in case another firm has acquired a prior right to use such name, 39 it refused to do so, thus compelling respondent to undergo litigation and
incur expenses to protect its corporate name.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

A.M. No. MTJ-92-643 November 27, 1992

LOUIS VUITTON S.A., complainant,
vs.
JUDGE FRANCISCO DIAZ VILLANUEVA, presiding Judge, Branch 36, The Metropolitan Trial Court at Quezon City, Metro Manila, respondent.

This is a complaint filed by Louis Vuitton, S.A., represented by counsel, Quasha Asperilla Ancheta Peña and Nolasco Law Office, against Judge Francisco Diaz
Villanueva of the Metropolitan Trial Court of Quezon City, Branch 36, on the ground that the latter knowingly rendered a manifestly unjust judgment.

This Court finds the following facts as relevant:

In Criminal Case No. XXXVI-62431, entitled "People of the Philippines vs. Jose V. Rosario", Louis Vuitton, S.A. accused the latter of unfair competition as
defined by paragraph 1 of Article 189, Revised Penal Code. The information stated:

. . . the above named accused, as owner/proprietor of Manila COD Department, Store . . . did then and there, wilfully, unlawfully and
feloniously manufacture, distribute, sell and offer for sale lady's bags, should (sic) bags, wallets, purses and other similar goods made of
leather with the labels, trademarks and logo of "LOUIS VUITTON " and "LV", which are exclusive trademarks owned and registered with
the Philippine Patent Office in the name of private complainant LOUIS VUITTON S.A. . . . thus, giving to them the general appearance of
goods or products of said private complainant, or such appearance which would be likely to induce the public to believe that said goods
offered are those of private complainant, in unfair competition and for the purpose of deceiving or defrauding it of its legitimate trade or
the public in general. . . .1

On February 8, 1991, before judgment, prosecution filed the Prosecution's Memorandum with Motion found in Annex "A" of the Complaint, where the
prosecution prayed:

Premises considered, it is most respectfully prayed that the accused Jose V. Rosario be declared guilty beyond reasonable doubt of having
committed the offense described in the criminal information against him.
 121

In the alternative, if the accused cannot be held responsible for the criminal information against him, it is respectfully moved that the
accused be committed to answer for the proper offense of "giving other persons (the supposed concessionaire) a chance or opportunity
to commit unfair competition" (Section 1, Article 189 of the Revised Penal Code in conjunction with Rule 119 of the 1985 Rules on
Criminal Procedure).2

The trial court summarized its factual findings as follows:

From the records of the case, the evidence presented and the arguments advanced by the parties, the Court finds that the complaining
witness in this case is the representative and attorney-in-fact, counsel of Louis Vuitton, S.A. French Company with business address at
Paris, France; that private complainant is suing the accused for the protection of the trade mark Louis Vuitton and the L.V. logo which are
duly registered with the Philippine Patent Office; that on May 10, 1989, Atty. Felino Padlan of the Quasha Law Office brought a letter to
the COD informing the latter to cease and desist from selling leather articles bearing the trade marks Louis Vuitton and L.V. logo as the
same is the registered trade marks belonging to the private complainant which has not authorized any person in the Philippines to sell
such articles; that on August 4, 1989, prosecution witness, Miguel trade mark and logo of Louis Vuitton . . . ; that again on September 6,
1989, said Mrs. Domingo again bought from the same store a wallet with a trade mark and logo of Louis Vuitton . . . ; that on September
28 1989, the NBI, upon the request of the Quasha law Firm applied for a Search Warrant at the Metropolitan Trial Court in Quezon City;
that the application was granted and the Search Warrant was issued against COD and was enforced on the same date; that from the
implementation of the said date; that from the implementation of the said Search Warrant, about seventy-two (72) leather products were
seized; that the accuse signed the inventory of the seized articles.

The accused, on the other hand, claimed: that he is not the manufacturer or seller of the seized articles; that the said articles were sold in
the store by a concessionaire by the name of Erlinda Tan who is doing business under the name of Hi-Tech Bags and wallets. 3

In acquitting the accused, the trial court gave the following reasons:

From all the foregoing, considering that the accused denied being the manufacturer or seller of the seized articles, it is incumbent upon
the prosecution to prove that said articles are owned and being sold by the accused. The prosecution relied as their evidence against the
accused the inventory which was signed by him (accused) with a notation under his signature "owner/representative". An examination
of the inventory . . . would show that the same was a prepared form of the NBI and that the accused was made to sign only on the space
on the typewritten word owner/representative. Aside from this, no other evidence was presented by the prosecution to show that there
is a link between the Manufacturers of the seized goods and the accused. Further, when the case was filed the Prosecutor's Office, it
stated the name of the accused as the owner of the COD, but from the evidence presented, it appears that the accused is not the owner by
the stockholder and the executive-vice president thereof.

The prosecution evidence shows that long before the raid of September 28, 1989, surveys have been caused to be made by the Quasha
Law Firm, not only at the COD but also in other department stores as far as Baguio City and Cebu City; that these seized products were
being sold not only t the COD but also in some big department (sic) store such as Cash and Carry. They could have easily verified from the
Securities and Exchange Commission who the actual officers of the COD [are] to be charged, but the prosecution did not do this and relied
only on the inventory of the seized goods prepared by the NBI agents with the typewritten word owner/representative.

With respect to the seized goods, the test of unfair competition is whether the goods have been made to appear that will likely deceive
the ordinary purchaser exercising ordinary care. The seized goods which were marked as exhibits and presented to the Court would
easily show that there was no attempt on the part of the manufacturer or seller to pass these goods as products of Louis Vuitton. From
the price tags attached to a seized bag, it could be seen that the article carried a price tag of ONE HUNDRED FORTY-SEVEN (P147.00)
PESOS, whereas, upon examination of the expert witness presented by the prosecution, he testified that a genuine bag of Louis Vuitton
would cost about FOUR THOUSAND (P4,000.00) PESOS to FIVE THOUSAND (P5,000.00) PESOS. It is apparent that the seized articles did
not come close to the appearance of a genuine Louis Vuitton product. Further, the buckle of the bag also carries the logo of Gucci, another
trade mark. From the appearance of all the seized goods, it is very apparent that these goods were roughly done. The quality and textures
of the materials used are of low quality that an ordinary purchases (sic) exercising ordinary [care] will easily determine that they were
locally manufactured and will not pass as a (sic) genuine Louis Vuitton products. From these, the Court finds that the prosecution failed
to prove that the essential elements of unfair competition, to wit:

a. That the offender gives his goods the general appearance of the goods of another manufacturer or dealer;

b. That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of their packages, or in
the (3) device or words therein, or in (4) any other feature of their a (sic) appearance.

These elements, to the mind of the Court are absent in this case.

Further finally, the prosecution filed this case accused Jose V. Rosario in his personal capacity and not as an officer of the Manila COD
Department Store, which is a corporation, and has a separate legal personality.4

In the complaint, pointed out that the respondent Judge did not consider the motion of February 11, 1990. This omission of respondent judge allegedly
constituted a clear and gross violation of his ministerial duty in order to allow the accused to escape criminal liability. Furthermore, complainant claimed that
the respondent judge's failure to resolve the motion exposed his gross ignorance of the law. Section 11, Rule 119 of the 1985 Rules on Criminal Procedure
states:

Sec. 11. When mistake has been made in charging the proper offense.— When it becomes manifest at any time before judgment, that a
mistake has been made in charging the proper offense, and the accused cannot be convicted of the offense charged, or of any other
 122

offense necessarily included therein, the accused shall not be discharged, if there appears to be good cause to detain him. In such case the
court shall commit the accused to answer for the proper information charged.

Complainant also assailed respondent judge's findings that there was no unfair competition because the elements of the crime were not met, and that he
seized articles did not come close to the appearance of a genuine Louis Vuitton product, the counterfeit items having been poorly, done. According to
complainant, in making such conclusions, respondent judge ignored the ruling Converse Rubber Corp. vs. Jacinto Rubber & Plastics Co., Inc.,5 that "the statute on
unfair competition extends protection to the goodwill of a manufacturer or dealer".

Thirdly, complainant criticized respondent judge for his failure to consider the alleged lack of credibility of Felix Lizardo, the lone witness for the defense, in
rendering the assailed decision.

Lastly, complainant pointed out that respondent judge violated the constitutional mandate that decisions should be rendered within three (3) months from
submission of the case. It appeared that the decision was date June 28, 1991 but it was promulgated only on October 25, 1991.

In response to the forgoing accusations, respondent judge set forth in his comment that:

1. The evidence of the prosecution was not sufficient to sustain the conclusion that Jose V. Rosario was guilty beyond reasonable doubt. The evidence did not
prove all the elements of the offense charged. He added that in deciding criminal cases, the trial court relies not on the weakness of the accused's evidence but
on the strength of the evidence submitted by the prosecution.

2. His alleged failure to act on the motion was due to the prosecutor's failure to point out to the court before judgment was rendered that a mistake was made
in charging the proper offense. He also added that the prosecutor's evidence did not also manifest this mistake.

Citing the conclusion of the Prosecution's Memorandum with Motion of the complaint, respondent judge averred that the private prosecutor himself, instead
of showing the court that the proper offense was not charged, clearly indicated that no such mistake was committed. The cited statement says;

It is respectfully submitted that the prosecution had fairly proven that the accused is guilty beyond reasonable doubt of having
committed the offense outlined in the criminal Information against him. . . . 6

3. The prayer contained in the Prosecution's Memorandum with Motion should have been placed in a proper pleading. He also said that the private prosecutor
should have conferred with public prosecutor if the former believed that the proper offense of giving other persons a chance to commit unfair competition
would be charged against Rosario. The failure of both public and private prosecutors to take the appropriate action provided no reason for respondent judge
to commit the accused to answer for the proper information.

The sole issue for consideration of this Court is whether or not respondent judge is guilty of knowingly rendering a manifestly unjust judgment.

The Revised Penal Code holds a judge liable for knowingly rendering a manifestly unjust judgment. Article 204 thereof provides:

Any judge who shall knowingly render an unjust judgment in a case submitted to him for decision shall be punished . . .

The law requires that the (a) offender is a judge; (b) he renders a judgment in a case submitted to him for decision; (c) the judgment is unjust; (d) he knew
that said judgment is unjust.7 In some administrative cases8 decided by this Court, We have ruled that in order to hold a judge liable, it must be shown beyond
reasonable doubt that the judgment is unjust and that it was made with conscious and deliberate intent to do an injustice.

In this case, We are constrained to hold that complainant failed to substantiate its claims that respondent judge rendered an unjust judgment knowingly. It
merely relied on the failure of respondent judge to mentioned the motion in the decision, on his alleged reliance on the testimony of defense witness and on
the delay in the promulgation of the case.

But they are not enough to show that the judgment was unjust and was maliciously rendered.

A judgment is said to be unjust when it is contrary to the standards of conduct prescribed by law. 9 The test to determine whether an order or judgment is
unjust may be inferred from the circumstances that it is contrary to law or is not supported by evidence. 10

The decision herein rests on two legal grounds: first, that there was no unfair competition because the elements of the crime were not sufficiently proven;
second, that Jose V. Rosarion who was accused as owner/proprietor of COD was not properly charged as his personality is distinct from that of the COD's.

In holding that there was no unfair competition, the respondent judge said that "the seized articles did not come close to the appearance of a genuine Louis
Vuitton product". 11 His pronouncement obviously had in mind the test to determine unfair competition which this Court had laid down in the case of U.S.
vs. Manuel, 12 to wit:

. . . whether certain goods have been clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary
care, . . .

In so finding that the seized products did not come close to the appearance of genuine Louis Vuittons because they were poorly done, the court considered not
only their appearance but other factors as well, such as the price differences between the real and the fake products. Complainant, on the other hand, alleged
that they were good workmanship. But, this Court is not in a position to review the evidence and thereafter conclude that the imitation was poorly or
 123

excellently done. The findings of fact of the trial court, if supported by substantial evidence, are binding on the Supreme Court. 13 Even on the assumption that
the judicial officer has erred in the appraisal of evidence, he cannot be held administratively or civilly liable for his judicial action. 14

The second ground which was relied upon by the trial court in acquitting the accused finds basis in the well-settled doctrine that a corporation has a distinct
personality from that of its stockholders/owners. A corporation is vested by law with a personality of its own, separate and distinct from that of its
stockholders and from that of its officers who manage and run its affairs. 15 Furthermore, Section 23 of the Corporation Code provides:

. . . the corporate powers of all corporations formed under this code shall be exercised, all business conducted, and all property of such
corporations controlled and held by the Board of Directors . . .

This decision is assailed to be unjust mainly because it did not consider the Prosecution's Memorandum with Motion and Motion for Early Resolution filed by
private prosecutor, herein complainant, on February 8, 1991 and February 11, 1991, respectively. According to complainant, had respondent judge taken the
former motion into account, he would not have acquitted the accused, Jose V. Rosario. Instead, he would have been held guilty for giving others an opportunity
engage in unfair competition as prescribed by Article 189 of the Revised Penal Code.

Respondent judge's judgment cannot be rendered unjust by this alone.

In the first place, it would not have made any difference because Jose v. Rosario was charged as owner/proprietor. COD is not a single proprietorship but one
that is run and owned by a corporation, Rosario Bros., Inc., of which the accused is stockholder and Executive Vice-President. A stockholder generally does not
have a hand in the management of the corporate affairs. On the other hand, the Vice-President had no inherent power to bind the corporation. 16 As general
rule, his duties must be specified in the by-laws. 17 In the criminal case, the information did not specify his duties as Executive Vice-President. The trial court
had no basis for holding that as such, the accused entered into a contract with the concessionaire thereby giving the latter an opportunity to practice unfair
competition. Whereas, Section 23 of the Corporation Code is explicit that the directors, acting as a body, exercise corporation powers and conduct the
corporation's business. The board has the sole power and responsibility to decide whether a corporation should enter into any contract or perform any
act. 18 The amendment of the charge, as proposed by the private prosecutor, would not in any way affect the application of the doctrine that the corporation
has a personality distinct from that of its owners.

Moreover, the finding of the trial court that there is no unfair competition rendered the consideration of the motions insignificant. If there was unfair
competition, so would there be no offense of giving others an opportunity to engage in unfair competition since there was no unfair competition to begin with.

Herein complainant also failed to prove malice and deliberate intent on the part of respondent judge to perpetrate an unjustice. We hereby quoted the
decision of this Honorable Court in Sta. Maria vs. Ubay, 19 stating that:

. . . complainant failed to show any unmistakable indication that bad faith motivated the alleged unjust actuations of the respondent judge
. . . Absent, thus, any positive evidence on record that the respondent judge rendered judgment in question with conscious and deliberate
intent to do an injustice, the . . . charge of the complainant must fall.

In Mendoza vs. Villaluz, 20 this Court has also held:

. . . it is a fundamental rule of long standing that a judicial officer when required to exercise his judgment or discretion is not criminally
liable for any error he commits provided he acts in good faith, that in the absence of malice or any wrongful conduct . . . the judge cannot
be held administratively responsible . . . for "no one, called upon to try the facts or interpret the law in the process of administering
justice can be infallible in his judgment," and "to hold a judge administratively accountable for every erroneous ruling or decision he
renders assuming that he has erred, would be nothing short of harrasment or would make his position unbearable.

This pronouncement has been reiterated by Us in the case of Miranda vs. Judge Manalastas, 21 where We said:

Well established is the rule that mere errors in the appreciation of evidence, unless so gross and patent as to produce an inference of
ignorance or bad faith, or that the judge knowingly rendered an unjust decision, are irrelevant and immaterial in administrative
proceedings against him. No one called upon to try the facts or interpret the law in the process of administering justice is infallible in his
judgment. All that is expected of him is that he follows the rules prescribed to ensure a fair and impartial hearing, assess the different factors
that emerge therefrom and bear on the issues presented, and on the basis of the conclusions he find established, with only his conscience and
knowledge of the law to guide him, adjudicate the case accordingly. . . . If in the mind of the respondent, the evidence for the defense was
entitled to more weight and credence, the cannot held to account administratively for the result of his ratiocination. For that is the very
essence of judicial inquiry: otherwise the burdens of judicial office will be intolerable. (Emphasis supplied)

A judge cannot be subjected to liability –– civil, criminal, or administrative — for any his official acts, not matter how erroneous, as long as he acts in good
faith. 22 In Pabalan vs. Guevarra, 23 the Supreme Court spoke of the rationale for this immunity. We held, thus:

. . . it is a general principle of the highest importance to the proper administration of justice that a judicial officer, in exercising the
authority vested in him, shall be free to act the authority vested in him, shall be free to act upon his own convictions, without
apprehension of personal consequences to himself." This concept of judicial immunity rests upon consideration of public policy, its
purpose being to preserve the integrity and independence of the judiciary.

Still, complainant wants Us to apply the Res Ipsa Loquitur Doctrine as applied by this Court in the cases of People vs. Valenzuela; 24 Cathay Pacific Airways vs.
Romillo; 25 In Re: Wenceslao Laureta; 26 and Consolidated Bank and Trust Corporation vs. Capistrano. 27
 124

That doctrine, however, is not applicable to the case at bar. In similar administrative cases separately filed against Judge Liwag 28 and Judge Dizon, 29 We have
ruled that:

In these res ipsa loquitur resolutions, there was on the face of the assailed decisions, an inexpliacable grave error bereft of any redeeming
feature, a patent railroading of a case to bring about an unjust decision, or a manifestly deliberate intent to wreak (sic) an injustice
against a hapless party. The facts themselves, previously proven or admitted, were of such a character as to give rise to a strong inference
that evil intent was present. Such intent, in short, was clearly deducible from what was already of record. The res ipsa loquitur doctrine
does not except or dispense with the necessity of proving the facts on which the inference of evil intent is based. It merely expresses the clearly
sound reasonable conclusion that when such facts are admitted or are already shown by the record, and no credible explanation that would
negative the strong inference of evil intent is forthcoming, no further hearing to establish them to support a judgment as to the culpability of
a respondents is necessary.

Thus, when asked to explain the clearly gross ignorance of law or the grave misconduct irresistibly reflecting on their integrity, the
respondent Judges were completely unable to give any credible explanation or to raise reasonable doubt . . . (Emphasis supplied).

Thus, even granting that res ipsa loquitur is appreciable, complainant still has to present proof of malice and bad faith. Respondent judge, on the other hand,
may raise good faith as a defense. That good faith is a defense to the charge of knowingly rendering an unjust judgment remains to be the law. 30 He is also
given the chance to explain his acts and if such explanation is credible, the court may absolve him of the charge.

In this case, We find that the facts and the explanation rendered by Judge Villanueva justify his absolution from the charge. However, while he is held to be not
guilty, he should avoid acts which tend to cast doubt on his integrity. Moreover, his delay in the promulgation of this case deserves a reprimand from this
Court as it is contrary to the mandate of our Constitution which enshrines the right of the litigants to a speedy disposition of their cases.

WHEREFORE, in view of the foregoing, this complaint is hereby DISMISSED for lack of merit. Considering the delay in the promulgation of the decision of this
case by respondent judge, a reprimand is in order.

SO ORDERED.

G.R. No. 164321 March 23, 2011

SKECHERS, U.S.A., INC., Petitioner,
vs.
INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or
STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY
R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's
Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,
vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or
STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY
R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's
Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents.

RESOLUTION

PERALTA, J.:

For resolution are the twin Motions for Reconsideration1 filed by petitioner and petitioner-intervenor from the Decision rendered in favor of respondents,
dated November 30, 2006.

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to the filing of the motions is in order.

The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court (RTC) of Manila an application for the issuance of search
warrants against an outlet and warehouse operated by respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic
Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines. 2 In the course of its business, petitioner has registered the trademark
"SKECHERS"3 and the trademark "S" (within an oval design)4 with the Intellectual Property Office (IPO).

Two search warrants5 were issued by the RTC and were served on the premises of respondents. As a result of the raid, more than 6,000 pairs of shoes bearing
the "S" logo were seized.

Later, respondents moved to quash the search warrants, arguing that there was no confusing similarity between petitioner’s "Skechers" rubber shoes and its
"Strong" rubber shoes.

On November 7, 2002, the RTC issued an Order6 quashing the search warrants and directing the NBI to return the seized goods. The RTC agreed with
respondent’s view that Skechers rubber shoes and Strong rubber shoes have glaring differences such that an ordinary prudent purchaser would not likely be
misled or confused in purchasing the wrong article.
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Aggrieved, petitioner filed a petition for certiorari 7 with the Court of Appeals (CA) assailing the RTC Order. On November 17, 2003, the CA issued a
Decision8 affirming the ruling of the RTC.

Subsequently, petitioner filed the present petition9 before this Court which puts forth the following assignment of errors:

A. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL
TRIAL FOR TRADEMARK INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN IT SHOULD HAVE LIMITED ITSELF
TO A DETERMINATION OF WHETHER THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH WARRANTS.

B. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING THAT RESPONDENTS ARE NOT GUILTY OF
TRADEMARK INFRINGEMENT IN THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE CAUSE TO ISSUE A SEARCH
WARRANT.10

In the meantime, petitioner-intervenor filed a Petition-in-Intervention11 with this Court claiming to be the sole licensed distributor of Skechers products here
in the Philippines.

On November 30, 2006, this Court rendered a Decision12 dismissing the petition.

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

In petitioner’s motion for reconsideration, petitioner moved for a reconsideration of the earlier decision on the following grounds:

(a) THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b) COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY
PETITIONER WERE INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF PETITIONER – RETURNING THE GOODS
TO RESPONDENTS WILL ADVERSELY AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c) THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED WITH GRAVE ABUSE OF DISCRETION.

(d) THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE EVIDENCE PRESENTED DURING THE SEARCH WARRANT
APPLICATION PROCEEDINGS.

(e) THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED ON A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF
GUILT (OR ABSENCE THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS WAS IMPROPER.

(f) THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS CLEAR. THE DOMINANCY TEST SHOULD BE USED.

(g) THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION. 13

On the other hand, petitioner-intervenor’s motion for reconsideration raises the following errors for this Court’s consideration, to wit:

(a) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE
ALREADY-REJECTED HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE
CAUSE FOR TRADEMARK INFRINGEMENT; AND

(c) THE COURT OF APPEALS SANCTIONED THE TRIAL COURT’S DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL
PROCEEDINGS WHEN IT UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A FINDING THAT THERE IS NO
CONFUSING SIMILARITY.14

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary issue posed by them dwells on the issue of whether
or not respondent is guilty of trademark infringement.

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically, Section 155 of R.A. No. 8293 states:

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in
connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale
of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or
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155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake,
or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes
place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services
using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of
confusion, jurisprudence has developed tests the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the
prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public.
Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration
are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market
segments.16

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging,
in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features
appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other. 17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product
confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2)
confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is
applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived
either into that belief or into the belief that there is some connection between the two parties, though inexistent. 18

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by respondent in its Strong rubber shoes infringes on the mark
already registered by petitioner with the IPO. While it is undisputed that petitioner’s stylized "S" is within an oval design, to this Court’s mind, the dominant
feature of the trademark is the stylized "S," as it is precisely the stylized "S" which catches the eye of the purchaser. Thus, even if respondent did not use an
oval design, the mere fact that it used the same stylized "S", the same being the dominant feature of petitioner’s trademark, already constitutes infringement
under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be considered as highly identifiable to the products of
petitioner alone. The CA even supported its conclusion by stating that the letter "S" has been used in so many existing trademarks, the most popular of which
is the trademark "S" enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which
is that respondent had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark for. The letter "S" used in the Superman
logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA
of the letter "S" used in the Superman trademark with petitioner’s stylized "S" is not appropriate to the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on the font and the size of the lettering, the stylized "S"
utilized by respondent is the very same stylized "S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner’s trademark. Indubitably,
the likelihood of confusion is present as purchasers will associate the respondent’s use of the stylized "S" as having been authorized by petitioner or that
respondent’s product is connected with petitioner’s business.

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed petitioner’s trademark. For its part, the RTC noted the following
supposed dissimilarities between the shoes, to wit:

1. The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2. The word "Strong" is conspicuously placed at the backside and insoles.

3. The hang tags and labels attached to the shoes bears the word "Strong" for respondent and "Skechers U.S.A." for private complainant;

4. Strong shoes are modestly priced compared to the costs of Skechers Shoes. 19

While there may be dissimilarities between the appearances of the shoes, to this Court’s mind such dissimilarities do not outweigh the stark and blatant
similarities in their general features. As can be readily observed by simply comparing petitioner’s Energy 20 model and respondent’s Strong21 rubber shoes,
respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and "wavelike" pattern of the midsole and outer sole of
respondent’s shoes are very similar to petitioner’s shoes, if not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated
designs in practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the back and six in front. On the side of
respondent’s shoes, near the upper part, appears the stylized "S," placed in the exact location as that of the stylized "S" on petitioner’s shoes. On top of the
"tongue" of both shoes appears the stylized "S" in practically the same location and size. Moreover, at the back of petitioner’s shoes, near the heel counter,
appears "Skechers Sport Trail" written in white lettering. However, on respondent’s shoes appears "Strong Sport Trail" noticeably written in the same white
lettering, font size, direction and orientation as that of petitioner’s shoes. On top of the heel collar of petitioner’s shoes are two grayish-white semi-transparent
circles. Not surprisingly, respondent’s shoes also have two grayish-white semi-transparent circles in the exact same location.lihpwa1

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it
cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it
is indubitable that respondent’s products will cause confusion and mistake in the eyes of the public. Respondent’s shoes may not be an exact replica of
petitioner’s shoes, but the features and overall design are so similar and alike that confusion is highly likely.1avvphi1
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In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc., 22 this Court, in a case for unfair competition, had opined that even if not all the details are
identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit:

From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the
plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their respective
brands, of course. We fully agree with the trial court that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles
of the two products are exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor." These
elements are more than sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were identical, with the general
appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and,
therefore, Custombuilt could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held
liable. x x x23

Neither can the difference in price be a complete defense in trademark infringement. In McDonald’s Corporation v. L.C. Big Mak Burger. Inc.,24 this Court held:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name
is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential
expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). x x x25

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. 26 The purchasing public might be mistaken in thinking that petitioner had
ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or
connected with petitioner’s brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the
goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods.27 While
respondent’s shoes contain some dissimilarities with petitioner’s shoes, this Court cannot close its eye to the fact that for all intents and purpose, respondent
had deliberately attempted to copy petitioner’s mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of
infringement do not normally copy but only make colorable changes. 28The most successful form of copying is to employ enough points of similarity to confuse
the public, with enough points of difference to confuse the courts. 29

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision dated November 30, 2006 is RECONSIDERED and SET ASIDE.

SO ORDERED.