Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-1816            April 17, 1906

CARLOS GSELL, plaintiff-appellee, vs.VALERIANO VELOSO YAP-JUE, defendant-appellant.

Chicote, Miranda and Sierra, for appellant.Coudert Brothers, for appellee.

JOHNSON, J.:

This was an action by the plaintiff to recover of the defendant damages for the infringement of a certain patent issued by the Spanish Government to the assignor of the plaintiff.

An examination of the evidence adduced during the trial shows that upon the 17th day of June, 1896, Henry Alfred Gsell presented a petition to the "Spanish Government to be granted a patent for manufacturing umbrella and cane handles, which patent was as follows:

Descriptive statement which accompanies the application for patent of invention for the industrial product 'handles for canes and umbrellas, curred by means of a small lamp or blowpipe, fed buy petroleum or mineral fuel.'

After the canes have been cut for cane or umbrella handles, the outsides are thoroughly cleaned. This operation having been performed, they are then trimmed and the interior cleaned by means of a gimlet of about fifteen centimeters in length operated by a wheel, by means of which the knots inside are broken. There is then introduced to a depth of about fifteen centimeters a piece of very clean: bamboo, which completely fills the hole made by the gimlet, thereby giving to the cane necessary strength to resist the heat of the lamp or blowpipe without breaking or cracking.

This operation having been performed, the cane, the end of which is attached to a fixed point, is given the shape of a hook or some other form by means of fire and pressure. Once the cane has been shaped desired, it is allowed to cool, and is then cleaned, varnished, and ornamented at will.

This industry requires skillful handiwork, owing to the great risk engendered by the treatment of such fragile material as a light cane. On the other hand, however, it affords large profits to the workman.

NOTE. — The patent applied for shall be for the industrial product 'cane handles for walking sticks and umbrellas, curved by means of a small lamp or blowpipe, fed by petroleum or mineral fuel.'

Madrid, June 17, 1896.

Which petition was granted in the following decree:

Whereas Mr. Henry Alfred Gsell, of ............. has filed under date of the 17th of June, 1896, in the civil government of Madrid, an application for a patent of an invention, consisting of a process for curving handles for canes and umbrellas by means of a lamp or blowpipe fed by petroleum or mineral fuel.

He having complied with the provisions of the law of July 30, 1878, the undersiged by virtue of the power conferred upon him by article 4 of the royal decree of July 30, 1887, issues by order of his excellency the minister of the interior, in favor of said party, the present patent of invention which guarantees to him the Peninsula and adjacent islands, for the term of vein ...... from the date of the present title, the exclusive right to the exploitation of the said industry, in the form described in the statement attached to ........ He may extend it to the colonies, provided he complies with the provisions of article 2 of the royal decree of May 14, 1880.

Of this patent the division of industry and registration of industrial property ............ shall make a record to be forwarded to the minister of the interior; and it is provided that the same shall expire and shall be null and void if the interested party should fail to pay to the said division, and in ............ section 14 of the law, the annual fees prescribed in article 13, and fails to show to the

chief of the same division within the fixed time of ............ from this date, which has been put in practice in Spain, the object of the patent, establishing a new industry in the country. Madrid, 28 ............, 1896.

(Signed) FEDERICO COBO DE GUZMAN.

Seal of division of industry and registration of industrial and commercial property.

Recorded in book 25, page 111, under No. 19228.

OFFICE OF THE COLONIES.

Article 2 of the royal decree of May 14, 1880, complied with.

Madrid, October 31, 1896.The chief of the division: (Signed) TOMAS LUCEÑO.

[SEAL]

By virtue of this patent Henry Alfred Gsell was granted the exclusive right to use the same in the Philippine Islands for a period of twenty years. On May 1, 1899, Henry Alfred Gsell transferred the said patent and the exclusive right to use the same to the plaintiff herein.

The evidence clearly shows that the defendant was manufacturing umbrella and cane handles bag the same method as that used by the plaintiff, under and by virtue of his said patent.

Under the treaty of Paris the United States Government undertook to protect citizens of the Philippine Islands in their rights secured by copyrights, patents, etc., from the Spanish Government, in the following language:

ART. 13. The rights of property secured by copyrights and patents acquired by Spaniards in the Island of Cuba, and in Porto Rico, the Philippines, and other ceded territories, at the time of the exchange of the ratifications of this treaty, shall continue to be respected. Spanish scientific, literary, and artistic works not subversive of public order in the territories in question shall continue to be admitted free of duty into such territories, for a period of ten years, to be reckoned from the date of the exchange of the ratifications of this treaty.

By virtue of the foregoing provisions of said treaty, Circular No. 12, Division of Customs and Insular Affairs, dated Washington, D. C., April 11, 1899, was issued by the Assistant Secretary of War and is as follows:

In territory subject to military government by the military forces of the United States, owners of patents, including design patents, which have been issued or which may hereafter be issued, and owners of trade-marks, prints, and labels, duly registered in the United States Patent Office, under the laws of the United States relating to the grant of patents and the registration of trade-marks, prints, and labels, shall receive the protection accorded them in the United States under said laws; and an infringement of the rights secured by lawful issue of a patent or by registration of a trade-mark, print, or label shall subject the person or party guilty of such infringement to the liability created and imposed by the laws of the United States relating to said matters: Provided, That a duly certified copy of the patents or of the certificate of registration of the trade-mark, print, or label shall be filed in the office of the Governor-General of the Island wherein such protection is desired: And provided further, That the rights of property in patents and trade-mark, secured in the Islands of Cuba, Porto Rico, the Philippines, and other ceded territory to persons under the Spanish laws shall be respected in said territory the same as if such laws were in full force and effect.

(Signed) G. D. MEIKLEJOHN,Assistant Secretary of War.

Circular No. 21, Division of Customs and Insular Affairs, dated Washington, D. C., June 1, 1899, as amended by Circular No. 34 of the same Department, dated September 25, 1899, required the holds of patents in the insular possessions of the United States to file with the proper authorities a certified copy of a patent or a certificate of registration, etc.

In a letter dated Manila, P. I., August 12, 1899, George P. Ahern, captain, Ninth Infantry United States Army, who was then in charge of the Office of Patent, Copyrights, and Trade-Marks, which letter was directed to the plaintiff herein, said:

I have the honor to hand you herewith nine patents, namely (among others was mentioned the patent here in question), now legally held by you, which have been granted under the Spanish law.

Said patent right will be protected by the United States authorities in these Islands, pursuant to Circular No. 12, Division of Customs and Insular Affairs, War Department, Washington, D. C., April 11, 1899.

"Provided further, That the rights of property in patents and trade-marks secured in the Islands of Cuba, Porto Rico, the Philippines, and other ceded territory to persons under the Spanish laws shall be respected in said territory the same as if such laws were in full force and effect."

On the 29th on January, 1900, Capt. George P. Ahern, who was then in charge of the Office of Patents, Copyrights, and Trade-Marks, addressed the following letter to the plaintiff herein:

MANILA, P. I.

SIR: This is to certify, in reply to your request of December 20, 1899, and pursuant to the provisions of Spanish law, and by virtue of the duties as prescribed for the undersigned in General Orders, No. 24, office of the United States military governor in the Philippine Islands, Manila, P. I., June 26, 1899, an inspection was made of your factory in Calle San Pedro, Manila, by the undersigned officer on the 26th day of January, 1900, patent number 19228, granted H. A. Gsell, Madrid, Spain, September 28, 1896, transferred to Carlos Gsell, May 1, 1899, for an exclusive privilege of twenty years of a process for curving sticks and umbrella handles.

A careful inspection was made of the process as per the specifications accompanying said patent, and all of said specifications and process were found to be in operation as required by law.

(Signed) GEORGE P. AHERN,Captain, Ninth United States Infantry,In Charge of Office.

At the close of the trial, and after the evidence had all been introduced, the lower court gave the plaintiff permission to amend his complaint, and also gave the defendant an opportunity to file an amended answer. The court granted this permission to amend the original complaint under and by virtue of the provisional of section 110 of the Code of Procedure in Civil Actions. This order of the court was excepted to on the part of the defendant. Said section 110 provides that —

The court shall, in furtherance of justice, and on such terms, if any, as may be proper, allow a party to amend any pleading or proceeding and at any stage of the action, in either the Court of First Instance or the Supreme Court, by adding or striking out the name of any party, either plaintiff or defendant, or by correcting a mistake in the name of a party, or s mistaken or inadequate allegation or description in any other respect, so that the actual merits of the controversy may speedily be determined, without regard to technicalities, and in the most expeditious and inexpensive manner. The court may also, upon like terms, allow an answer or other pleading to be made after the time limited by the rules of the court for filing the same. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

We are of the opinion that this section justified the court in allowing the amendment.

The appellant assigned several other errors alleged to have been committed by the inferior court, some of which we deem unnecessary to be considered here in the decision of this cause. The trial court, in his decision, stated that there were but two questions at issue: First, Did the Government issue to plaintiff's assignor the patent which covers the process in question? And second, Did the defendant infringe upon that process?

An examination of the evidence adduced during the trial shows clearly that the Government of Spain did, upon the 28th day of September, 1896, grant to the plaintiff's assignor the patent in question, giving to him the exclusive right to use the name for a period of twenty years from that date. The evidence also shows clearly that the defendant used, and had been using, the same process for the manufacture of walking sticks and umbrella handle, the exclusive right to which had been granted to, the plaintiff's assignor. The evidence also shows that the original grantee of the patent, Henry Alfred Gsell, had duly transferred to the plaintiff herein, and that the plaintiff herein thereby succeeded to all of the right granted in said letter patent.

The lower court made no finding as to the damages suffered by the plaintiff by reason to-the unlawful use by the defendant of the said patent.

From all of the evidence adduced during the trial of said cause, we are convinced that the judgment to the inferior court should be affirmed with costs. After the expiration of twenty days let a judgment be entered perpetually enjoining the defendant, his attorneys, agents, and representatives of whatever character, from the use of the process for manufacture of walking sticks and umbrella handles, the exclusive right to the manufacture of which was granted to plaintiff's assignor on the 28th day September, 1896. So ordered.

Arellano, C.J., Torres, Mapa, and Carson, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-4720             January 19, 1909

CARLOS GSELL, plaintiff-appellee, vs.VALERIANO VELOSO YAP-JUE, defendant-appellant.

Chicote and Miranda, for appellant.Haussermann and Cohn, for appellee.

CARSON, J.:

This an appeal from a final order of the Court of First Instance of the city of Manila, in contempt proceedings prosecuted under the provisions of section 172 of the Code of Civil Procedure. The principal case to which these proceedings are ancillary, was an action to enjoin infringement of a patented process for the manufacture of curved handles for canes, parasols, and umbrellas. In that case plaintiff established his title to a valid patent covering the process in question, and obtained against this defendant a judgment, granting a perpetual injunction restraining its infringement, which judgment was affirmed by this court on appeal (6 Phil. Rep., 143.) The order was couched in the following terms:

It is ordered that the defendant abstain from manufacturing canes and umbrellas with a curved handle by means of a lamp or blowpipe fed with mineral oil or petroleum, which process was protected by patent No. 19228, issued in favor of Henry Gsell, and by him transferred to Carlos Gsell —

and the process therein mentioned is fully described in the following statement which accompanied the application for the patent:

After the canes have been cut for cane or umbrella handles, the outsides are thoroughly cleaned. This operation having been performed, they are then trimmed and the interior cleaned by means of a gimlet of about 15 centimeters in length operated by a wheel, by means of which the knots inside are broken. There is then introduced to a depth of about 15 centimeters a piece of very clean bamboo, which completely fills the hole made by the gimlet, thereby giving to the cane the necessary strength to resist the heat of the lamp or blowpipe without breaking or cracking.

This operation having been performed, the cane, the end of which is attached to a fixed point, is given the shape of a hook or some other form by means of fire and pressure. Once the cane has been shaped as desired, it is allowed to cool, and is then cleaned, varnished, and ornamented at will.

This industry requires skillful, handiwork, owing to the great risk engendered by the treatment of such fragile material as a light cane. On the other hand, however, it affords large profits to the workman.

NOTE. — The patent applied for shall be for the industrial product "cane handles for walking sticks and umbrellas, curved by means of a small lamp or blowpipe, fed by petroleum or mineral fuel."

Thereafter the defendant continued to manufacture curved cane handled for walking sticks and umbrellas by a process in all respectes identical with that used by the plaintiff under his patent, except only that he be substituted for a lamp fed with petroleum or mineral oil, lamp fed with alcohol, as appears from a stipulation entered into between plaintiff and defendant in the following terms:

The plaintiff and defendant agree upon the fact that the defendant has used and is still using a process for curving handles of canes and umbrellas identical with that described in the application for the patent by the plaintiff with the exception that he has substituted for the lamp fed with all other lamp fed with alcohol.

Contempt proceedings were instituted against the defendant in the month of February, 1904, the plaintiff in the original action alleging that the —

Defendant in disobediencce of the judgment of the same was and is now engaged in the unlawful manufacture of umbrella handles by the identical process described in and protected said patent, No. 19228, or a process so like the patented process as to be indistinguishable.

The trial court found the defendant "not guilty" of contempt as charged; and this court, on appeal, held that — a character that it could be made patent by the mere annunciation of the acts performed by the defendant, which are alleged to constitute the said violation. These acts were not clearly and manifestly contrary to the precise terms of the prohibition. According to the express language of the judgment, the prohibition is against the manufacture of canes and umbrellas with curved handles by means of the use of a cool or mineral oil-burning lamp or blowpipe and the parties have stipulated that the defendant did not use a coal or mineral oil-burning lamp but an alcohol-burning lamp.

The question, however, arises as to whether that prohibition included the substitution of alcohol for coal or mineral oil. In more abstract and general terms, the appellant propounds this question in his brief, as follows: "The question presented by this appeal is whether or not the use of a patented process by a third person, without license or authority therefor, constitutes an infringement when the alleged infringer has substituted in lieu of some unessential part of the patented process a well-known mechanical equivalent." It has seen that by its very terms this question implies in the present case the existence of two fundamental facts which must first be duly established, viz: (1) That the use of the lamp fed with petroleum or mineral oil was an unessential part of the patented process the use of which by the accused was prohibited by the said judgment; and (2) that alcohol is an equivalent and proper substitute, well known as such, for mineral oil or petroleum in connection with the said process. The appellant has failed to affirmatively establish either of these two essential facts. He has merely assumed their existence, without proving the same, thus begging the whole question. Consequently the contempt with which the accused is charged has not been fully and satisfactorily proved, and the order appealed from should accordingly be affirmed in so far as it holds that the defendant is not guilty of contempt. (7 Phil. Rep., 130).

Thereafter the plaintiff continued the use of the patented process, save only for the substitutions of a lamp fed by alcohol for a lamp fed by petroleum or mineral oil, and new proceedings were instituted under the provisions of section 172 for the purpose of enforcing the original injunction above cited. Substantially the same question is submitted in these new proceedings as that submitted in the former case, but at the trial of this case testimony was introduced which, in our opinion, leaves no room for doubt, first, that alcohol is an equivalent or substitute, well known as such at the time when the patent was issued, for mineral oil or petroleum, in connection with blast lamps or blowpipes such as that which plaintiff uses in the patented process, and, second, that the use of a blast lamp or blowpipe fed with petroleum or mineral oil, rather than one fed with alcohol, is an unessential part of the patented process the use of which was prohibited by the said judgment.

It was clearly proven at the trial, that kerosene and alcohol blast lamps are agencies for producing and applying heat, well known throughout the world long prior to 1906, the date of the issue of the patent; that it is and for many years has been known that one may for all ordinary purposes be used in the place of the other, and especially for the purpose of applying heat in the manner described in the patent; that the only consideration which determines the employment of one in place of the other is the convenience of the user and the question of relative cost; and that the principle upon which both lamps work is substantially identical, the only difference in construction being occasioned by the application of this principle to oils of different physical and chemical composition.

The plaintiff does not and can not claim a patent upon the particular lamp used by him. The patent, however, gives him the exclusive right to the use of "la lamparilla o soplete, alimentada de petroleo o esencia mineral" (the small lamp or blowpipe fed with petroleum or mineral oil) in manufacturing curved handles for umbrellas and canes, to which reference is made in the above-cited descriptive statement and annexed note. "The small lamp or blowpipe" mentioned in the descriptive statement and annexed note which accompanied the application for the patent, evidently referred to the design of a blast lamp which was attached thereto; and in our opinion both plaintiff and defendant make use of a blast lamp substantially similar, in principle and design, to that referred to in the descriptive statement and the annexed note, for the exclusive use of which in the manufacture of curved handles, plaintiff holds a patent. True, defendant's blast lamp is fed with alcohol, and its shape varies in unimportant details, for the purpose of accommodating the principle, by which the flame is secured, to the different physical and chemical composition of the fuel used therein; but the principle on which it works, its mode of application, and its general design distinguish it in no essential particular from that used by the plaintiff. If the original design accompanying the statement had shown a blast lamp made of brass or delf, he would be a reckless advocate who would claim that the patent might lawfully be evaded by the use of a lamp made of iron or tin; or if the original design had shown a blast lamp 6 inches high with a nozzle 4 inches long it would hardly be seriously contended that the use of lamp 8 inches high with a nozzle 3 inches long would protect the ingenious individual, who in all other respects borrowed the patented process, from the consequences of an action for damages for infringement. But in the light of the evidence of record in this case, the reasoning upon which these hypothetical claims should be rejected applies with equal force to the contentions of the defendant, the ground for the rejection of the claims in each case being the same, and resting on the fact that unessential changes, which do not affect the principle of the blast lamp used in the patented process, or the mode of application of heat authorized by the patent, are not sufficient to support a contention that the process in one case is in any essential particular different from that used in the other.

Counsel for plaintif invokes the doctrine of "mechanical equivalents" in support of his contention, and indeed that doctrine is strikingly applicable to the facts in this case. This doctrine is founded upon sound rules of reason and logic, and unless restrained or modified by law in particular jurisdiction, is of universal

application, so that it matters not whether a patent be issued by one sovereignty or another, the doctrine may properly be invoked to protect the patentee from colorable invasions of his patent under the guise of substitution of some part of his invention by some well known mechanical equivalent. Our attention has not been called to any provision of the patent law of Spain, which denies to patentees thereunder the just and equitable protection of the doctrine; and indeed a patent law which failed to recognize this doctrine would afford scant protection to inventors, for it is difficult if not impossible to conceive an invention, which is incapable of alteration or change in some unessential part, so as to bring that part outside of the express terms of any form of language which might be used in granting a patent for the invention; and has been well said by counsel for plaintiff, human ingenuity would be taxed beyond its powers in preparing a grant of a patent so comprehensive in its terms, "as to include within the express terms of its detailed description every possible alternative of form, size, shape, material, location, color, weight, etc., of every wheel, rod, bolt, nut, screw, plate, and other component parts of an invention."

The following citations from various decisions of the Federal Courts of the United States illustrate the application of the doctrine in that jurisdiction, and clearly point the way to the proper solution of the questions involved in the case at bar:

Can the defendant have the right of infringement, by substituting in lieu of some parts of the combination well-known mechanical equivalents? I am quite clear that be can not, both on principle and authority. It is not to be disputed that the inventor of an ordinary machine is, by his letters patent, protected against all mere formal alterations and against the substitution of mere mechanical equivalents. Why should not the inventor of a new combination receive the same protection? If he can not, then will his patent not be worth the parchment on which it is written.

If no one can be held to infringe a patent for a combination unless he uses all the parts of the combination and the identical machinery as that of the patentee, then will no patent for a combination be infringed; for certainly no one capable of operating a machine can be incapable of adopting some formal alteration in the machinery, or of substituting mechanical equivalents. No one infringes a patent for a combination who does not employ all of the ingredients of the combination; but if he employs all the ingredients, or adopts mere formal alterations, or substitutes, for one ingredient another which was well known at the date of the patent as a proper substitute for the one withdrawn, and which performs substantially the same function as the one withdrawn, he does infringe. (King vs. Louisville Cement Co., Fed. Cas., 7798.)

Bona fide inventors of a combination are as much entitled to equivalents as the inventors other patentable improvements; by which is meant that a patentee in such a case may substitute another ingredient for any one of the ingredients of his invention, if the ingredient substituted performs the same function as the one omitted and as well known at the date of his patent as a proper substitute for the one omitted in the patented combination. Apply that rule and it is clear that an alteration in a patented combination which merely substitutes another old ingredient for one of the ingredients in the patented combination, is an infringement of the patent, if the substitute performs the same function and was well known at the date of the patent as a proper substitute for the omitted ingredient. (Gould vs. Rees, 82 U.S., 187, 194.)

Mere formal alterations in a combination in letters patent are no defense to the charge of infringement and the withdrawal of one ingredient from the same and the substitution of another which was well known at the date of the patent as a proper substitute for the one withdrawn is a mere formal alteration of the combination if the ingredient substituted performs substantially the same function as the one withdrawn.

Bona fide inventors of a combination are as much entitled to suppress every other combination of the same ingredients to produce the same result, not substantially different from what they have invented and caused to be patented as to any other class of inventors. All alike have the right to suppress every colorable invasion of that which is secured to them by letters patent. (Seymour vs. Osborne, 78 U.S., 516, 556.)

A claim for the particular means and mode of operation described in the specification extends, by operation of law, to the equivalent of such means — not equivalent simply because the same result is thereby produced — but equivalent as being substantially the same device in structure, arrangement and mode of operation. (Burden vs. Corning, Fed. Cas., 2143. Gottfried vs. Philip Best Brewing Co., Fed. Cas., 5633.)

An equivalent device is such as a mechanic of ordinary skill in construction of similar machinery, having the forms, specifications and machine before him, could substitute in the place of the mechanism described without the exercise of the inventive faculty. (Burden vs. Corning, supra.)

All the elements of the invention in this case are old, and the rule in such cases, as before explained, undoubtedly is that a purpose can not invoke the doctrine of equivalents to suppress all other improvements of the old machine, but he is entitled to treat everyone as an infringer who makes, uses, or vends his patented improvement without any other change than the employment of a substitute for one of its elements, well known as such at the date of his invention, and which any constructor acquainted with the art will know how to comply. The reason for the qualification of the rule as stated is, that such change — that is, the mere substitution of a well- known

element for another — where it appears that the substituted element was well known as a usual substitute for the element left out — is merely a formal one, and nothing better than a colorable evasion of the patent. (Union Sugar Refining Co. vs. Matthieson, Fed. Cas., 14399.)

Counsel for the defendant insists that, under Spanish law, none of the steps of the process described in the descriptive statement, save those mentioned in the "note" thereto attached are included in the patent, and that the patent rights secured thereunder are strictly limited to the precise language of the "note" attached to the descriptive statement; while counsel for plaintiff appears to think that the language of the patent covers any process or device whereby wood or cane may be bent or curved by the use of heat. But for the purpose of this decision it is not necessary to consider these questions, further than to hold, as we do, that under the doctrine of equivalents, the language of the note in the descriptive statement applies to the operation of applying heat for the purpose of curving handles or canes and umbrellas by means of a blast lamp fed with alcohol, as well as by means of a blast lamp fed with petroleum or mineral oil; and the defendant having admitted the fact that he applied heat for the purpose of curving handles for canes and umbrellas by means of a blast lamp fed with alcohol, he must be deemed to have contempt of violating the terms and the injunction issued in the principal case, wherein plaintiff was declared the owner of the patent in question, and defendant enjoined from its infringement.

The argument of counsel for defendant and appellant, based on the theory that the questions herein discussed and decided to have been heretofore settled by this court, and that the subject-matter of this proceeding is res adjudicata between the parties thereto is sufficiently refuted by the simple reading of the decision of this court in the case relied upon. (Gsell vs. Veloso, 7 Phil. Rep., 130.)

The judgment of the lower court should be and is hereby affirmed, with the costs of this instance against the appellant.

Arellano, C.J., Torres, Mapa, Willard, and Tracey, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 121867 July 24, 1997

SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner, vs.COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and DOCTORS PHARMACEUTICALS, INC. respondents.

 

DAVIDE, JR., J.:

This is an appeal under Rule 45 of the Rules of Court from the decision 1 4 November 1994 of the Court of Appeals in CA-G.R. SP No. 33520, which affirmed the 14 February 1994 decision 2 of the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory non-exclusive and non-transferable license to private respondent to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing petitioner's patented pharmaceutical product known as Cimetidine.

Petitioner is a foreign corporation with principal office at Welwyn Garden City, England. It owns Philippine Letters Patent No. 12207 issued by the BPTTT for the patent of the drug Cimetidine.

Private respondent is a domestic corporation engaged in the business of manufacturing and distributing pharmaceutical products. On 30 March 1987, it filed a petition for compulsory licensing 3 with the BPTTT for authorization to manufacture its own brand of medicine from the drug Cimetidine and to market the resulting product in the Philippines. The petition was filed pursuant to the provisions of Section 34 of Republic Act No. 165 (An Act Creating a Patent Office Prescribing Its Powers and Duties, Regulating the Issuance of Patents, and Appropriating Funds Therefor), which provides for the compulsory licensing of a particular patent after the expiration of two years from the grant of the latter if the patented invention relates to, inter alia, medicine or that which is necessary for public health or public safety. Private respondent alleged that the grant of Philippine Letters Patent No. 12207 was issued on 29 November 1978; that the petition was filed beyond the two-year protective period provided in Section 34 of R.A. No. 165; and that it had the capability to work the patented product or make use of it in its manufacture of medicine.

Petitioner opposed, arguing that private respondent had no cause of action and lacked the capability to work the patented product; the petition failed to specifically divulge how private respondent would use or improve the patented product; and that private respondent was motivated by the pecuniary gain attendant to the grant of a compulsory license. Petitioner also maintained that it was capable of satisfying the demand of the local market in the manufacture and marketing of the medicines covered by the patented product. Finally, petitioner challenged the constitutionality of Sections 34 and 35 of R.A. No. 165 for violating the due process and equal protection clauses of the Constitution.

After appropriate proceedings, the BPTTT handed down its decision on 14 February 1994, with the dispositive portion thereof providing:

NOW, THEREFORE, by virtue of the powers vested in this Office by Republic Act No. 165, as amended by Presidential Decree No. 1263, there is hereby issued a license in favor of the herein [private respondent], United Laboratories, Inc., [sic] under Letters Patent No. 12207 issued on November 29, 1978, subject to the following terms and conditions:

1. That [private respondent] be hereby granted a non-exclusive and non-transferable license to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing [petitioner's] patented invention which is disclosed and claimed in Letters Patent No. 12207;

2. That the license granted herein shall be for the remaining life of said Letters Patent No. 12207 unless this license is terminated in the manner hereinafter provided and that no right or license is hereby granted to [private respondent] under any patent to [petitioner] or [sic] other than recited herein;

5. By virtue of this license, [private respondent] shall pay [petitioner] a royalty on all license products containing the patented substance made and sold by [private respondent] in the amount equivalent to TWO AND ONE HALF PERCENT (2.5%) of the net sales in Philippine currency.

The term "net scale" [sic] means the gross amount billed for the product pertaining to Letters Patent No. 12207, less —

(a) Transportation charges or allowances, if any, included in such amount;

(b) Trade, quantity or cash discounts and broker's or agent's or distributor's commissions, if any, allowed or paid;

(c) Credits or allowances, if any, given or made on account of rejection or return of the patented product previously delivered; and

(d) Any tax, excise or government charge included in such amount, or measured by the production sale, transportation, use of delivery of the products.

In case [private respondent's] product containing the patented substance shall contain one or more active ingredients admixed therewith, said product hereinafter identified as admixed product, the royalty to be paid shall be determined in accordance with the following formula:

Net Sales on Value of Patented

ROYALTY = Admixed Product x 0.025 x Substance

—————————— ————————

Value of Patented Value of Other

Substance Active Ingredients

4. The royalties shall be computed after the end of each calendar quarter to all goods containing the patented substance herein involved, made and sold during the precedent quarter and to be paid by [private respondent] at its place of business on or before the thirtieth day of the month following the end of each calendar quarter. Payments should be made to [petitioner's] authorized representative in the Philippines;

5. [Private respondent] shall keep records in sufficient detail to enable [petitioner] to determine the royalties payable and shall further permit its books and records to be examined from time to time at [private respondent's] premises during office hours, to the extent necessary to be made at the expense of [petitioner] by a certified public accountant appointed by [petitioner] and acceptable to [private respondent].

6. [Private respondent] shall adopt and use its own trademark or labels on all its products containing the patented substance herein involved;

7. [Private respondent] shall comply with the laws on drugs and medicine requiring previous clinical tests and approval of proper government authorities before selling to the public its own products manufactured under the license;

8. [Petitioner] shall have the right to terminate the license granted to [private respondent] by giving the latter thirty (30) days notice in writing to that effect, in the event that [private respondent] default [sic] in the payment of royalty provided herein or if [private respondent] shall default in the performance of other convenants or conditions of this agreement which are to be performed by [private respondent]:

(a) [Private respondent] shall have the right provided it is not in default to payment or royalties or other obligations under this agreement, to terminate the license granted to its, [sic] giving [petitioner] thirty (30) days-notice in writing to that effect;

(b) Any termination of this license as provided for above shall not in any way operate to deny [petitioner] its rights or remedies, either at laws [sic] or equity, or relieve [private respondent] of the payment of royalties or satisfaction of other obligations incurred prior to the effective date of such termination; and

(c) Notice of termination of this license shall be filed with the Bureau of Patents, Trademarks and Technology Transfer.

9. In case of dispute as to the enforcement of the provisions of this license, the matter shall be submitted for arbitration before the Director of Bureau of Patents, Trademarks and Technology Transfer or any ranking official of the Bureau of Patents, Trademarks and Technology Transfer duly delegated by him.

10. This License shall inure to the benefit of each of the parties herein, to the subsidiaries and assigns of [petitioner] and to the successors and assigns of [private respondent]; and

11. This license take [sic] effect immediately. 4

Petitioner then appealed to the Court of Appeals by way of a petition for review, which was docketed as CA-G.R. SP No. 33520. Petitioner claimed that the appealed decision was erroneous because:

I

. . . [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THE PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND MUST ACCORDINGLY BE SET ASIDE AND MODIFIED.

II

. . . [IT] IS AN INVALID EXERCISE OF POLICE POWER.

III

CONCEDING ARGUENDO THE QUESTIONED DECISION'S VALIDITY, THE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPROPRIATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION WHICH IS VIOLATE OF THE CONSTITUTION.

IV

. . . [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THE CASE BELOW FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION. 5

In its decision of 4 November 1994, 6 the Court of Appeals affirmed in toto the challenged decision. We quote its findings and conclusion upon which the affirmance is anchored, viz.:

An assiduous scrutiny of the impugned decision of the public respondent reveals that the same is supported by substantial evidence. It appears that at the time of the filing of the petition for compulsory license on March 24, 1987, the subject letters Patent No. 12207 issued on November 29, 1978 has been in effect for more than two (2) years. The patented invention relates to compound and compositions used in inhibiting certain actions of the histamine, hence, it relates to medicine. Moreover, after hearing and careful consideration of the evidence presented, the Director of Patents ruled that — "there is ample evidence to show that [private respondent] possesses such capability, having competent personnel, machines and equipment as well as permit to manufacture different drugs containing patented active ingredients such as ethambutol of American Cyanamid and Ampicillin and Amoxicillin of Beecham Groups, Ltd."

As to the claim by the petitioner that it has the capacity to work the patented product although it was not shown that any pretended abuse has been committed, thus the reason for granting compulsory license "is intended not only to give a chance to others to supply the public with the quantity of the patented article but especially to prevent the building up of patent monopolities [sic]." [Parke Davis v. Doctors Pharmaceuticals, Inc., 14 SCRA 1053].

We find that the granting of compulsory license is not simply because Sec. 34 (1) e, RA 165 allows it in cases where the invention relates to food and medicine. The Director of Patents also considered in determining that the applicant has the capability to work or make use of the patented product in the manufacture of a useful product. In this case, the applicant was able to show that Cimetidine, (subject matter of latters Patent No. 12207) is necessary for the manufacture of an anti-ulcer drug/medicine, which is necessary for the promotion of public health. Hence, the award of compulsory license is a valid exercise of police power.

We do not agree to [sic] petitioner's contention that the fixing of the royalty at 2.5% of the net wholesale price amounted to expropriation of private property without just compensation.

Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No. 1267, states:

Sec. 35-B. Terms and Conditions of Compulsory License.

(1) . . .

(2) . . .

(3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license.

If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 34-A) of the patented commodity and/or commodity manufactured under the patented process, the same rate of royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent.

The foregoing provision grants the Director of Patents the use of his sound discretion in fixing the percentage for the royalty rate. In the instant case, the Director of Patents exercised his discretion and ruled that a rate of 2.5% of the net wholesale price is fair enough for the parties. In Parke Davis & Co. vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it was held that — "liberal treatment in trade relations should be afforded to local industry for as reasoned out by respondent company, it is so difficult to compete with the industrial grants [sic] of the drug industry, among them being the petitioner herein, that it always is necessary that the local drug companies should sell at much lower (than) the prices of said foreign drug entities." Besides, foreign produce licensor can later on ask for an increase in percentage rate of royalty fixed by the Director of Patents if local sales of license should increase. Further, in Price vs. UNILAB, the award of royalty rate of 2.5% was deemed to be just and reasonable, to wit [166 SCRA 133]:

Moreover, what UNILAB has with the compulsory license is the bare right to use the patented chemical compound in the manufacture of a special product, without any technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB will only be used, distributed, and disposed locally. Therefore, the royalty rate of 2.5% is just and reasonable.

It appearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee may manufacture using any or all of the patented compounds, the petitioner cannot complain of a deprivation of property rights without just compensation [Price v. UNILAB, L-82542, September 19, 1988].

We take note of the well-crafted petition submitted by petitioner albeit the legal milieu and a good number of decided cases militate against the grounds posited by petitioner. In sum, considering the well-entrenched jurisprudence sustaining the position of respondents, We reiterate the rule in Basay Mining Corporation vs.SEC, to the effect that —

The legal presumption is that official duty has been performed. And it is particularly strong as regards administrative agencies vested with powers said to be quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the proper regulation and/or promotion of which requires a technical or special training, aside from a good knowledge and grasp of the overall conditions, relevant to said field, obtaining in the nations. The policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial. [G.R. No. 76695, October 3, 1988, Minute Resolution; Beautifont, Inc., et al. v. Court of Appeals, et al., G.R. No. 50141, January 29, 1988]

Its motion for reconsideration having been denied in the resolution 7 of 31 August 1995, petitioner filed the instant petition for review on certiorari with the following assignment of errors:

I

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION VIOLATES INTERNATIONAL LAW AS EMBODIED IN (A) THE PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND (B) THE GATT TREATY, URUGUAY ROUND, AND MUST ACCORDINGLY BE SET ASIDE AND MODIFIED.

II

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION IS AN INVALID EXERCISE OF POLICE POWER, ABSENT ANY SHOWING BY EVIDENCE OF AN OVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE OVER CIMETIDINE IN FAVOR OF PRIVATE RESPONDENT.

III

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY FOR AN INVOLUNTARY LICENSE AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPORTATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION AND IS IN VIOLATION OF THE CONSTITUTIONAL RIGHT TO DUE PROCESS.

IV

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE BPTTT'S ACTION WAS RENDERED NULL AND VOID FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY LAW.

We resolved to give due course to the petition and required the parties to submit their respective memoranda, which they did, with that of public respondent filed only on 7 February 1997.

After a careful perusal of the pleadings and evaluation of the arguments adduced by the parties, we find this petition to be without merit.

In its first assigned error, petitioner invokes Article 5 of the Paris Convention for the Protection of Industrial Property, 8 or "Paris Convention," for short, of which the Philippines became a party thereto only in 1965. 9Pertinent portions of said Article 5, Section A, provide:

A. . . .

(2) Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.

xxx xxx xxx

(4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license.

In is thus clear that Section A (2) of Article 5 above unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms or categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies. 10 Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165.

R.A. No. 165, as amended by Presidential Decree No. 1263, promulgated on 14 December 1977, provides for a system of compulsory licensing under a particular patent. Sections 34 and 35, Article Two, of Chapter VIII read as follows:

Sec. 34. Grounds for Compulsory Licensing — (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances:

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason;

(b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the

establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained;

(d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; or

(e) If the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety.

(2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of the patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working."

xxx xxx xxx

Sec. 35. Grant of License. — (1) If the Director finds that a case for the grant is a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing.

(2) A compulsory license sought under Section 34-B shall be issued within one hundred twenty days from the filing of the proponent's application or receipt of the Board of Investment's endorsement.

The case at bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34 — the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety. And it may not be doubted that the aforequoted provisions of R.A. No. 165, as amended, are not in derogation of, but are consistent with, the recognized right of treaty signatories under Article 5, Section A (2) of the Paris Convention.

Parenthetically, it must be noted that paragraph (4) of Section A, Article 5 of the Paris Convention setting time limitations in the application for a compulsory license refers only to an instance where the ground therefor is "failure to work or insufficient working," and not to any ground or circumstance as the treaty signatories may reasonably determine.

Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary Rizalino Navarro. 11 Forming integral parts thereof are the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services. 12 The Agreement establishing the World Trade Organization includes various agreements and associated legal instruments. It was only on 14 December 1994 that the Philippine Senate, in the exercise of its power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the ratification by the President of the Agreement. The President signed the instrument of ratification on 16 December 1994. 13 But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty.

The second and third assigned errors relate more to the factual findings of the Court of Appeals. Well-established is the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a finding grounded entirely on speculation or conjecture; (2) the inference made is manifestly absurd; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both the appellant and appellee. 14 Petitioner has not convinced us that the instant case falls under any of the exceptions. On the contrary, we find the findings of fact and conclusions of respondent Court of Appeals and that of the BPTTT to be fully supported by the evidence and the applicable law and jurisprudence on the matter.

Petitioner's claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere conclusions which it failed to convincingly support. As to due the process argument, suffice it to say that full-blown adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with the Court of Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by substantial evidence.

It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not only grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but subsequently, the law recognizes just compensation in the form of royalties. 15

In Parke, Davis & Co. v. Doctors' Pharmaceuticals, Inc., 16 we held:

The right to exclude others from the manufacturing, using, or vending an invention relating to, food or medicine should be conditioned to allowing any person to manufacture, use, or vend the same after a period of three [now two] years from the date of the grant of the letters patent. After all, the patentee is not entirely deprived of any proprietary right. In fact, he has been given the period of three years [now two years] of complete monopoly over the patent. Compulsory licensing of a patent on food or medicine without regard to the other conditions imposed in Section 34 [now Section 35] is not an undue deprivation of proprietary interests over a patent right because the law sees to it that even after three years of complete monopoly something is awarded to the inventor in the form of bilateral and workable licensing agreement and a reasonable royalty to be agreed upon by the parties and in default of such an agreement, the Director of Patents may fix the terms and conditions of the license.

As to the fourth assigned error, we hold that petitioner can no longer assail the jurisdiction of the BPTTT, raising this issue only for the first time on appeal. In Pantranco North Express, Inc. v. Court of Appeals, 17 we ruled that where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred on the ground of laches or estoppel under the circumstances therein stated. It is now settled that this rule applies with equal force to quasi-judicial bodies 18 such as the BPTTT. Here, petitioner have not furnished any cogent reason to depart from this rule.

WHEREFORE, the petition is hereby DENIED and the challenged decision of the Court of Appeals in CA-G.R. SP No. 33520 is AFFIRMED in toto.

Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 121267            October 23, 2001

SMITH KLINE & FRENCH LABORATORIES, LTD. plaintiff-appellee, vs.COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant.

KAPUNAN, J.:

This petition for review on certiorari assails the Decision dated January 27, 1995 of the Court of Appeals in CA-G.R. SP No. 337701 which affirmed the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory license to private respondent Danlex Research Laboratories for the use of the pharmaceutical product Cimetidine. Likewise assailed is the July 25, 1995 Resolution of the Court of Appeals denying the motion for reconsideration filed by petitioner Smith Kline and French Laboratories, Ltd.

Petitioner is the assignee of Letters Patent No. 12207 covering the pharmaceutical product Cimetidine, which relates to derivatives of heterocyclicthio or lower alkoxy or amino lower alkyl thiourea, ureas or guanadines. Said patent was issued by the BPTTT to Graham John Durant, John Collin Emmett and Robin Genellin on November 29, 1978.2

On August 21, 1989, private respondent filed with the BPTTT a petition for compulsory license to manufacture and produce its own brand of medicines using Cimetidine. Private respondent invoked Section 34 (1) (e) of Republic Act No. 165,3 (the Patent Law) the law then governing patents, which states that an application for the grant of a compulsory license under a particular patent may be filed with the BPTTT at any time after the lapse of two (2) years from the date of grant of such patent, if the patented invention or article relates to food or medicine, or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety.4 The petition for compulsory license stated that Cimetidine is useful as an antihistamine and in the treatment of ulcers, and that private respondent is capable of using the patented product in the manufacture of a useful product.5

Petitioner opposed the petition for compulsory license, arguing that the private respondent had no cause of action and failed to allege how it intended to work the patented product. Petitioner further stated that its manufacture, use and sales of Cimetidine satisfied the needs of the Philippine market, hence, there was no need to grant a compulsory license to private respondent to manufacture, use and sell the same. Finally, petitioner also claimed that the grant of a compulsory license to private respondent would not promote public safety and that the latter was only motivated by pecuniary gain.6

After both parties were heard, the BPTTT rendered a decision directing the issuance of a compulsory license to private respondent to use, manufacture and sell in the Philippines its own brand of pharmaceutical products containing Cimetidine and ordered the payment by private respondent to petitioner of royalties at the rate of 2.5% of net sales in Philippine currency.7

Petitioner thereafter filed with the Court of Appeals a petition for review of the decision of the BPTTT, raising the following arguments: (1) the BPTTT's decision is violative of the Paris Convention for the Protection of Industrial Property; (2) said decision is an invalid exercise of police power; (3) the rate of royalties payable to petitioner as fixed by the BPTTT was rendered without factual basis and amounts to an expropriation of private property without just compensation; (4) the petition for compulsory license should have been dismissed by the BPTTT for failure to prove the jurisdictional requirement of publication.8

On January 27, 1995, the Court of Appeals promulgated its Decision, the dispositive portion of which states:

WHEREFORE, the petition is DENIED, and the decision of the Bureau of Patents, Trademarks and Technology Transfer is hereby AFFIRMED, with costs against the Petitioner.

SO ORDERED.9

In affirming the decision of the BPTTT, the appellate court held that the grant of a compulsory license to private respondent for the manufacture and use of Cimetidine is in accord with the Patent Law since the patented product is medicinal in nature, and therefore necessary for the promotion of public health and safety.10 It explained further that the provisions of the Patent Law permitting the grant of a compulsory license are intended not only to give a chance to others to supply the public with the quantity of the

patented article but especially to prevent the building up of patent monopolies.11 Neither did the appellate court find the royalty rate of 2.5% of net sales fixed by the BPTTT unreasonable, considering that what was granted under the compulsory license is only the right to manufacture Cimetidine, without any technical assistance from petitioner, and royalty rates identical to that fixed by the BPTTT have been prescribed for the grant of compulsory license in a good number of patent cases.12 The Court of Appeals also ruled that contrary to petitioner's claim, private respondent complied with the requirement of publication under the Patent Law and had submitted proof of such compliance.13

Not satisfied with the appellate court's decision, petitioner filed a motion for reconsideration thereof as well as a motion for the issuance of a temporary restraining order against private respondent's sister company, Montreal Pharmaceutical, Inc. to refrain from marketing a product similar to Cimetidine, but both motions were denied by the Court of Appeals in its Resolution of July 25, 1995.14

Petitioner thus filed the present petition on September 15, 1995, with the following assignment of errors:

I. The respondent Court erred in upholding the validity of the decision of public respondent BPTTT which is an arbitrary exercise of police power and is violative of international law.

II. The respondent Court erred in holding that compulsory licensing will not create a confusion that the patented product is the brainchild of private respondent Danlex and not of petitioner.

III.Assuming that the grant of compulsory license is in order, the respondent Court still erred in holding that the BPTTT decision fixing the royalty at 2.5% of the net wholesale price in peso does not amount to expropriation of private property without just compensation.

IV.The respondent Court erred in finding that the jurisdictional requirement of publication in a newspaper of general circulation for three (3) consecutive weeks has been complied with by private respondent Danlex.15

While petitioner concedes that the State in the exercise of police power may regulate the manufacture and use of medicines through the enactment and implementation of pertinent laws, it states that such exercise is valid only if the means employed are reasonably necessary for the accomplishment of the purpose and if not unduly oppressive.16 According to petitioner, the grant of a compulsory license to private respondent is an invalid exercise of police power since it was not shown that there is an overwhelming public necessity for such grant, considering that petitioner is able to provide an adequate supply of i to satisfy the needs of the Philippine market. Petitioner also claims that the grant of a compulsory license to private respondent unjustly deprives it of a reasonable return on its investment.17 It argues further that the provisions of the Patent Law on compulsory licensing contravene the Convention of Paris for the Protection of Industrial Property18 (Paris Convention), which allegedly permits the granting of a compulsory license over a patented product only to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent,19 or on the ground of failure to work or insufficient working of the patented product, within four years from the date of filing of the patent application or three years from the date of grant of the patent, whichever expires last.20 Petitioner opines that the inclusion of grounds for the grant of a compulsory license in Section 34 of the Patent Law other than those provided under the Paris Convention constitutes a violation of the Philippines' obligation to adhere to the provisions of said treaty.21

It is also contended by petitioner that the grant of a compulsory license to private respondent will allow the latter to liberally manufacture and sell medicinal products containing Cimetidine without even extending to petitioner due recognition for pioneering the development and worldwide acceptance of said invention, and will unreasonably dilute petitioner's right over the patent.22

Petitioner likewise asseverates that the rate of royalty fixed by the BPTTT at 2.5% of net sales is grossly inadequate, taking into consideration its huge investments of money, time and other resources in the research and development, as well as marketing of Cimetidine. It is further alleged that such rate has no factual basis since the appellate court and the BPTTT relied solely on analogous cases and did not explain how such rate was arrived at.23

Lastly, petitioner claims that the appellate court erred in ruling that private respondent had complied with the requirement of publication of the notice of the filing of the petition for compulsory license because private respondent failed to formally offer in evidence copies of the notice of filing of the petition and notice of the date of hearing thereof as published and the affidavits of publication thereof. Thus, it says, the BPTTT did not properly acquire jurisdiction over the petition for compulsory license.24

In its Comment to the Petition, private respondent adopted the reasoning of the Court of Appeals in the assailed decision and prayed that the petition be denied for lack of merit.25

The petition has no merit.

The Court of Appeals did not err in affirming the validity of the grant by the BPTTT of a compulsory license to private respondent for the use, manufacture and sale of Cimetidine. The said grant is in accord with Section 34 of the Patent Law which provides:

Grounds for Compulsory Licensing.— (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances:

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason;

(b) If the demand of the patented article in the Philippines is not being met to an adequate extent and on reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained;

(d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article;

(e) If the patented invention or article relates to food or medicine or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety.

(2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working". (Emphasis supplied.)

The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years have passed since the patent for Cimetidine was issued to petitioner and its predecessors-in-interest, and the compulsory license applied for by private respondent is for the use, manufacture and sale of a medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability to workCimetidine or to make use thereof in the manufacture of a useful product.

Petitioner's contention that Section 34 of the Patent Law contravenes the Paris Convention because the former provides for grounds for the grant of a compulsory license in addition to those found in the latter, is likewise incorrect. Article 5, Section A(2) of the Paris Convention states:

Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.26

This issue has already been resolved by this Court in the case of Smith Kline & French Laboratories, Ltd. vs. Court of Appeals,27 where petitioner herein questioned the BPTTT's grant of a compulsory license to Doctors Pharmaceuticals, Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency between Section 34 and the Paris Convention and held that:

It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such, is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies [Congressional Record, House of Representatives, 12 May 957, 998]. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165.28(Emphasis supplied.)

Neither does the Court agree with petitioner that the grant of the compulsory license to private respondent was erroneous because the same would lead the public to think that the Cimetidine is the invention of private respondent and not of petitioner. Such fears are unfounded since, as the appellate court pointed out in the assailed decision, by the grant of the compulsory license, private respondent as licensee explicitly acknowledges that petitioner is the source of the patented product Cimetidine.29 Even assuming arguendo that such confusion may indeed occur, the disadvantage is far outweighed by the benefits resulting from the grant of the compulsory license, such as an increased supply of pharmaceutical products containing Cimetidine, and the consequent reduction in the prices thereof.30

There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of petitioner's property without just compensation. It must be pointed out that as owner of Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture, use and sell Cimetidine for at least two years from its grant in November, 1978. Even if other entities like private respondent are subsequently allowed to manufacture, use and sell the patented invention by virtue of a compulsory license, petitioner as owner of the patent would still receive remuneration for the use of such product in the form of royalties.

Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of Appeals correctly held that the rate of 2.5% of net wholesale price fixed by the Director of the BPTTT is in accord with the Patent Law. Said law provides:

Sec. 35. Grant of License.—(1) If the Director finds that a case for the grant of a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing.

x x x

Section 35-B. Terms and Conditions of Compulsory License. – (1) A compulsory license shall be non-exclusive, but this shall be without prejudice to the licensee's right to oppose an application for such a new license.

(2) The terms and conditions of a compulsory license, fixed in accordance with Section 35, may contain obligations and restrictions both for the licensee and for the registered owner of the patent.

(3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 33-A) of the patented commodity/and or commodity manufactured under the patented process; the same rate of royalty shall be paid whenever two or more patents are involved; which royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent.

x x x

Under the aforequoted provisions, in the absence of any agreement between the parties with respect to a compulsory license, the Director of the BPTTT may fix the terms thereof, including the rate of the royalty payable to the licensor. The law explicitly provides that the rate of royalty shall not exceed five percent (5%) of the net wholesale price.

The Court agrees with the appellate court's ruling that the rate of royalty payments fixed by the Director of the BPTTT is reasonable. The appellate court, citing Price vs. United Laboratories,31 ruled as such, considering that the compulsory license awarded to private respondent consists only of the bare right to use the patented invention in the manufacture of another product, without any technical assistance from the licensor.32 Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been prescribed by the Director of the BPTTT in numerous patent cases.33

There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule is that factual findings of administrative bodies, which are considered as experts in their respective fields, are accorded not only respect but even finality if the same are supported by substantial evidence.34

Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by private respondent for failure to comply with the publication requirement under Section 35-F of R.A. No. 165, the Court holds that petitioner is estopped from questioning the same since it did not raise the issue of lack of jurisdiction

at the earliest possible opportunity, i.e., during the hearings before the BPTTT.35 The Court notes that petitioner raised this contention for the first time when it appealed the case to the appellate court.

WHEREFORE, the petition is hereby DENIED for lack of merit and the Decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 154330             February 15, 2007

ZOSIMO GODINEZ, ELIZABETH GODINEZ and EDWIN GODINEZ, Petitioners, vs.THE COURT OF APPEALS, HON. OSCAR G. TIROL in his capacity As Presiding Judge, Regional Trial Court, Branch 1, Tagum City, Davao del Norte, and DELFINA VILLAGE SUBDIVISION HOMEOWNERS ASSOCIATION, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Certiorari assailing the Decision1 of the Court of Appeals promulgated on February 22, 2002 in CA-G.R. SP No. 65445.

The facts are:

On August 30, 2000, Delfina Village Subdivision Homeowners Association (DVSHA), respondent, filed with the Regional Trial Court, Tagum City, Davao del Norte, an amended complaint for injunction and damages against spouses Zosimo and Elizabeth Godinez and their son Edwin, petitioners, docketed as Special Case No. 383. The complaint alleges that petitioners were operating a mineral processing plant in the annex of their residential house located within Delfina Village. The village has been classified by Municipal Ordinance No. 63, s. 1993 as a "medium-density residential district."

On September 13, 2000, petitioners filed their answer raising the following affirmative defenses: a) the complaint states no cause of action; b) respondent DVSHA has no capacity to sue; c) it is not a real party in interest; d) the complaint fails to implead the real parties in interest; and e) respondent failed to refer the case for conciliation to the barangay before filing its complaint.1awphi1.net

On April 3, 2001, the trial court issued an Order directing respondent to amend its complaint and attach thereto proofs showing that it is a juridical person with capacity to sue and that it is the real party in interest.

On April 16, 2001, respondent submitted its amended complaint impleading, as additional plaintiffs, its officers and members, and attaching thereto its Certificate of Registration with the Home Insurance and Guaranty Corporation, as well as its Articles of Incorporation and By-Laws.

On April 27, 2001, petitioners filed a motion for reconsideration of the trial court’s Order dated April 3, 2001, but it was denied on May 21, 2001, prompting them to file a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 65445.

On February 22, 2002, the Court of Appeals rendered its assailed Decision dismissing the petition for certiorari.

The Court of Appeals held that the trial court did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in directing respondent to amend its complaint. The purpose of the trial court was to determine whether respondent is a juridical person and whether it is a real party in interest. In sum, its intention was to ensure respondent’s compliance with the procedural rules.

Petitioners timely filed their motion for reconsideration, but in its Resolution2 dated June 26, 2002, the Court of Appeals denied the same.

Hence, this recourse.

The only issue for our resolution is whether the Court of Appeals erred in sustaining the trial court’s April 3, 2001 Order directing respondent to amend its complaint in Special Case No. 383.

In resolving this issue, we are guided by two principles. First, there is nothing sacred about processes or pleadings and their forms or contents, their sole purpose being to facilitate the application of justice to the rival claims of contending parties.3 Hence, pleadings as well as procedural rules should be construed liberally.4 Second, the judicial attitude has always been favorable and liberal in allowing amendments to a

pleading in order to avoid multiplicity of suits and so that the real controversies between the parties are presented, their rights determined, and the case decided on the merits without unnecessary delay.5

Here, we find no reason to deviate from the foregoing dicta. It is on record that in its first amended complaint, respondent DVSHA alleged that it is a registered association. However, it failed to attach to its complaint the supporting certificate of registration, as well as its articles of incorporation and by-laws. In their answer, petitioners promptly assailed respondent’s lack of personality to sue. The trial court, desiring to determine if indeed respondent has the capacity to sue, directed respondent to amend its complaint anew by attaching thereto the necessary documents.

Sections 1 and 4, Rule 10 of the 1997 Rules of Civil Procedure, as amended, provide:

SEC. 1. Amendments in general. – Pleadings may be amended by adding or striking out an allegation or the name of any party, or by correcting a mistake in the name of a party or a mistaken or inadequate allegation or description in any other respect, so that the actual merits of the controversy may speedily be determined without regard to technicalities, and in the most expeditious and inexpensive manner.

SEC. 4. Formal amendments. – A defect in the designation of the parties and other clearly clerical or typographical errors may be summarily corrected by the court at any stage of the action, at its initiative or on motion, provided no prejudice is caused thereby to the adverse party.

Here, the amendment of respondent’s complaint at the instance of the trial court merely involves the designation of respondent as a proper party, i.e., whether it has a juridical personality and, therefore, can sue or be sued. We note that when respondent amended its complaint by attaching the required supporting documents, such amendment did not change its cause of action. Nor was its action intended to prejudice petitioners.Verily, the Court of Appeals correctly ruled that the RTC did not gravely abuse its discretion when it ordered the amendment of the complaint.

Anent petitioners’ contention that respondent is not a real party in interest, the same is without merit. Section 2, Rule 3 of the same Rules defines a real party in interest as "the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of a suit." In its complaint, respondent alleged that it will be prejudiced by petitioners’ act complained of. Even assuming it will not suffer an injury from the alleged unlawful act of petitioners, its members or homeowners may sustain such injury. In this jurisdiction, an association has a standing to file suit for its members despite lack of interest if its members are directly affected by the action.6

WHEREFORE, we DENY the petition and AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 65445. Costs against the petitioners.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. L-45101 November 28, 1986

ROSARIO C. MAGUAN (formerly ROSARIO C. TAN), petitioner, vs.THE HONORABLE COURT OF APPEALS and SUSANA LUCHAN, respondents.

Ambrosio Padilla Law Offices for petitioner.

 

PARAS, J.:p

Submitted on December 9, 1977 for Our decision is this petition for review on certiorari of the two Resolutions of the Court of Appeals, the first dated July 6, 1976, setting aside its Decision of February 16, 1976 in CA-G.R. No. SP-04706, titled "SUSANA LUCHAN v. Hon. HONRADO, et al." wherein it ruled for the dismissal of the petition for lack of merit and at the same time nullifying the writ of preliminary injunction it had previously issued; and the second, dated November 4, 1976, denying the motion for reconsideration of the first resolution above-mentioned.

Petitioner is doing business under the firm name and style of SWAN MANUFACTURING" while private respondent is likewise doing business under the firm name and style of "SUSANA LUCHAN POWDER PUFF MANUFACTURING."

It is undisputed that petitioner is a patent holder of powder puff namely:

1. UM-423 (extended and/or renewed under Extension No. UM-109 for a period of 5 years from October 6, 1971)

2. UM-450 (extended and/or renewed under Extension No. UM110 for a period of 5 years from January 26, 1972)

3. UM 1184, for a period of 5years fromApril 5, 1974.(Petition, Rollo, pp. 6-7).

In a letter dated July 10, 1974 (Annex "D", Rollo, p. 86), petitioner informed private respondent that the powder puffs the latter is manufacturing and selling to various enterprises particularly those in the cosmetics industry, resemble Identical or substantially Identical powder puffs of which the former is a patent holder under Registration Certification Nos. Extension UM-109, Extension UM-110 and Utility Model No. 1184; petitioner explained such production and sale constitute infringement of said patents and therefore its immediate discontinuance is demanded, otherwise it will be compelled to take judicial action. (Rollo, pp. 7-8).

Private respondent replied stating that her products are different and countered that petitioner's patents are void because the utility models applied for were not new and patentable and the person to whom the patents were issued was not the true and actual author nor were her rights derived from such author. (Taken from allegations in the Answer, par. 4, Rollo, p. 93). And on July 25, 1974, private respondent assailed the validity of the patents involved and filed with the Philippine Patent Office petitions for cancellation of (1) Utility Model Letter Patent Extension No. UM-109 (Inter Partes Case No. 838, Susana Luchan v. Rosario C. Tan), (2) Utility Model Letters Patent No. UM-1184 (Inter Partes Case No. 839, Susana Luchan v. Rosario C. Tan), (3) Utility Model Letters Patent Extension No. UM-110 (Inter Partes Case No. 840, Susana Luchan v. Rosario C. Tan. (Taken from allegations in the Answer, par. 10, Rollo, pp. 94-95).

In view thereof, petitioner, on August 24, 1974, filed a complaint for damages with injunction and preliminary injunction against private respondent with the then Court of First Instance of Rizal, Pasig Branch, docketed as Civil Case No. 19908, for infringing the aforesaid letters patent, and prayed, among others, that a writ of preliminary injunction be immediately issued (Complaint, Rollo, p. 90).

In her answer, private respondent alleged that the products she is manufacturing and offering for sale are not Identical, or even only substantially Identical to the products covered by petitioner's patents and, by way of affirmative defenses, further alleged that petitioner's patents in question are void on the following grounds:

(1) at the time of filing of application for the patents involved, the utility models applied for were not new and patentable under Sec. 55 of R.A. 165, as amended by R.A. 864; and

(2) the person to whom the patents were issued was not the true and actual author of the utility models applied for, and neither did she derive her rights from any true and actual author of these utility models.

for the following reasons:

(a) since years prior to the filing of applications for the patents involved, powder puffs of the kind applied for were then already existing and publicly being sold in the market; both in the Philippines and abroad; and

(b) applicant's claims in her applications, of "construction" or process of manufacturing the utility models applied for, with respect to UM-423 and UM-450, were but a complicated and impractical version of an old, simple one which has been well known to the cosmetics industry since years previous to her filing of applications, and which belonged to no one except to the general public; and with respect to UM1184; her claim in her application of a unitary powder puff, was but an limitation of a product well known to the cosmetics industry since years previous to her firing of application, and which belonged to no one except to the general public; (Answer, Rollo, pp. 93-94).

On September 18, 1974, the trial court issued an Order (Annex "K", Rollo, p. 125) granting the preliminary injunction prayed for by petitioner. Consequently, the corresponding writ was subsequently issued (Annex "K-1", Rollo, p. 131) enjoining the herein private respondent (then defendant) and all other persons employed by her, her agents, servants and employees from directly or indirectly manufacturing, making or causing to be made, selling or causing to be sold, or using or causing to be used in accordance with, or embodying the utility models of the Philippine Patent Office Utility Model Letters Patent Nos. 423 (Extension No. UM-109), No. 450 (Extension No. UM-110), and Utility Model No. 1184 or from infringement upon or violating said letters patent in any way whatsoever (Annex " K-1 ", Rollo, p. 131).

Private respondent questioned the propriety of the trial court's issuance of the Writ of Preliminary Injunction arguing that since there is still a pending cancellation proceedings before the Philippine Patent Office concerning petitioner's patents, such cannot be the basis for preliminary injunction (Motion for Reconsideration, Rollo, p. 132).

In an Order dated September 11, 1975, the trial court denied private respondent's motion for reconsideration (Annex "N", Rollo, p. 142).

In challenging these Orders private respondent filed a petition for certiorari with the respondent court on September 29, 1975 (Annex "D", Rollo, pp. 148-171) reiterating among other things the invalidity of petitioner's patents and prayed that the trial court be restrained from enforcing or continuing to enforce the following:

(1) Order dated September 18, 1974, granting the preliminary injunction;

(2) Writ of preliminary injunction dated September 18, 1974; and

(3) Order dated September 11, 1974 denying petitioner's motion petition for reconsideration.

On October 15, 1975, the Writ of Preliminary Injunction was issued by the respondent Court of Appeals as follows:

NOW, THEREFORE, you, respondents, and/or any person/persons acting on your stead, are hereby ENJOINED to RESTRAIN from enforcing or continuing to enforce, the proceedings complained of in the petition to wit: 1) Order dated September 18, 1974, granting the preliminary injunction; 2) Writ of Preliminary Injunction dated September 18, 1974; and Order dated September 11, 1975, denying petitioner's motion for reconsideration, all issued in connection with Civil Case No. 19908, UNTIL FURTHER ORDERS FROM THIS COURT. (Annex "P", Rollo, p. 1.73)

On February 16, 1976, respondent court promulgated a decision the dispositive portion of which reads:

WHEREFORE, finding no merit in the herein petition, the same is hereby dismissed and the preliminary injunction previously issued by this Court is hereby set aside, with costs.

SO ORDERED. (CA Decision, Rollo, p. 189).

ln said decision respondent court stated that in disposing of the petition it tackled only the issue of whether the court a quo acted with grave abuse of discretion in issuing the challenged orders. It made clear the question of whether the patents have been infringed or not was not determined considering the court a quo has yet to decide the case on the merits (Ibid., p. 186).

Feeling aggrieved, private respondent moved to reconsider the afore-mentioned Decision based on the following grounds:

I

THAT THIS HONORABLE COURT ERRED IN NOT APPRECIATING THE EXISTENCE OF A FAIR QUESTION OF INVALIDITY OF PRIVATE RESPONDENT'S PATENTS.

II

THAT THIS HONORABLE COURT ERRED IN NOT REJECTING THE THEORY OF RESPONDENT JUDGE THAT HE HAS NO JURISDICTION TO INVALIDATE THE PATENTS UPON GROUND OF LACK OF NOVELTY OF THE PRODUCTS PATENTED. (Motion for Reconsideration, Rollo, p. 190).

Reviewing on reconsideration, respondent court gave weight to private respondent's allegation that the latter's products are not identical or even only substantially identical to the products covered by petitioner's patents. Said court noticed that contrary to the lower courts position that the court a quohad no jurisdiction to determine the question of invalidity of the patents, Section 45 and 46 of the Patent Law allow the court to make a finding on the validity or invalidity of patents and in the event there exists a fair question of its invalidity, the situation calls for a denial of the writ of preliminary injunction pending the evaluation of the evidence presented (Rollo, pp. 218-226). Thus, finding the lower court's position to have been opposed to Patent Law, respondent court considered it a grave abuse of discretion when the court a quo issued the writ being questioned without looking into the defenses alleged by herein private respondent. Further, it considered the remedy of appeal, under the circumstances, to be inadequate.

Thus, on July 6, 1976, respondent court made a complete turnabout from its original decision and promulgated a Resolution, the dispositive portion of which reads:

WHEREFORE, our decision is hereby set aside. The writ of certiorari is ordered issued. Accordingly, the challenged orders, Exhibit H and H-1 and the order denying the motion for reconsideration (Annex "K", Petition), are hereby set aside. The writ of preliminary injunction previously ordered by this Court and ordered lifted by the Decision now being set aside is hereby reinstated and made permanent. Without pronouncement as to costs.

SO ORDERED. (CA Resolution, Rollo, p. 226).

In a Resolution dated November 4, 1976, respondent court, not persuaded by the grounds embodied in the motion for reconsideration filed by herein petitioner (Annex "V ", Rollo, p. 227), denied the same for lack of merit, thereby maintaining the same stand it took in its July 6, 1976 Resolution (Rollo, p. 281). Hence, this petition.

On December 3, 1976, without giving due course to the petition, this Court required respondent to file her Comment (Rollo, p. 290) which was filed on December 16, 1976 (Rollo, pp. 291-316). Thereafter, petitioner filed her Reply (Rollo, p. 323) and on May 30, 1977, the petition was given due course (Rollo, p. 345). Petitioner filed her brief on July 14, 1977 (Rollo, p. 351) while private respondent filed her brief on August 25, 1977 (Rollo, p. 359). Thereafter, petitioner having failed to file reply brief, the Court resolved to declare the case submitted for decision on December 9, 1977 (Rollo, p. 359).

The assignment of errors raised by the petitioner in this case (Rollo, pp. 15-16) may be reduced to three main issues:

(1) Whether or not in an action for infringement the Court a quo had jurisdiction to determine the invalidity of the patents at issue which invalidity was still pending consideration in the patent office.

(2) Whether or not the Court a quo committed grave abuse of discretion in the issuance of a writ of preliminary injunction.

(3) Whether or not certiorari is the proper remedy.

The first issue has been laid to rest in a number of cases where the Court ruled that "When a patent is sought to be enforced, the questions of invention, novelty or prior use, and each of them, are open to judicial examination." (Vargas v. F.M. Yaptico & Co. 40 Phil. 199 [1919]; Vargas v. Chua, 57 Phil. 790-791 [1933]; Frank and Gohn v. Kosuyana 59 Phil. 207 [1933]).

Under the present Patent Law, there is even less reason to doubt that the trial court has jurisdiction to declare the patents in question invalid. A patentee shall have the exclusive right to make, use and sell the patented article or product and the making, using, or selling by any person without the authorization of the patentee constitutes infringement of the patent (Sec. 37, R.A. 165). Any patentee whose rights have been infringed upon may bring an action before the proper CFI now (RTC) and to secure an injunction for the protection of his rights (Sec. 42, R.A. 165). Defenses in an action for infringement are provided for in Section 45 of the same law which in fact were availed of by private respondent in this case. Then, as correctly stated by respondent Court of Appeals, this conclusion is reinforced by Sec. 46 of the same law which provides that if the Court shall find the patent or any claim thereof invalid, the Director shall on certification of the final judgment ... issue an order cancelling the patent or the claims found invalid and shall publish a notice thereof in the Official Gazette." Upon such certification, it is ministerial on the part of the patent office to execute the judgment. (Rollo, pp. 221-222).

II.

The burden of proof to substantiate a charge of infringement is with the plaintiff. But where the plaintiff introduces the patent in evidence, and the same is in due form, there is created a prima faciepresumption of its correctness and validity. The decision of the Commissioner (now Director) of Patent in granting the patent is presumed to be correct. The burden of going forward with the evidence (burden of evidence) then shifts to the defendant to overcome by competent evidence this legal presumption.

The question then in the instant case is whether or not the evidence introduced by private respondent herein is sufficient to overcome said presumption.

After a careful review of the evidence consisting of 64 exhibits and oral testimonies of five witnesses presented by private respondents before the Court of First Instance before the Order of preliminary injunction was issued as well as those presented by the petitioner, respondent Court of Appeals was satisfied that there is a prima facie showing of a fair question of invalidity of petitioner's patents on the ground of lack of novelty. As pointed out by said appellate court said evidence appeared not to have been considered at all by the court a quo for alleged lack of jurisdiction, on the mistaken notion that such question in within the exclusive jurisdiction of the patent office.

It has been repeatedly held that an invention must possess the essential elements of novelty , originality and precedence and for the patentee to be entitled to protection, the invention must be new to the world. Accordingly, a single instance of public use of the invention by a patentee for more than two years (now for more than one year only under Sec. 9 of the Patent Law) before the date of his application for his patent, will be fatal to, the validity of the patent when issued. (Frank, et al. v. Kosuyama Vargas v. F.M. Yaptico & Co. and Vargas v. Chua, et al., supra).

The law provides:

SEC. 9. Invention not considered new or patentable. — An invention shall not be considered new or capable of being patented if it was known or used by others in the Philippines before the invention thereof by the inventor named in an application for patent for the invention; or if it was patented or described in any printed publication in the Philippines or any foreign country more than one year before the application for a patent therefor; or if it had been in public use or on sale in the Philippines for more than one year before the application for a patent therefor; or if it is the subject matter of a validity issued patent in the Philippines granted on an application filed before the filing of the application for patent therefor.

Thus, more specifically, under American Law from which our Patent Law was derived (Vargas v. F.M. Yaptico & Co. supra) it is generally held that in patent cases a preliminary injunction will not issue for patent infringement unless the validity of the patent is clear and beyond question. The

issuance of letters patent, standing alone, is not sufficient to support such drastic relief (8 Deller's Walker on Patents p. 406). In cases of infringement of patent no preliminary injunction will be granted unless the patent is valid and infringed beyond question and the record conclusively proves the defense is sham. (Ibid., p. 402)

In the same manner, under our jurisprudence, as a general rule because of the injurious consequences a writ of injunction may bring, the right to the relief demanded must be clear and unmistakable. (Sangki v. Comelec, 21 SCRA 1392; December 26, 1967) and the dissolution of the writ is proper where applicant has doubtful title to the disputed property. (Ramos v. C.A., 95 SCRA 359).

III.

It will be noted that the validity of petitioner's patents is in question for want of novelty. Private respondent contends that powder puffs Identical in appearance with that covered by petitioner's patents existed and were publicly known and used as early as 1963 long before petitioner was issued the patents in question. (List of Exhibits, Rollo, pp. 194-199). As correctly observed by respondent Court of Appeals, "since sufficient proofs have been introduced in evidence showing a fair question of the invalidity of the patents issued for such models, it is but right that the evidence be looked into, evaluated and determined on the merits so that the matter of whether the patents issued were in fact valid or not may be resolved." (Rollo, pp. 286-287).

All these notwithstanding, the trial court nonetheless issued the writ of preliminary injunction which under the circumstances should be denied.

For failure to determine first the validity of the patents before aforesaid issuance of the writ, the trial court failed to satisfy the two requisites necessary if an injunction is to issue, namely: the existence of the right to be protected and the violation of said right. (Buayan Cattle Co., Inc. v. Quintillan, 128 SCRA 276).

Under the above established principles, it appears obvious that the trial court committed a grave abuse of discretion which makes certiorari the appropriate remedy.

As found by respondent Court of Appeals, the injunctive order of the trial court is of so general a tenor that petitioner may be totally barred from the sale of any kind of powder puff. Under the circumstances, respondent appellate court is of the view that ordinary appeal is obviously inadequate. (Rollo, p. 288). A parallel was drawn from a decision of the Supreme Court in the case of Sanchez v. Hon. Court of Appeals, 69 SCRA 328 [1976] where the First Division of the Supreme Court ruled that "The prerogative writ of certiorari may be applied for by proper petition notwithstanding the existence of the regular remedy of an appeal in due cause when among other reasons, the broader interests of justice so require or an ordinary appeal is not an adequate remedy."

Private respondent maintains the position that the resolutions sought to be appealed from had long become final and executory for failure of Hon. Reynaldo P. Honrado, the trial court judge, to appeal by certiorari from the resolutions of respondent Court of Appeals. (Rollo, pp. 291-292).

Such contention is untenable.

There is no dispute that petitioner has seasonably petitioned. On the other hand, it is elementary that the trial judge is a mere nominal party as clearly provided in Section 5, Rule 65 of the Revised Rules of Court where it shall be the duty of such person or persons interested in sustaining the proceedings in court, "to appear and defend, both in his or their own behalf and in behalf of the court or judge affected by the proceedings."

Relative thereto "the judge whose order is under attack is merely a nominal party; wherefore, a judge in his official capacity should not be made to appear as a party seeking reversal of a decision that is unfavorable to the action taken by him." (Hon. Alcasid v. Samson, 102 Phil. 735-736; Tarona v. Sayo, 67 SCRA 508, 524; Lim Se v. Argel, 70 SCRA 378).

As to petitioner's claim of prescription, private respondent's contention that such refers to the filing of petitions for cancellation in the Patent Office under Sec. 28 of the Patent Law and not to a defense against an action for infringement under Sec. 45 thereof which may be raised anytime, is evident under aforesaid law.

PREMISES CONSIDERED, the assailed resolutions of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.

[G.R. No. 118708.  February 2, 1998]

CRESER PRECISION SYSTEMS, INC., petitioner, vs. COURT OF APPEALS AND FLORO INTERNATIONAL CORP., respondents.

D E C I S I O N

MARTINEZ, J.:

This petition for review on certiorari assails the decision[1]. The decision of the Court of Appeals was penned by Justice Gloria C. Paras and concurred in by Justice Salome A. Montoya and Justice Hector L. Hofileña.

1 of the Court of Appeals dated November 9, 1994 in C.A.-G.R. SP. No. 34425 entitled “Floro International Corp. vs. Hon. Tirso D.C Cruz and Creser Precision System, Inc.”, the dispositive portion of which reads:

“WHEREFORE, THE PETITION IS HEREBY GRANTED. THE COMPLAINT FOR INJUNCTION AND DAMAGES, CIVIL CASE NO. 93-1856 BEFORE THE RESPONDENT JUDGE IS HEREBY ORDERED DISMISSED AND HIS ORDERS THEREIN OF DECEMBER 29, 1993 AND MAY 11, 1994 ARE ORDERED SET ASIDE.”

Private respondent is a domestic corporation engaged in the manufacture, production, distribution and sale of military armaments, munitions, airmunitions and other similar materials.[2]

On January 23, 1990, private respondent was granted by the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), a Letters Patent No. UM-6938[3] covering an aerial fuze which was published in the September-October 1990, Vol. III, No. 5 issue of the Bureau of Patent’s Official Gazette.[4]

Sometime in November 1993, private respondent, through its president, Mr. Gregory Floro, Jr., discovered that petitioner submitted samples of its patented aerial fuze to the Armed Forces of the Philippines (AFP) for testing. He learned that petitioner was claiming the aforesaid aerial fuze as its own and planning to bid and manufacture the same commercially without license or authority from private respondent. To protect its right, private respondent on December 3, 1993, sent a letter[5] to petitioner advising it fro its existing patent and its rights thereunder, warning petitioner of a possible court action and/or application for injunction, should it proceed with the scheduled testing by the military on December 7, 1993.

In response to private respondent’s demand, petitioner filed on December 8, 1993 a complaint[6] for injunction and damages arising from the alleged infringement before the Regional Trial Court of Quezon City, Branch 88. The complaint alleged, among others: that petitioner is the first, true and actual inventor of an aerial fuze denominated as “Fuze, PDR 77 CB4” which is developed as early as December 1981 under the Self-Reliance Defense Posture Program (SRDP) of the AFP; that sometime in 1986, petitioner began supplying the AFP with the said aerial fuze; that private respondent’s aerial fuze is identical in every respect to the petitioner’s fuze; and that the only difference between the two fuzes are miniscule and merely cosmetic in nature. Petitioner prayed that a temporary restraining order and/or writ of preliminary injunction be issued enjoining private respondent including any and all persons acting on its behalf from manufacturing, marketing and/or profiting therefrom, and/or from performing any other act in connection therewith or tending to prejudice and deprive it of any rights, privileges and benefits to which it is duly entitled as the first, true and actual inventor of the aerial fuze.

On December 10, 1993, the trial court issued a temporary restraining order. Thereafter, hearings were held on the application of petitioner for the issuance of a writ of preliminary injunction, with both parties presenting their evidence. After the hearings, the trial court directed the parties to submit their respective memoranda in support of their positions.

On December 27, 1993, private respondent submitted its memorandum[7] alleging that petitioner has no cause of action to file a complaint of infringement against it since it has no patent for the aerial fuze which it claims to have invented; that petitioner’s available remedy is to file a petition for cancellation of patent before the Bureau of Patents; that private respondent as the patent holder cannot be stripped of its property right over the patented aerial fuze consisting of the exclusive right to manufacture, use and sell the same and that it stands to suffer irreparable damage and injury if it is enjoined from the exercise of its property right over its patent.

On December 29, 1993, the trial court issued an Order[8] granting the issuance of a writ of preliminary injunction against private respondent the dispositive portion of which reads:

“WHEREFORE, plaintiff’s application for the issuance of a writ of preliminary injunction is granted and, upon posting of the corresponding bond by plaintiff in the amount of PHP 200,000.00, let the writ of preliminary injunction be issued by the branch Clerk of this Court enjoining the defendant and any and all persons acting on its behalf or by and under its authority, from manufacturing, marketing and/or selling aerial fuzes identical, to those of plaintiff, and from profiting therefrom, and/or from performing any other act in connection therewith until further orders from this Court.”

Private respondent moved for reconsideration but this was denied by the trial courts in its Order[9] of May 11, 1994, pertinent portions of which read:

“For resolution before this Court is the Motion for Reconsideration filed by the defendant and the plaintiff’s Opposition thereto. The Court finds no sufficient cause to reconsider its order dated December 29, 1993. During the hearing for the issuance of the preliminary injunction, the plaintiff has amply proven its entitlement to the relief prayed for. It is undisputed that the plaintiff has developed its aerial fuze way back in 1981 while the defendant began manufacturing the same only in 1987. Thus, it is only logical to conclude that it was the plaintiff’s aerial fuze that was copied or imitated which gives the plaintiff the right to have the defendant enjoined “from manufacturing, marketing and/or selling aerial fuzes identical to those of the plaintiff, and from profiting therefrom and/or performing any other act in connection therewith until further orders from this Court.” With regards to the defendant’s assertion that an action for infringement may only be brought by “anyone possessing right, title or interest to the patented invention,” (Section 42, RA 165) qualified by Section 10, RA 165 to include only “the first true and actual inventor, his heirs, legal representatives to assignees,” this court finds the foregoing to be untenable. Sec. 10 merely enumerates the persons who may have an invention patented which does not necessarily limit to these persons the right to institute an action for infringement. Defendant further contends that the order in issue is disruptive of the status quo. On the contrary, the order issued by the Court in effect maintained the status quo. The last actual , peaceable uncontested status existing prior to this controversy was the plaintiff manufacturing and selling its own aerial fuzes PDR 77 CB4 which was ordered stopped through the defendant’s letter. With issuance of the order, the operations of the plaintiff continue. Lastly, this court believes that the defendant will not suffer irreparable injury by virtue of said order. The defendant’s claim is primarily hinged on its patent (Letters Patent No. UM-6983) the validity of which is being questioned in this case.

WHEREFORE, premises considered, the Motion for Reconsideration is hereby denied for lack of merit.

SO ORDERED.”

Aggrieved, private respondent on June 27, 1994, filed a petition for certiorari, mandamus and prohibition[10]before respondent Court of Appeals raising as grounds the following:

a.       Petitioner has no cause of action for infringement against private respondent, the latter not having any patent for the aerial fuze which it claims to have invented and developed and allegedly infringed by private respondent;

b.       The case being an action for cancellation or invalidation of private respondent’s Letters Patent over its own aerial fuze, the proper venue is the Office of the Director of Patents;

c.        The trial court acted in grave abuse of discretion and or in excess of jurisdiction in finding that petitioner has fully established its clear title or right to preliminary injunction;

d.       The trial court acted in grave abuse of discretion and/or in excess of jurisdiction in granting the preliminary injunction, it being disruptive of the status quo; and

e.       The trial court acted in grave abuse of discretion and/or in excess of jurisdiction in granting the preliminary injunction thereby depriving private respondent of its property rights over the patented aerial fuze and cause it irreparable damages.

On November 9, 1994, the respondent court rendered the now assailed decision reversing the trial court’s Order of December 29, 1993 and dismissing the complaint filed by petitioner.

The motion for reconsideration was also denied on January 17, 1995.[11] Hence, this present petition.

It is petitioner’s contention that it can file, under Section 42 of the Patent Law (R.A. 165), an action for infringement not as a patentee but as an entity in possession of a right, title or interest in and to the patented invention. It advances the theory that while the absence of a patent may prevent one from lawfully suing another for infringement of said patent, such absence does not bar the first true and actual inventor of the patented invention from suing another who was granted a patent in a suit for declaratory or injunctive relief recognized under American patent laws. This remedy, petitioner points out, may be likened to a civil action for infringement under Section 42 of the Philippine Patent Law.

We find the above arguments untenable.

Section 42 of R.A. 165, otherwise known as the Patent Law, explicitly provides:

SECTION. 42. Civil action for infringement. – Any patentee, or anyone possessing any right, title or interest in and to the patented invention, whose rights have been infringed, may bring a civil action before the proper Court of First Instance (now Regional Trial court), to recover from the infringer damages sustained by reason of the infringement and to secure an injunction for the protection of his right. x x x

Under the aforequoted law, only the patentee or his successors-in-interest may file an action for infringement. The phrase “anyone possessing any right, title or interest in and to the patented invention” upon which petitioner maintains its present suit, refers only to the patentee’s successors-in-interest, assignees or grantees since actions for infringement of patent may be brought in the name of the person

or persons interested, whether as patentee, assignees or grantees, of the exclusive right. [12] Moreover, there can be no infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of patent. [13] In short, a person or entity who has not been granted letters patent over an invention and has not acquired any right or title thereto either as assignee or as licensee, has no cause of action for infringement because the right to maintain an infringement suit depends on the existence of the patent.[14]

Petitioner admits it has no patent over its aerial fuze. Therefore, it has no legal basis or cause of action to institute the petition for injunction and damages arising from the alleged infringement by private respondent. While petitioner claims to be the first inventor of the aerial fuze, still it has no right of property over the same upon which it can maintain a suit unless it obtains a patent therefor. Under American jurisprudence, and inventor has no common-law right to a monopoly of his invention. He has the right to make, use and vend his own invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive right of making, using or selling the invention.[15]

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

Thus, as correctly ruled by the respondent Court of Appeals in its assailed decision: “since the petitioner (private respondent herein) is the patentee of the disputed invention embraced by letters of patent UM No. 6938 issued to it on January 23, 1990 by the Bureau of Patents, it has in its favor not only the presumption of validity of its patent, but that of a legal and factual first and true inventor of the invention.”

In the case of Aguas vs. De Leon,[16] we stated that:

“The validity of the patent issued by the Philippine Patent Office in favor of the private respondent and the question over the investments, novelty and usefulness of the improved process therein specified and described are matters which are better determined by the Philippines patent Office, composed of experts in their field, have, by the issuance of the patent in question, accepted the thinness of the private respondent’s new tiles as a discovery. There is a presumption that the Philippine Patent Office has correctly determined the patentability of the improvement by the private respondent of the process in question.”

In fine, in the absence of error or abuse of power or lack or jurisdiction or grave abuse of discretion, we sustain the assailed decision of the respondent Court of Appeal.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-32160 January 30, 1982

DOMICIANO A. AGUAS, petitioner, vs.CONRADO G. DE LEON and COURT OF APPEALS, respondents.

 

FERNANDEZ, J.:

This is a petition for certiorari to review the decision of the Court of Appeals in CA G.R. NO. 37824-R entitled "Conrado G. de Leon, plaintiff-appelle vs. Dominciano Aguas and F.H. Aquino and Sons, defendants-appellants," the dispositive portion of which reads:

WHEREFORE, with the modification that plintiff-applee's award of moral damages is hereby redured to P3,000.00, the appealed judgment is hereby affirmed, in all othe respects, with costs against appellants. 1

On April 14, 1962, Conrado G. de Leon filed in the Court of First Instance of Rizal at Quezon City a complaint for infringement of patent against Domiciano A. Aguas and F. H. Aquino and Sons alleging that being the original first and sole inventor of certain new and useful improvements in the process of making mosaic pre-cast tiles, he lawfully filed and prosecuted an application for Philippine patent, and having complied in all respects with the statute and the rules of the Philippine Patent Office, Patent No. 658 was lawfully granted and issued to him; that said invention was new, useful, not known or used by others in this country before his invention thereof, not patented or described in any printed publication anywhere before his invention thereof, or more than one year prior to his application for patent thereof, not patented in any foreign country by him or his legal representatives on application filed more than one year prior to his application in this country; that plaintiff has the exclusive license to make, use and sell throughout the Philippines the improvements set forth in said Patent No. 658; that the invention patented by said Patent No. 658 is of great utility and of great value to plaintiff and of great benefit to the public who has demanded and purchased tiles embodying the said invention in very large quantities and in very rapidly increasing quant ies; that he has complied with the Philippine statues relating to marking patented tiles sold by him; that the public has in general acknowledged the validity of said Patent No. 658, and has respected plaintiff's right therein and thereunder; that the defendant Domiciano A. Aguas infringed Letters of Patent No. 658 by making, using and selling tiles embodying said patent invention and that defendant F. H. Aquino & Sons is guilty of infringement by making and furnishing to the defendant Domiciano A. Aguas the engravings, castings and devices designed and intended of tiles embodying plaintiff;s patented invention; that he has given direct and personal notice to the defendants of their said acts of infringement and requested them to desist, but nevertheless, defendants have refused and neglected to desist and have disregarded such request, and continue to so infringe causing great and irreparable damage to plaintiff; that if the aforesaid infringement is permitted to continue, further losses and damages and irreparable injury will be sustained by the plaintiff; that there is an urgent need for the immediate issuance of a preliminary injunction; that as a result of the defendants' wrongful conduct, plaintiff has suffered and the defendants are liable to pay him, in addition to actual damages and loss of profits which would be determined upon proper accounting, moral and exemplary or corrective damages in the sum of P90,000.00; that plaintiff has been compelled to go to court for the protection and enforcement of his and to engage the service of counsel, thereby incurring attorney's fees and expenses of litigation in the sum of P5,000.00. 2

On April 14, 1962, an order granting the plaintiff's petition for a Writ of Preliminary Injunction was issued. 3

On May 23, 1962, the defendant Domiciano A. Aguas filed his answer denying the allegations of the plaintiff and alleging that: the plaintiff is neither the original first nor sole inventor of the improvements in the process of making mosaic pre-cast tiles, the same having been used by several tile-making factories in the Philippines and abroad years before the alleged invention by de Leon; that Letters Patent No. 658 was unlawfully acquired by making it appear in the application in relation thereto that the process is new and that the plaintiff is the owner of the process when in truth and in fact the process incorporated in the patent application has been known and used in the Philippines by almost all tile makers long before the alleged use and registration of patent by plaintiff Conrado G. de Leon; that the registration of the alleged invention did not confer any right on the plaintiff because the registration was unlawfully secured and was a result of the gross misrepresentation on the part of the plaintiff that his alleged invention is a new and inventive process; that the allegation of the plaintiff that Patent No. 658 is of great value to plaintiff and of great benefit to the public is a mere conclusion of the plaintiff, the truth being that a) the invention of plaintiff is neither inventive nor new, hence, it is not patentable, b) defendant has been granted valid patents (Patents No. 108, 109, 110 issued on December 21, 1961) on designs for concrete decorative

wall tiles; and c) that he can not be guilty of infringement because his products are different from those of the plaintiff.4

The trial court rendered a decision dated December 29, 1965, the dispositive portion of which reads:

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

1. Declaring plaintiff's patent valid and infringed:

2. Granting a perpetual injunction restraining defendants, their officers, agents, employees, associates, confederates, and any and all persons acting under their authority from making and/or using and/or vending tiles embodying said patented invention or adapted to be used in combination embodying the same, and from making, manufacturing, using or selling, engravings, castings and devises designed and intended for use in apparatus for the making of tiles embodying plaintiff's patented invention, and from offering or advertising so to do, and from aiding and abetting or in any way contributing to the infringement of said patent;

3. Ordering that each and all of the infringing tiles, engravings, castings and devices, which are in the possession or under the control of defendants be delivered to plaintiff;

4. Ordering the defendants to jointly and severally pay to the plaintiff the following sums of money, to wit:

(a) P10,020.99 by way of actual damages;

(b) P50,000.00 by way of moral damages;

(c) P5,000.00 by way of exemplary damages;

(d) P5,000.00 by way of attorney's fees and

(e) costs of suit. 5

The defendant Domiciano Aguas appealed to the Court of Appeals, assigning the following errors. 6

I

THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF'S PATENT FOR THE 'PROCESS OF MAKING MOSAIC PRE-CAST TILE' IS INVALID BECAUSE SAID ALLEGED PROCESS IS NOT AN INVENTION OR DISCOVERY AS THE SAME HAS ALREADY LONG BEEN USED BY TILE MANUFACTURERS BOTH ABROAD AND IN THIS COUNTRY.

II

THE TRIAL COURT ERRED IN HOLDING THAT THE PATENT OF PLAINTIFF IS VALID BECAUSE IT IS AN IMPROVEMENT OR THE AGE-OLD TILE MAKING SYSTEM.

III

THE TRIAL COURT ERRED IN NOT ORDERING THE CANCELLATION OF PLAINTIFF-APPELLEE'S LETTERS PATENT NO. 658, EXHIBIT L, IN ACCORDANCE WITH THE PERTINENT PROVISIONS OF THE PATENT LAW, REPUBLIC ACT 165.

IV

THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT DOMICIANO A. AGUAS IS GUILTY OF INFRINGEMENT DESPITE THE FACT THAT PLAINTIFF'S PATENT IS NOT A VALID ONE.

V

THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEFENDANT COULD NEVER BE GUILTY OF INFRINGEMENT OF PLAINTIFF'S PATENT BECAUSE EVEN IN MATTERS NOT PATENTED BY THE PLAINTIFF - LIKE THE COMPOSITION AND PROPORTION OF INGREDIENTS USED AND THE STRUCTURAL DESIGNS OF THE MOULD AND THE TILE PRODUCED - THAT OF THE DEFENDANT ARE DIFFERENT.

VI

THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT AND IN HOLDING THE DEFENDANT, INSTEAD OF THE PLAINTIFF, LIABLE FOR DAMAGES, AND ATTORNEY'S FEES.

On August 5, 1969, the Court of Appeals affirmed the decision of the trial court, with the modification that plaintiff-appellee's award of moral damages was reduced to P3,000.00. 7

The petitioner assigns the following errors supposedly committed by the Court of Appeals:

It is now respectfully submitted that the Court of Appeals committed the following errors involving questions of law, to wit:

First error. — When it did not conclude that the letters patent of the respondent although entitled on the cover page as a patent for improvements, was in truth and in fact, on the basis of the body of the same, a patent for the old and non-patentable process of making mosaic pre-cast tiles;

Second error. — When it did not conclude from the admitted facts of the case, particularly the contents of the letters patent, Exh. L and the pieces of physical evidence introduced consisting of samples of the tiles and catalouges, that the alleged improvements introduced by the respondent in the manufacture of mosaic pre-cast tiles are not patentable, the same being not new, useful and inventive.

Third error. — As a corollary, when it sentenced the herein petitioner to pay the damages enumerated in the decision of the lower court (Record on Appeal, pp. 74-75), as confirmed by it (the Court of Appeals), but with the modification that the amount of P50,000.00 moral damages was reduced to P3,000.00. 8

The facts, as found by the Court of Appeals, are:

The basic facts borne out by the record are to the effect that on December 1, 1959 plaintiff-appellee filed a patent application with the Philippine Patent Office, and on May 5, 1960, said office issued in his favor Letters Patent No. 658 for a "new and useful improvement in the process of making mosaic pre-cast tiles" (Exh, "L"); that defendant F.H. Aquino & Sons engraved the moulds embodying plaintiff's patented improvement for the manufacture of pre-cast tiles, plaintiff furnishing said defendant the actual model of the tiles in escayola and explained to said engraver the plans, specifications and the details of the engravings as he wanted them to be made, including an explanation of the lip width, artistic slope of easement and critical depth of the engraving that plaintiff wanted for his moulds; that engraver Enrique Aquino knew that the moulds he was engraving for plaintiff were the latter's very own, which possession the new features and characteristics covered by plaintiff's parent; that defendant Aguas personally, as a building contractor, purchased from plaintiff, tiles shaped out of these moulds at the back of which was imprinted plaintiff's patent number (Exhs., "A" to "E"); that subsequently, through a representative, Mr. Leonardo, defendant Aguas requested Aquino to make engravings of the same type and bearing the characteristics of plaintiff's moulds; that Mr. Aquino knew that the moulds he was asked to engrave for defendant Aguas would be used to produce cement tiles similar to plaintiff's; that the moulds which F.H. Aquino & Sons eventually engraved for Aguas and for which it charged Aguas double the rate it charged plaintiff De Leon, contain the very same characteristic features of plaintiff's mould and that Aguas used these moulds in the manufacture of his tiles which he actually put out for sale to the public (Exhs. "1" to "3" and Exhs. "A" to "E"); that both plaintiff's and defendant Aguas' tiles are sculptured pre-cast wall tiles intended as a new feature of construction and wag ornamentation substantially Identical to each other in size, easement, lip width and critical depth of the deepest depression; and that the only significant difference between plaintiff's mould and that engraved by Aquino for Aguas is that, whereas plaintiff's mould turns out tiles 4 x 4 inches in size, defendant Aguas' mould is made to fit a 4-1/4 x 4-1/4 inch tile. 9

The patent right of the private respondent expired on May 5, 1977. 10 The errors will be discuss only to determine the right of said private respondent to damages.

The petitioner questioned the validity of the patent of the private respondent, Conrado G. de Leon, on the ground that the process, subject of said patent, is not an invention or discovery, or an improvement of the old system of making tiles. It should be noted that the private respondent does not claim to be the discoverer or inventor of the old process of tile-making. He only claims to have introduced an improvement of said process. In fact, Letters Patent No. 658 was issued by the Philippine Patent Office to the private respondent, Conrado G. de Leon, to protect his rights as the inventor of "an alleged new and useful improvement in the process of making mosaic pre-cast tiles." 11 Indeed, Section 7, Republic Act

No. 165, as amended provides: "Any invention of a new and useful machine, manufactured product or substance, process, or an improvement of the foregoing, shall be patentable.

The Court of Appeals found that the private respondent has introduced an improvement in the process of tile-making because:

... we find that plaintiff-appellee has introduced an improvement in the process of tile-making, which proceeds not merely from mechanical skill, said improvement consisting among other things, in the new critical depth, lip width, easement and field of designs of the new tiles. The improved lip width of appellee's tiles ensures the durability of the finished product preventing the flaking off of the edges. The easement caused by the inclination of the protrusions of the patented moulds is for the purpose of facilitating the removal of the newly processed tile from the female die. Evidently, appellee's improvement consists in the solution to the old critical problem by making the protrusions on his moulds attain an optimum height, so that the engraving thereon would be deep enough to produce tiles for sculptured and decorative purposes, strong optimum thickness of appellee's new tiles of only 1/8 of an inch at the deepest easement (Exhs. "D" and "D-1") is a most critical feature, suggestive of discovery and inventiveness, especially considering that, despite said thinness, the freshly formed tile remains strong enough for its intended purpose.

While it is true that the matter of easement, lip width, depth, protrusions and depressions are known to some sculptors, still, to be able to produce a new and useful wall tile, by using them all together, amounts to an invention. More so, if the totality of all these features are viewed in combination with the Ideal composition of cement, sodium silicate and screened fine sand.

By using his improved process, plaintiff has succeeded in producing a new product - a concrete sculptured tile which could be utilized for walling and decorative purposes. No proof was adduced to show that any tile of the same kind had been produced by others before appellee. Moreover, it appears that appellee has been deriving considerable profit from his manufacture and sale of such tiles. This commercial success is evidence of patentability (Walker on Patents, Dellers Edition, Vol. I, p. 237). 12

The validily of the patent issued by the Philippines Patent Office in favor of the private respondent and the question over the inventiveness, novelty and usefulness of the improved process therein specified and described are matters which are better determined by the Philippines Patent Office. The technical staff of the Philippines Patent Office, composed of experts in their field, have, by the issuance of the patent in question, accepted the thinness of the private respondent's new tiles as a discovery. There is a presumption that the Philippines Patent Office has correctly determined the patentability of the improvement by the private respondent of the process in question.

Anent this matter, the Court of Appeals said:

Appellant has not adduced evidence sufficient to overcome the above established legal presumption of validity or to warrant reversal of the findings of the lower court relative to the validity of the patent in question. In fact, as we have already pointed out, the clear preponderance of evidence bolsters said presumption of validity of appellee's patent. There is no indication in the records of this case and this Court is unaware of any fact, which would tend to show that concrete wall tiles similar to those produced by appellee had ever been made by others before he started manufacturing the same. In fact, during the trial, appellant was challenged by appellee to present a tile of the same kind as those produced by the latter, from any earlier source but, despite the fact that appellant had every chance to do so, he could not present any. There is, therefore, no concrete proof that the improved process of tile-making described in appellee's patent was used by, or known to, others previous to his discovery thereof. 13

The contention of the petitioner Aguas that the letters patent of de Leon was actually a patent for the old and non-patentable process of making mosaic pre-cast tiles is devoid of merit. De Leon never claimed to have invented the process of tile-making. The Claims and Specifications of Patent No. 658 show that although some of the steps or parts of the old process of tile making were described therein, there were novel and inventive features mentioned in the process. Some of the novel features of the private respondent's improvements are the following: critical depth, with corresponding easement and lip width to such degree as leaves the tile as thin as 1/8 of an inch at its thinnest portion, Ideal composition of cement and fine river sand, among other ingredients that makes possible the production of tough and durable wall tiles, though thin and light; the engraving of deep designs in such a way as to make the tiles decorative, artistic and suitable for wall ornamentation, and the fact that the tiles can be mass produced in commercial quantities and can be conveniently stock-piled, handled and packed without any intolerable incidence of breakages. 14

The petitioner also contends that the improvement of respondent is not patentable because it is not new, useful and inventive. This contention is without merit.

The records disclose that de Leon's process is an improvement of the old process of tile making. The tiles produced from de Leon's process are suitable for construction and ornamentation, which previously had not been achieved by tiles made out of the old process of tile making. De Leon's invention has therefore brought about a new and useful kind of tile. The old type of tiles were usually intended for floors although there is nothing to prevent one from using them for walling purposes. These tiles are neither artistic nor ornamental. They are heavy and massive.

The respondent's improvement is indeed inventive and goes beyond the exercise of mechanical skill. He has introduced a new kind of tile for a new purpose. He has improved the old method of making tiles and pre-cast articles which were not satisfactory because of an intolerable number of breakages, especially if deep engravings are made on the tile. He has overcome the problem of producing decorative tiles with deep engraving, but with sufficient durability. 15 Durability inspite of the thinness and lightness of the tile, is assured, provided that a certain critical depth is maintained in relation to the dimensions of the tile. 16

The petitioner also claims that changing the design from embossed to engraved tiles is neither new nor inventive because the Machuca Tile Factory and the Pomona Tile Manufacturing Company have been manufacturing decorative wall tiles that are embossed as well as engraved; 17 that these tiles have also depth, lip width, easement and field of designs; 18 and that the private respondent had copied some designs of Pomona. 19

The Machuca tiles are different from that of the private respondent. The designs are embossed and not engraved as claimed by the petitioner. There may be depressions but these depressions are too shallow to be considered engraved. Besides, the Machuca tiles are heavy and massive.

There is no similarity between the Pomona Tiles and de Leon's tiles. The Pomona tiles are made of ceramics. 20The process involved in making cement tiles is different from ceramic tiles. Cement tiles are made with the use of water, while in ceramics fire is used. As regards the allegation of the petitioner that the private respondent copied some designs of Pomona, suffice it to say that what is in issue here is the process involved in tile making and not the design.

In view of the foregoing, this Court finds that Patent No. 658 was legally issued, the process and/or improvement being patentable.

Both the trial court and the Court of Appeals found as a fact that the petitioner Domiciano A. Aguas did infringe de Leon's patent. There is no showing that this case falls under one of the exceptions when this Court may overrule the findings of fact of the Court of Appeals. The only issue then to be resolved is the amount of damages that should be paid by Aguas.

In its decision the Court of Appeals affirmed the amount of damages awarded by the lower court with the modification that the respondent is only entitled to P3,000.00 moral damages. 21

The lower court awarded the following damages: 22

a) P10,020.99 by way of actual damages;

b) P50,000.00 by way of moral damages;

c) P5,000.00 by way of exemplary damages;

d) P5,000.00 by way of attomey's fees and

e) Costs of suit

because:

An examination of the books of defendant Aguas made before a Commissioner reveals that during the period that Aguas was manufacturing and selling tiles similar to plaintiff's, he made a gross income of P3,340.33, which can be safely be considered the amount by which he enriched himself when he infringed plaintiff's patent. Under Sec. 42 of the Patent Law any patentee whose rights have been infringed is entitled to damages which, according to the circumstances of the case may be in a sum above the amount found as actual damages sustained provided the award does not exceed three times the amount of such actual damages. Considering the wantonness of the infringement committed by the defendants who knew all the time about the existence of plaintiff's patent, the Court feels there is reason to grant plaintiff maximum damages in the sum of P10,020.99. And in order to discourage patent infringements and to give more teeth to the provisions of the patent law thus promoting a stronger public policy committed to afford greater incentives and protection to inventors, the Court hereby awards plaintiff exemplary damages in the sum of P5,000.00 to be paid jointly and severally by defendants. Considering the status of plaintiff as a reputable businessman, and owner of the likewise reputed House of Pre-Cast, he is entitled to an award of moral damages in the sum of P50,000.00. 23

In reducing the amount of moral damages the Court of Appeals said:

As regards the question of moral damages it has been shown that as a result of the unlawful acts of infringment committed by defendants, plaintiff was unstandably very sad; he worried and became nervous and lost concentration on his work in connection with his tile business (pp. 28, 30, t.s.n., Feb. 28, 1964). In addition, plaintiff's character and reputation have been unnecessarily put in question because defendants, by their acts of infringement have created a doubt or suspicion in the public mind concerning the truth and honesty of plaintiff's advertisements and public announcements of his valid patent. Necessarily, said acts of defendants have caused plaintiff considerable mental suffering, considering especially, the fact that he staked everything on his pre-cast tile business (p. 36, t.s.n., Id.) The wantonness and evident bad faith characterizing defendants' prejudicial acts against plaintiff justify the assessment of moral damages in plaintiff's favor, though we do not believe the amount of P50,000.00 awarded by the lower court is warranted by the circumstances. We feel that said amount should be reduced to P3,000.00 by way of compensating appellee for his moral suffering. "Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances such damages are justly due" (Art. 2219 NCC).

There is no reason to reduce the amount of damages and attorneys fees awarded by the trial court as modified by the Court of Appeals.

WHEREFORE, the decision of the Court of Appeals in CA G.R. No. 37824-R appealed from is hereby affirmed, without pronouncement as to costs.

SO ORDERED.

Makasiar, Guerrero, Melencio-Herrera and Plana, JJ., concur.

Teehankee, J., took no part.

[G.R. No. 113388.  September 5, 1997]

ANGELITA MANZANO, petitioner, vs. COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY MANUFACTURING CORPORATION, respondents.

D E C I S I O N

BELLOSILLO, J.:

The primary purpose of the patent system is not the reward of the individual but the advancement of the arts and sciences.  The function of a patent is to add to the sum of useful knowledge and one of the purposes of the patent system is to encourage dissemination of information concerning discoveries and inventions.  This is a matter which is properly within the competence of the Patent Office the official action of which has the presumption of correctness and may not be interfered with in the absence of new evidence carrying thorough conviction that the Office has erred.   Since the Patent Office is an expert body preeminently qualified to determine questions of patentability, its findings must be accepted if they are consistent with the evidence, with doubts as to patentability resolved in favor of the Patent Office.[1]

Petitioner Angelita Manzano filed with the Philippine Patent Office on 19 February 1982 an action for the cancellation of Letters Patent No. UM-4609 for a gas burner registered in the name of respondent Melecia Madolaria who subsequently assigned the letters patent to New United Foundry and Manufacturing Corporation (UNITED FOUNDRY, for brevity).  Petitioner alleged that (a) the utility model covered by the letters patent, in this case, an LPG gas burner, was not inventive, new or useful; (b) the specification of the letters patent did not comply with the requirements of Sec. 14, RA No. 165, as amended; (c) respondent Melecia Madolaria was not the original, true and actual inventor nor did she derive her rights from the original, true and actual inventor of the utility model covered by the letters patent; and, (d) the letters patent was secured by means of fraud or misrepresentation.  In support of her petition for cancellation petitioner further alleged that (a) the utility model covered by the letters patent of respondent had been known or used by others in the Philippines for more than one (1) year before she filed her application for letters patent on 9 December 1979; (b) the products which were produced in accordance with the utility model covered by the letters patent had been in public use or on sale in the Philippines for more than one (1) year before the application for patent therefor was filed.

Petitioner presented the following documents which she correspondingly marked as exhibits: (a) affidavit of petitioner alleging the existence of prior art, marked Exh. “A;” (b) a brochure distributed by Manila Gas Corporation disclosing a pictorial representation of Ransome Burner made by Ransome Torch and Burner Company, USA, marked Exh. “D;” and, (c) a brochure distributed by Esso Gasul or Esso Standard Eastern, Inc., of the Philippines showing a picture of another similar burner with top elevation view and another perspective view of the same burner, marked Exh. “E.”

Testifying for herself petitioner narrated that her husband Ong Bun Tua worked as a helper in the UNITED FOUNDRY where respondent Melecia Madolaria used to be affiliated with from 1965 to 1970; that Ong helped in the casting of an LPG burner which was the same utility model of a burner for which Letters Patent No. UM-4609 was issued, and that after her husband’s separation from the shop she organized Besco Metal Manufacturing (BESCO METAL, for brevity) for the casting of LPG burners one of which had the configuration, form and component parts similar to those being manufactured by UNITED FOUNDRY.   Petitioner presented in evidence an alleged model of an LPG burner marked Exh. “K” and covered by the Letters Patent of respondent, and testified that it was given to her in January 1982 by one of her customers who allegedly acquired it from UNITED FOUNDRY.  Petitioner also presented in evidence her own model of an LPG burner called “Ransome” burner marked Exh. “L,” which was allegedly manufactured in 1974 or 1975 and sold by her in the course of her business operation in the name of BESCO METAL.  Petitioner claimed that this “Ransome” burner (Exh. “L”) had the same configuration and mechanism as that of the model which was patented in favor of private respondent Melecia Madolaria.  Also presented by petitioner was a burner cup of an imported “Ransome” burner marked Exh “M” which was allegedly existing even before the patent application of private respondent.

Petitioner presented two (2) other witnesses, namely, her husband Ong Bun Tua and Fidel Francisco.  Ong testified that he worked as a helper in the UNITED FOUNDRY from 1965 to 1970 where he helped in the casting of LPG burners with the same form, configuration and mechanism as that of the model covered by the Letters Patent issued to private respondent.  Francisco testified that he had been employed with the Manila Gas Corporation from 1930 to 1941 and from 1952 up to 1969 where he retired as supervisor and that Manila Gas Corporation imported “Ransome” burners way back in 1965 which were advertised through brochures to promote their sale.

Private respondent, on the other hand, presented only one witness, Rolando Madolaria, who testified, among others, that he was the General Supervisor of the UNITED FOUNDRY in the foundry, machine and buffing section; that in his early years with the company, UNITED FOUNDRY was engaged in the manufacture of different kinds of gas stoves as well as burners based on sketches and specifications furnished by customers; that the company  manufactured early models of single-piece types of burners where the mouth and throat were not detachable; that in the latter part of 1978 respondent Melecia Madolaria confided in him that complaints were being brought to her attention concerning the early models being manufactured; that he was then instructed by private respondent to cast several experimental models based on revised sketches and specifications; that private respondent again made some innovations; that after a few months, private respondent discovered the solution to all

the defects of the earlier models and, based on her latest sketches and specifications, he was able to cast several models incorporating the additions to the innovations introduced in the models.  Various tests were conducted on the latest model in the presence and under the supervision of Melecia Madolaria  and they obtained perfect results. Rolando Madolaria testified that private respondent decided to file her application for utility model patent in December 1979.

On 7 July 1986 the Director of Patents Cesar C. Sandiego issued Decision No. 86-56 denying the petition for cancellation and holding that the evidence of petitioner was not able to establish convincingly  that the patented utility model of private respondent was anticipated.  Not one of the various pictorial representations of business clearly and convincingly showed that the devices presented by petitioner was identical or substantially identical with the utility model of the respondent.  The decision also stated that even assuming that the brochures depicted clearly each and every element of the patented gas burner device so that the prior art and patented device became identical although in truth they were not, they could not serve as anticipatory bars for the reason that they were undated.  The dates when they were distributed to the public were not indicated and, therefore, were useless prior art references.  The records and evidence also do not support the petitioner’s contention that Letters Patent No. UM-4609 was obtained by means of fraud and/or misrepresentation.  No evidence whatsoever was presented by petitioner to show that the then applicant Melecia Madolaria withheld with intent to deceive material facts which, if disclosed, would have resulted in the refusal by the Philippine Patent Office to issue the Letters Patent under inquiry.

Petitioner elevated the decision of the Director of Patents to the Court of Appeals which on 15 October 1993 affirmed the decision of the Director of Patents.  Hence, this petition for review on certiorari alleging that the Court of Appeals erred (a) in relying on imaginary differences which in actuality did not exist between the model of private respondent covered by Letters Patent No. UM-4609 and the previously known model of Esso Standard Eastern, Inc., and Manila Gas Corporation, making such imaginary differences grounded entirely on speculation, surmises and conjectures; (b) in rendering judgment based on misapprehension of facts; (c) in relying mainly on the testimony of private respondent’s sole witness Rolando Madolaria; and, (d) in not canceling Letters Patent No. UM-4609 in the name of private respondent.

Petitioner submits that the differences cited by the Court of Appeals between the utility model of private respondent and the models of Manila Gas Corporation and Esso Standard Eastern, Inc., are more imaginary than real.  She alleges that based on Exhs. “E,” “E-1,” “F” and “F-1” or the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., presented by petitioner, the cup-shaped burner mouth and threaded hole on the side are shown to be similar to the utility model of private respondent.   The exhibits also show a detachable burner mouth having a plurality of upwardly existing undulations adopted to act as gas passage when the cover is attached to the top of said cup-shaped mouth all of which are the same as those in the patented model.  Petitioner also denies as substantial difference the short cylindrical tube of the burner mouth appearing in the brochures of the burners being sold by Manila Gas Corporation and the long cylindered tube of private respondent’s model of the gas burner. 

Petitioner argues that the actual demonstration made during the hearing disclosed the similarities in form, operation and mechanism and parts between  the utility model of private respondent and those depicted in the brochures.  The findings of the Patent Office and the Court of Appeals that the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., are undated cannot overcome the fact of their circulation before private respondent filed her application for utility model patent.  Petitioner thus asks this Court to take judicial notice of the fact that Esso Standard Eastern, Inc., disappeared before 1979 and reappeared only during the Martial Law years as Petrophil Corporation. Petitioner also emphasizes that the brochures indicated the telephone number of Manila Gas Corporation as 5-79-81 which is a five (5) numbered telephone number existing before 1975 because telephones in Metro Manila started to have six (6) numbers only after that year.

Petitioner further contends that the utility model of private respondent is absolutely similar to the LPG burner being sold by petitioner in 1975 and 1976, and also to the “Ransome” burner depicted in the old brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., fabricated by Ransome Torch and Burner Company of Oakland, California, USA, especially when considered through actual physical examination, assembly and disassembly of the models of petitioner and private respondent.  Petitioner faults the Court of Appeals for disregarding the testimonies of Ong Bun Tua and Fidel Francisco for their failure to produce documents on the alleged importation by Manila Gas Corporation of “Ransome” burners in 1965 which had the same configuration, form and mechanism as that of the private respondent’s patented model.

Finally, it is argued that the testimony of private respondent’s lone witness Rolando Madolaria should not have been given weight by the Patent Office and the Court of Appeals because it contained mere after-thoughts and pretensions. 

We cannot sustain petitioner.  Section 7 of RA No. 165, as amended, which is the law on patents, expressly provides -

Sec. 7.  Inventions patentable.  Any invention of a new and useful machine, manufactured product or substance, process or an improvement of any of the foregoing, shall be patentable. 

Further, Sec. 55 of the same law provides -

Sec. 55.  Design patents and patents for utility models. - (a) Any new, original and ornamental design for an article of manufacture and (b) any new model of implements or tools or of any industrial product or of part of the same,

which does not possess the quality of invention, but which is of practical utility by reason of its form, configuration, construction or composition, may be protected by the author thereof, the former by a patent for a design and the latter by a patent for a utility model, in the same manner and subject to the same provisions and requirements as relate to patents for inventions insofar as they are applicable except as otherwise herein provided.

The element of novelty is an essential requisite of the patentability of an invention or discovery.  If a device or process has been known or used by others prior to its invention or discovery by the applicant, an application for a patent therefor should be denied; and if the application has been granted, the court, in a judicial proceeding in which the validity of the patent is drawn in question, will hold it void and ineffective.[2] It has been repeatedly held that an invention must possess the essential elements of novelty, originality and precedence, and for the patentee to be entitled to the protection the invention must be new to the world.[3]

In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an “LPG Burner” on 22 July 1981, the Philippine Patent Office found her invention novel and patentable.  The issuance of such patent creates a presumption which yields only to clear and cogent evidence that the patentee was the original and first inventor.  The burden of proving want of novelty is on him who avers it and the burden is a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt. [4] Hence, a utility model shall not be considered “new” if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country.[5]

As found by  the Director of Patents, the standard of evidence sufficient to overcome the presumption of legality of the issuance of UM-4609 to respondent Madolaria was not legally met by petitioner in her action for the cancellation of the patent.  Thus the Director of Patents explained his reasons for the denial of the petition to cancel private respondent’s patent -

Scrutiny of Exhs. “D” and “E” readily reveals that the utility model (LPG Burner) is not anticipated.  Not one of the various pictorial representations of burners clearly and convincingly show that the device presented therein is identical or substantially identical in construction with the aforesaid utility model.  It is relevant and material to state that in determining whether novelty or newness is negatived by any prior art, only one item of the prior art may be used at a time.  For anticipation to occur, the prior art must show that each element is found either expressly or described or under principles of inherency in a single prior art reference or that the claimed invention was probably known in a single prior art device or practice.  (Kalman v. Kimberly Clark, 218 USPQ 781, 789)

Even assuming gratia arguendi  that the aforesaid brochures do depict clearly on all fours each and every element of the patented gas burner device so that the prior art and the said patented device become identical, although in truth they are not, they cannot serve as anticipatory bars for the reason that they are undated.  The dates when they were distributed to the public were not indicated and, therefore, they are useless prior art references.

xxxx

Furthermore, and more significantly, the model marked Exh. “K” does not show whether or not it was manufactured and/or cast before the application for the issuance of patent for the LPG burner was filed by Melecia Madolaria.

With respect to Exh. “L,” petitioner claimed it to be her own model of LPG burner allegedly manufactured sometime in 1974 or 1975 and sold by her in the course of her business operation in the name of Besco Metal Manufacturing, which burner was denominated as “Ransome” burner

xxxx

But a careful examination of Exh. “L” would show that it does not bear the word “Ransome” which is the burner referred to as the product being sold by the Petitioner.  This is not the way to prove that Exh. “L” anticipates Letters Patent No. UM-4609 through Exhs. “C” and “D.”  Another factor working against the Petitioner’s claims is that an examination of Exh. “L” would disclose that there is no indication of the time or date it was manufactured.  This Office, thus has no way of determining whether Exh. “L” was really manufactured before the filing of the aforesaid application which matured into Letters Patent No. UM-4609, subject matter of the cancellation proceeding.

At this juncture, it is worthwhile to point out that petitioner also presented Exh. “M” which is the alleged burner cup of an imported “Ransome” burner.  Again, this Office finds the same as unreliable evidence to show anticipation.  It observed that there is no date indicated therein as to when it was manufactured and/or imported before the filing of the application for issuance of patent of the subject utility model.  What is more, some component parts of Exh.  “M” are missing, as only the cup was presented so that the same could not be compared to the utility model (subject matter of this case) which consists of several other detachable parts in combination to form the complete LPG burner.

xxxx

It must likewise be pointed out that Ong Bun Tua testified on the brochures allegedly of Manila Gas and of Esso Gasul marked Exhs. “E” and “F” and on the alleged fact that Manila Gas Corporation was importing from the United States “Ransome” burners.  But the same could not be given credence since he himself admitted during

cross- examination that he has never been connected with Manila Gas Corporation.  He could not even present any importation papers relating to the alleged imported ransome burners.  Neither did his wife.[6]

The above findings and conclusions of the Director of Patent were reiterated and affirmed by the Court of Appeals.[7]

The validity of the patent issued by the Philippine Patent Office in favor of private respondent and the question over the inventiveness, novelty and usefulness of the improved model of the LPG burner are matters which are better determined by the Patent Office.  The technical staff of the Philippine Patent Office composed of experts in their field has by the issuance of the patent in question accepted private respondent’s model of gas burner as a discovery.  There is a presumption that the Office has correctly determined the patentability of the model[8] and such action must not be interfered with in the absence of competent evidence to the contrary. 

The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by substantial evidence.  Petitioner has failed to show compelling grounds for a reversal of the findings and conclusions of the Patent Office and the Court of Appeals.

The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the petition.  Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral testimony to show anticipation is open to suspicion and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient.[9]

Finally, petitioner would want this Court to review all over again the evidence she presented before the Patent Office.  She argues that contrary to the decision of the Patent Office and the Court of Appeals, the evidence she presented clearly proves that the patented model of private respondent is no longer new and, therefore, fraud attended the acquisition of patent by private respondent.

It has been held that the question on priority of invention is one of fact.  Novelty and utility are likewise questions of fact.  The validity of patent is decided on the basis of factual inquiries.  Whether evidence presented comes within the scope of prior art is a factual issue to be resolved by the Patent Office.[10] There is question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevance of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation.[11]

Time and again we have held that it is not the function of the Supreme Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower tribunal or office.  The Supreme Court is not a trier of facts.  Its jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, its findings of fact being conclusive and not reviewable by this Court.

WHEREFORE, the Petition is DENIED.  The Decision of the Court of Appeals affirming that of the Philippine Patent Office is AFFIRMED. Costs against petitioner.

SO ORDERED.

Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. L-24919 January 28, 1980

JAMES HOWARD BOOTHE and JOHN MORTON, II, petitioners, vs.THE DIRECTOR OF PATENTS, respondent.

Picazo & Agcaoili for petition.

Office of the Solicitor General for respondent.

 

MELENCIO-HERRERA, J.:

Sought to be reviewed herein is the Decision of the Director of Patents, dated December 9, 1964, denying priority rights under section 15 of our Patent Law (Republic Act No. 165) to petitioners, as foreign applicants for Letters Patent, for their invention of "Chemotherapeutic Materials and Methods of Preparing the same.

Petitioners James Howard Boothe and John Morton II, chemists, citizens and residents of the United States, claim to be the inventors of a new antibiotic designated as "tetracycline", a new derivative of chlortetracycline (popularly known as "aureomycin")

On February 19, 1954, petitioners applied for Letters Patent covering said invention to respondent Director of Patents claiming the right of priority granted to foreign applicants under section 15 of the Patent Law (RA 165). Receipt of petitioners' application was acknowledged by respondent Director on March 6, 1954.

On April 14, 1954, petitioners filed with respondent Director a legalized copy of their Application for Letters Patent in the United States for the same invention (U.S. Serial No. 342556). Said legalized copy indicated that the application in the United States was filed on March 16, 1963. 1 This latter date is of crucial importance to petitioners' cause under section 15 of the Patent Law, which provides that:

Section 15. Application previously filed abroad. — An application for patent for an invention filed in this country by any person who has previously regularly filed an application for a patent for the same invention in a foreign country, which by treaty, convention or law affords similar privileges to citizens of the Philippines, shall have the same force and effect as the same application would have if filed in this country on the date on which the application for patent for the same invention was first filed in such foreign country: Provided, That the application in this country is filed within twelve months from the earliest date on which such foreign application was filed and a certified copy of the foreign application together with a translation thereof into English, if not in the English language, is filed within six months from the date of filing in the Philippines, unless the Director for good cause shown shall extend the time for filing such certified copy: And provided, further, that no patent shall be granted on an application for patent for an invention which had been patented or described in a printed publication in this or any foreign country more than one year before the date of the actual filing of the application in this country, or which had been in public use or sale in this country for more than one year prior to such filing.

Under the foregoing provision, petitioners would be entitled to the priority date of March 16, 1953 if their application is considered filed in the Philippines as of March 5, 1954, since the latter date would fall within the one-year period prior to March 5, 1954.

On February 7, 1958, petitioners informed respondent Director that in interference proceedings in the United States, Letters Patent for a similar invention as theirs was awarded to Pfizer and Co., which had filed its application ahead and that they failed to obtain any U.S. patent for their own invention. Petitioners, however, observed and requested:

In the Philippines, however, the situation is at least the reverse. Pfizer and Co. did not file or else filed an application after the above application has already been filed. The said above application therefore is good and valid.

We request, therefore, that the present application be granted on the basis of the claims originally filed. 2

On August 5, 1959, in Paper No. 6, 3 Patent Examiner, Lydia Nueva España, rejected all of petitioners' claims in view of "Philippine Patent No. 254 — November 29, 1956", apparently referring to a local Patent obtained by Pfizer and Co., presumably covering the same invention. Additionally, petitioners were advised that the "Specification" they had submitted was "incomplete" and that responsive action should be filed them four months from date of mailing, which was also August 5, 1959. Paper No. 6 precipitated a series of communications between the aforementioned Patent Examiner and petitioners, who apparently failed to meet the deadline of four months for filing their responsive action.

On October 9, 1961, petitioners requested for clarification of Paper No. 6, particularly as to why their Specification was considered incomplete.

In response, Supervising Patent Examiner Nelia de Castro informed petitioners as follows:

With respect to applicant's request for clarification as to the meaning of the second to the last sentence contained in Paper 6, attention is called to the fact that the specification which was originally filed is incomplete and not in accordance with Rule 62 of the Revised Rules. Said specification ends on Page 9 with the incomplete sentence "The refractive indices of this crystalline phase were found —

It appears from further from a comparison between the submitted 9 pages of the specification and 2 pages of the claims on one hand and the corresponding pages of the legalized copy of the U.S. application on the other that the present application does not correspond with the said certified copy of the U.S. Application. The present application cannot therefore be granted priority date under section 15 are requested by applicant. 4

On July 3, 1962, petitioners submitted two complete copies of the Specification, which included nine additional pages, and reiterated their request for priority right in the Philippines. 5

On October 2, 1962, Chief Patent Examiner Nicanor Mapili issued Paper No. 20 rejecting the additional nine pages of Specification submitted by petitioners, and ruling:

xxx xxx xxx

The filing of the alleged complete copy Of the specification is an attempt to effect a remedy to the previous finding of incompleteness as stated in the 2nd to the last paragraph of Office Action mailed Aug. 5, 1959, marked Paper 6. This cannot be allowed inasmuch as 9 pages of new matter are actually proposed to be added to the specification.

This action is made final for purpose of appeal 6

Petitioners moved for reconsideration on the ground that their application falls under the exception provided for in Rule 47 of the Revised Rules of Practice in Patent Cases in that the missing nine pages submitted by them are not really new matter but a mere "minor informality."

On February 5, 1963, Chief Patent Examiner Mapili issued Paper No. 22 denying petitioners' Motion for Reconsideration and the findings of Examiner de Castro as follows:

The basis of the examiner's finding is applicant's verification on file, exclusive of what is in an alleged corresponding application in the US as evidenced by a certified copy of record. The only use of such certified a copy is to give proof to an earlier filing date as provided for such section 15 of the Patent Law and to use the inventors' oath therein to complete the form requirements relative to his application in a dance with the provisions of section 13(3) of the same law.

The provisions of section 15 of the Patent Law, under which the present application was filed, provides for a for filing. This deadline cannot be extended directly or indirectly by the filing of an imperfect application which can be freely amended or rectified at a later date. If this can be done legally, the restrictive provisions of section 15 will be nullified. 7

Adversely affected, petitioners appealed to dent Director of Patents.

In their Brief filed with respondent Directors petitioners prayed for 1) revocation of the of the Chief Patent Examiner, 8 2) admission of their Specification submitted on July 3, 1962; and 3) allowance of their application on the merits.

On December 9, 1964, respondent Director rendered the questioned Decision, the dispositive portion of which reads:

WHEREFORE, the appeal is hereby sustained. The additional pages to the specification are hereby admitted, but the application shall not be extended priority rights under

section 15 of the Patent Law. Let the filing date of this application be changed from March 5, 1954 to April 14, 1954. The application is hereby remanded to the Chief Patent Examiner for proper action and for further examination on the merits. 9

In reaching the foregoing conclusion, respondent Director opined that the portions subsequently supplied in the local application are not new matter a comparison between the foreign and local applications showed that the foreign application included the missing portions of the local one. However, respondent Direct qualified that petitioners' application may be considered complete only on April 14, 1954 when the certified copy of the foreign application was submitted. Consequently, the instant application is to be considered an ordinary application, not entitled to the right of priority granted by section 15 of the Patent Law, inasmuch as said application was not complete within the meaning of Rules 47 and 48 of the Revised Rules of Practice in Patent Case when first filed on March 5, 1954.

Petitioners filed a Motion for Partial Reconsideration of the above-mentioned Decision questioning that portion of respondent Director's ruling barring them from entitlement to the right of priority under section 15 of the Patent Law contending that their appeal centered merely on the issue of whether or not the additional nine pages of Specification they had submitted should be treated as new matter.

On June 10, 1965, respondent Director denied reconsideration for lack of merit, and explained:

... It should be emphasized that under Rule 262 (b) of the Revised Rules of Practice in Patent Cases, it is stated that should the Director have any knowledge of any ground not involved in the appeal for rejecting any claim, he may include in his decision a statement to that effect with his reasons for so holding, which statement shall constitute a rejection of the claim. Priority claims are covered by the rule: 10

On June 11, 1965, petitioners filed a Second Motion for reconsideration on the ground that priority rights are governed by convention and treaty, while invention claims are governed exclusively by the Statute and Rules of Practice. Respondent Director denied that Motion for lack of merit on August 24, 1965.

Hence, this recourse.

On January 9, 1967, we deemed the case submitted for decision, after petitioners had filed their Brief on February 12, 1966, and respondent Director, through the Solicitor General, his Brief on June 9, 1966.

On June 9, 1968, Republic Act No. 5434 was enacted providing that final Orders and Decisions of the Director of Patents in ex parte and inter partes proceedings are appealable to the Court of Appeals. Since no provision for retroactivity exists in said Act this Tribunal has resolved to retain jurisdiction over this case.

Petitioners maintain before this Court that:

RESPONDENT DIRECTOR OF PATENTS ERRED IN HOLDING THAT PETITIONERS' APPLICATION, SERIAL NO. 952, MAY NOT BE TREATED AS FILED UNDER SECTION 15 AS AMENDED, OF REPUBLIC ACT NO. 165 KNOWN AS THE PATENT LAW.

and in support thereof stress that:

1) The Director had no jurisdiction to decide the question of whether or not the Philippine Application should be treated as filed under Section 15 of the Act;

2) The Director had no jurisdiction to decide the question of whether or not the Philippine Application was incomplete under Rules 47 and 48 of the Revised Rules of Practice in Patent Cases;

3) The Director misconstrued and misapplied Rules 47 and 48 of the Rules;

4) The Director misconstrued and misapplied Rule 262 (b) of the Rules.

For resolution, therefore, are the following issues: the scope of the powers of the Director of Patents in cases appealed to him and the correctness of his application of Rules 47, 48 and 262(b) of the Revised Rules of Practice in Patent Cases.

The facts unfolded call for an affirmance of respondent Director's rulings.

Explicit in Rule 262 of the Revised Rules of Practice in Patent Cases is the power and authority of respondent Director to decide petitioners' appeal in the manner that he did, and we quote:

262. Decision by the Director. — (a) The Director, in his decision, may affirm or reverse the decision of the Principal Examiner in whole or in part on the ground and on the claims

specified by the Examiner. The affirmance of the rejection of a claim on any of the grounds specified constitutes a general affirmance of the decision of the Principal Examiner on that claim, except as to any ground specifically reversed.

(b) Should the Director have knowledge of any grounds not involved in the appeal for rejecting any claim he may include in his decision a statement to that effect with his reasons for so holding which statement shall constitute a rejection of the claims. ...

In other words, respondent Director is empowered to consider grounds which may have come to his knowledge other than those specifically raised in an appeal He need not confine himself only to issues invoked. Besides, the question of new matter is inextricably linked with the right of priority on which petitioners have anchored their application. As early as Paper No. 18, supra, the Supervising Patent Examiner had concluded that inasmuch as the submitted pages did not correspond with the certified copy of the U.S. application, "the present application cannot therefore be granted priority date under section 16 as requested by applicant." Again, in Paper No. 22,supra, the Chief Patent Examiner made mention of petitioner' imperfect application and the fact that the deadline for filinf required by section 15 of the Patent Law cannot be extended directly or indirectly otherwise "the restrictive provisions of section 15 will be nullified."

It is also far-fetched for petitioners to claim that in ruling on petitioners' right of priority, respondent Director had contravened Rule 254 of the Revised Rules of Practice in Patent cases, which provides that the Director of Patents exercises no direct control, direction and supervision over the Principal Examiner and the Executive Examiner. What respondent Director exercised was his authority to review the decisions of Patent Examiners, as explicitly provided for in the last paragraph of the same Rules 254, as follows:

xxx xxx xxx

The only supervision which the Director of Patent may lawfully exercise over the Principal Examiners and the Executive Examiner is a general supervision, exercised through a review of the recommendations they may make for the grant of a patent, and through a review of their decision by petition and appeal.

Similarly untenable is petitioners' contention that respondent Director had misconstrued and misapplied Rules 47 and 48 of the Revised Rules of Practice in Patent Cases. The said Rules provide:

47. Application accepted and filed for examination only w hen complete — An application for an invention patent will not be accepted and placed upon the files for examination until all its required parts, complying with the rules relating thereto are received except that 'certain minor informalities may be waived subject to subsequent correction, whenever required.

If the papers and parts are incomplete, or so defective that they cannot be accepted as a complete application for examination, the applicant will be notified; the papers will be held four months for completion and if not by then completed, will be stored as an abandoned incomplete application and eventually destroyed or otherwise disposed of.

48. Serial number and filing date of application — Complete applications are numbered in regular order, and the applicant win be informed of the serial number and filing date of the application by a filing receipt. The filing date of the applicant is the, date on which the complete application, acceptable for placing on the files for examination, is received in the Patent Office; or the date on which the last part completing such application is received, in the case of an incomplete or defective application completed within four months. The Executive Examiner shall be in charge of fixing the filing date and serial number of an application.

Under the aforecited provisions, it is imperative that the application be complete in order that it may be accepted. It is essential to the validity of Letters Patent that the specifications be full, definite, and specific. 11 The purpose of requiring a definite and accurate description of the process is to apprise the public of what the patentee claims as his invention, to inform the Courts as to what they are called upon to construe, and to convey to competing manufacturers and dealers information of exactly what they are bound to avoid. 12

The specification which petitioners submitted on March 5, 1954 was far from complete. That defect was one of substance and not merely one of form. What petitioners claimed as their invention was not completely determinable therefrom. Petitioners' application could be deemed as complete only on July 2, 1963 when they submitted the additional pages on the Specifications and Claims. Respondent Director, therefore, did not err in converting petitioners' application into an ordinary application filed on April 14, 1954, not only for their having failed to complete their application within the four-month period provided for by Rules 47 and 48, Revised Rules of Practice in Patent Cases, and as required of them by Paper No. 6, but also for their having failed to file a complete application within twelve months from March 16, 1953, the date of the foreign application For, to be entitled to the filing date of the patent application, an

invention disclosed in a previously filed application must be described within the instant application in such a manner as to enable one skilled in the art to use the same for a legally adequate utility. 13

All told, we sustain respondent Director's findings in the absence of error or abuse of power or lack of jurisdiction or grave abuse of discretion. 14 We have held that in the absence of arbitrariness, and provided they are supported by substantial evidence, as in this case, the conclusions reached by the Director of Patents are to be accorded respect and must be upheld. 15

WHEREFORE, we hereby affirm the Decision of respondent Director of Patents dated December 9, 1964.

SO ORDERED.

Teehankee (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. L-24112 July 23, 1974

ONG SHIAO KONG and CU WU KIAM, petitioners, vs.THE DIRECTOR OF PATENTS and PESSUMAL TOLARAM, respondents.

C.M. Diokno for petitioners. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro and Solicitor Celso P. Ylagan for respondent Director of Patents. Rafael R. Lasam for private respondent.

 

CASTRO, J.:

The petitioners Ong Shiao Kong and Cu Wu Kiam (hereinafter referred to as the petitioners) seek a reversal of the decision of the Director of Patents in Inter Partes Case No. 248 cancelling letters patent No. UM-135 issued in their favor. They contend (1) that a hearing officer of the Philippines Patent Office has no authority (a) to hear cases filed with that office, (b) to compel the petitioners to testify as adverse witnesses, and (c) to receive evidence on a matter not raised. in the respondent's petition for cancellation of the letters patent issued to the petitioners; (2) that Cu Wu Kiam, contrary to the findings of the Director of Patents, is a co-maker of the utility model (water heater) in dispute, and that even if he were not, this fact is not sufficient to warrant the cancellation of the letters patent; and (3) that the evidence does not support the conclusion that the utility model of the respondent Pessumal Tolaram (hereinafter referred to as the respondent) "dominates" that of the petitioners.

It appears that on November 20, 1961 the respondent filed a petition for cancellation of letters patent UM-135 issued by the Philippines Patent Office to the petitioners for a "flash water heater" upon the ground, among others, that the respondent's previously patented utility model (UM-66) of an "instant water heater" is substantially similar to that of the petitioners. At the hearing held below, the hearing officer, over the objection of the petitioners, ruled that the latter may be utilized by the respondent as adverse witnesses. The subsequent testimony of the petitioners disclosed that Cu Wu Kiam, contrary to what was stated in their patent application, was merely a financier, not a co-maker, of the article for which the petitioners sought and were able to obtain letters patent.

On February 11, 1964, the director of Patents rendered a decision cancelling UM-135 on the ground that "under the great weight of (American) case law, if several persons obtained a joint patent for what was invented solely by one of them, that patent is void." On January 18, 1965 the Director of Patents amended his decision by holding further that the Ong-Cu model embodied the novel features of the respondent's model "in so far as it concerns the construction and arrangement of the electrodes or steel plates" through which water is heated, and that consequently the respondent has the right to exclude others from making, using and vending a water heater embodying his novel construction. On February 4, 1965 the petitioners filed the present petition for review. Thereafter the Court gave due course to the petition, and issued a writ of preliminary injunction enjoining the Director of Patents from enforcing his decision pending appeal.

On March 24, 1966 the case was submitted for decision.

On June 17, 1974 we required the parties to show cause why the instant petition should not be dismissed for being moot and academic due to the expiration of the respective terminal periods prescribed for the allegedly conflicting letters patent by section 58 of R.A. 165, as amended, which recites:

Sec. 58. Term and extension thereof. — The term of the design patent and of the patent for a utility model shall be five years from the date of the grant thereof.

Before the expiration of the five-year term, upon payment of the required fee, or within a further time thereafter not to exceed six months upon payment of the surcharge, the owner of the design patent or of a patent for a utility model may apply for an extension for an additional five years. The application for extension must be accompanied by an affidavit showing that the design or the model is in commercial or industrial use in the Philippines or satisfactorily explaining non-use. In a similar manner an extension for a third five-year period may be obtained.

We also required the Director of Patents to submit a certification on the current, status of the letters patent in question. In compliance, the Director of Patents certified the following:

(a) Letters Patent No. UM-66 issued on September 24, 1959 to Pessumal Tolaram for 'instant water heater' has EXPIRED on September 24, 1969 for failure of the Patentee to file an application for extension for additional five (5) years, six (6) months before September 24, 1969 or three (3) months after the said date, and

(b) Letters Patent No. UM-135 issued on July 6, 1964 to Ong Shiao Kong and Cu Wu Kiam for 'flash water heater' has also EXPIRED on July 6, 1969 for failure to file an application for extension for additional five (5) years, six months before July 6, 1969 or three months after the said date, as required by Section 58 of Republic Act 165, as amended.

The respondent has manifested agreement that the present petition should be dismissed. The petitioners have failed to file any manifestation within the period of time given to them.

It being clear from the foregoing certification of the Director of Patents that the respective lifetime periods of the allegedly conflicting letters patent of the petitioners and the respondent have already expired, and that neither the respondent nor the petitioners have applied for extension of their respective letters patent, the Court is of the view that a resolution of the issues raised by the instant petition would serve no useful purpose and this case should now be declared moot.

ACCORDINGLY, the instant petition is dismissed, and the writ of preliminary injunction heretofore issued is hereby dissolved. No costs.

Makalintal, C.J., Teehankee, Makasiar, Esguerra and Muñoz Palma, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-38010         December 21, 1933

PATRICK HENRY FRANK and WILLIAM HENRY GOHN, plaintiffs-appellants, vs.G. KOSUYAMA, defendant-appellee.

J.W. Ferrier for appellants.Pablo Lorenzo for appellee.

 

IMPERIAL, J.:

Patent No. 1519579 (Exhibit 117) on improvement in hemp stripping machines, issued by the United States Patent Office on December 16,1924, and registered in the Bureau of Commerce and Industry of the Philippine Islands on March 17,1925, was the origin of this action brought by the plaintiffs herein who prayed that the judgment be rendered against the defendant, ordering him thereby to refrain immediately from the manufacture and sale of machines similar to the one covered by the patent: to render an accounting of the profits realized from the manufacture and sale of the machines in question; that in case of refusal or failure to render such accounting, the defendants be ordered to pay the plaintiffs the sum of P60 as profit on each machine manufactured or sold by him; that upon approval of the required bond, said defendant be restrained from continuing the manufacture and sale of the same kind of machines; that after the trial the preliminary injunction issued therein be declared permanent and, lastly, that the said defendant be sentenced to pay the costs and whatever damages the plaintiffs might be able to prove therein. The action therefore was based upon alleged infringement by the defendant of the rights and privileges acquired by the plaintiffs over the aforesaid patent through the manufacture and sale by the former of machines similar to that covered by the aforesaid patent.

The plaintiffs appealed from the judgment rendered by the trial court dismissing their complaint, with cost, as well as the defendant's counterclaim of P10,000. The defendant did not appeal.

In their amended complaint, the plaintiff alleged that their hemp stripping machines, for which they obtained a patent, have the following characteristics: "A stripping head, a horizontal table, a stripping knife supported upon such table, a tappering spindle, a rest holder adjustably secured on the table portion, a lever and means of compelling the knife to close upon the table, a pallet or rest in the bottom of the table, a resilient cushion under such palletor rest." In spite of the fact that they filed an amended complaint from which the "spindle" or conical drum, which was the only characteristic feature of the machine mentioned in the original complaint, was eliminated, the plaintiffs insisted that the said part constitutes the essential difference between the machine in question and other machines and that it was the principal consideration upon which their patent was issued. The said plaintiffs sustained their contention on this point even in their printed brief and memorandum filed in this appeal.

During the trial, both parties presented voluminous evidence from which the trial court arrived at the following conclusions:

In constructing their machine the plaintiffs did nothing but improve, to a certain degree, those that were already in vogue and in actual us in hemp producing provinces. It cannot be said that they have invented the "spindle" inasmuch as this was already known since the year 1909 or 1910. Neither it can be said that they have invented the stripping knife and the contrivance which controls the movement and pressure thereof on the ground that stripping knives together with their control sets were already in actual use in the different stripping machines long before their machine appeared. Neither can it be said that they invented the fly wheel because that part or piece thereof, so essential in every machine from time immemorial, was already known and actually employed in hemp stripping machines such as those of Riesgo (Exhibit 4-A), Crumb (Exhibit 1-A), Icsiar (Exhibit A-Suzara), Browne (Exhibit 28-A), McFie, etc., all of which were in use for the benefit of hemp long before the appearance of the plaintiffs' machines in the market. Much less can it be said that they invented the pedal to raise the knife in order to allow the hemp to be stripped to pass under it, on the ground that the use of such contrivance has, likewise, been known since the invention of the most primitive of hemp stripping machines.

On the other hand, although the plaintiffs alleged in their original complaint that "the principal and important feature of said machine is a spindle upon which the hemp to be stripped is wound in the

process of stripping," nevertheless, in their amended complaint of March 3, 1928, which was filed after a portion of the evidence therein had already been submitted and it was known that the use of the spindle was nothing new, they still made the allegations appearing in paragraph 3 of their said amended complaint and reproduced on pages 2,3,4 and 5 hereof, copying the same from the application which they filed with the United States Patent Office, under which they obtained their patent in question. The aforesaid application clearly shows that what they applied for was not a patent for a "pioneer or primary invention" but only for some "new and useful improvement in hemp stripping machines."

We have carefully reviewed the evidence presented and have had the opportunity of ascertaining the truth of the conclusions above stated. We agree with the trial court that, strictly speaking, the hemp stripping machine of the plaintiffs does not constitute an invention on the ground that it lacks the elements of novelty, originality and precedence (48 C.J., sec. 101, p. 97, and 102, p. 98). In fact, before the plaintiffs herein obtained their patent, they themselves had already publicly used the same kind of machine for some months, at least, and, various other machines, having in general, the same characteristics and important parts as that of the said plaintiffs, were known in the Province of Davao. Machines known as Molo, Riesgo, Crumb, Icsiar, Browne and McFie were already known in that locality and used by the owners of hemp plantations before the machine of the plaintiffs came into existence. It may also be noted that Adrian de Icsiar applied for a patent on an invention which resulted in the rejection by the United States Patent Office of the plaintiffs' original application for a patent on the so called "spindle" or conical drum which was then in actual use in the Dringman and Icsiar hemp stripping machines.

Notwithstanding the foregoing facts, the trial court did not decree the annulment of the plaintiffs' patent and the herein defendant-appellee insists that the patent in question should be declared null and void. We are of the opinion that it would be improper and untimely to render a similar judgment, in view of the nature of the action brought by the plaintiffs and in the absence of a cross-complaint to that effect. For the purposes of this appeal, suffice it to hold that the defendant is not civilly liable for alleged infringement of the patent in question.

In the light of sound logic, the plaintiffs cannot insist that the "spindle" was a patented invention on the ground that said part of the machine was voluntarily omitted by them from their application, as evidenced by the photographic copy thereof (Exhibit 41) wherein it likewise appears that the patent on Improved Hemp Stripping Machines was issued minus the "spindle" in question. Were we to stress to this part of the machine, we would be giving the patent obtained by the plaintiffs a wider range than it actually has, which is contrary to the principles of interpretation in matters relating to patents.

In support of their claim the plaintiffs invoke the doctrine laid down by this court in the case of Frank and Gohn vs.Benito (51 Phil., 712), wherein it was held that the therein defendant really infringed upon the patent of the therein plaintiffs. It may be noted that the plaintiffs in the former and those of the latter case are the same and that the patent then involved is the very same one upon which the present action of the plaintiffs is based. The above-cited case, however, cannot be invoked as a precedent to justify a judgment in favor of the plaintiffs-appellants on the ground that the facts in one case entirely different from those in the other. In the former case the defendant did not set up the same special defenses as those alleged by the herein defendant in his answer and the plaintiffs therein confined themselves to presenting the patent, or rather a copy thereof, wherein the "spindle" was mentioned, and this court took for granted their claim that it was one of the essential characteristics thereof which was imitated or copied by the then defendant. Thus it came to pass that the "spindle" in question was insistently mentioned in the decision rendered on appeal as the essential part of the plaintiffs' machine allegedly imitated by the then defendant. In the case under consideration, it is obvious that the "spindle" is not an integral part of the machine patented by the plaintiffs on the ground that it was eliminated from their patent inasmuch as it was expressly excluded in their application, as evidenced by the aforesaid Exhibit 41.

Wherefore, reiterating that the defendant cannot be held civilly liable for alleged infringement of the patent upon which the present action is based on the ground that there is no essential part of the machine manufactured and sold by him, which was unknown to the public in the Province of Davao at the time the plaintiffs applied for and obtained their patent for improved hemp stripping machines, the judgment appealed from is hereby affirmed, with the costs against the plaintiffs-appellants. So ordered.

Avanceña, C.J., Malcolm, Villa-Real, and Hull, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-20354             July 28, 1969

GERARDO SAMSON, JR., petitioner, vs.FELIPE TARROZA and DIRECTOR OF PATENTS, respondents.

Hermenegildo V. Lopez for petitioner.Isaac S. Puno, Jr. for respondent Felipe Tarroza.Office of the Solicitor General for respondent Director of Patents.

FERNANDO, J.:

          With the statutory recognition of patentability based on the "practical utility" concept 1 thus rendering clear that a patent is not solely to be earned under the "flash of genius" theory, 2 this petition for the cancellation of a utility model patent for a Side Tilting-Dumping Wheelbarrow granted to respondent Felipe A. Tarroza was correctly denied by respondent Director of Patents. Petitioner Gerardo Samson, Jr., himself the grantee of a utility model patent for a Dumping and Detachable Wheelbarrow, lacked any legal justification for such a plea. So respondent Director ruled. Not satisfied, petitioner elevated the matter to us for review. There is no reason why a different outcome is to be expected. His appeal must fail.

          Petitioner was, on May 22, 1958, awarded Utility Model Patent No. 27 for the above type of wheelbarrow which, as noted in the decision, "consists of a wheeled carriage base and an upper pivoted and detachable carrying tray. The carriage base is comprised of a wheel and two equal lengths of continuous pipes bent to provide wheel forks at the front and at the rear to support the back portion of the tray, with the ends of the pipes being adopted as the carrying handles for the wheelbarrow. The two pipes thus bent are joined together by cross braces in the front and at the rear. The tray is removably pivoted at its front end through hook catches at its bottom corners, to the forward cross brace, and its rear end rests solidly over the rear portion of the legs. To dump the load the user pulls a dumping handle at the back end to cause the tray to pivot upwardly about the front brace to a position of about 45 degrees with the horizontal and with its front end panel being supported by the wheel." 3

          Respondent's Side Tilting-Dumping Wheelbarrow, on the other hand, consists "of a wheeled carriage made of tubular frames essentially as in petitioner's. Welded transversely to the parallel frames are two brackets provided with holes designed to complement similar holes on brackets provided on the tray. The brackets on the tray are so placed that with the provision of a bolt through the openings the tray may be tilted approximately 170 degrees to the left or to the right of the wheelbarrow with its axis running longitudinally through the center of the bottom face of the tray." 4

          There is an express recognition under the Patent Law, as already noted, that any new model of implements or tools or of any industrial product even if not possessed of the quality of invention but which is of "practical utility" is entitled to a "patent for a utility model." From the above description of the side tilting-dumping wheelbarrow, the product of respondent's ingenuity and industry, it is quite apparent that it has a place in the market and possesses what the statute refers to as "practical utility." The requirement explicitly set forth in the statute has thus been met. Respondent Tarroza is entitled to its benefits. The grant to him of a patent for a utility model is in accordance with law. There was no reason, therefore, for its cancellation. So it was held by the Director of Patents. That decision as already noted should stand.

          Moreover, in appeals from a decision of the Director of Patents, only questions of law may be reviewed, findings of facts being conclusive unless unsupported by substantial evidence. So it was decided in Che v. Philippines Patent Office. 5 As was emphasized in Bagano v. Director of Patents: "It is almost trite to state here that in cases of the nature as the one at bar, only questions of law are to be raised in order that this Court could exercise its appellate jurisdiction and review the decision." 6 The above well-settled doctrines suffice to demonstrate that this petition for review, as noted at the outset, is without merit. It was not error then, to reiterate, for the respondent Director of Patents to deny the cancellation of the utility patent granted respondent Tarroza. To borrow from the language of the Che opinion: "Even on the sole issue alone, the petition for review must fail."

          Another alleged error was imputed to respondent Director of Patents. It would find fault with his failing to hold that respondent Tarroza "was not the true and actual" author of the mechanical contrivance for which he was granted a utility model patent. This is what the appealed decision has to say on this point: "Petitioner's theory with respect to the second ground for cancellation, to wit: that respondent is not the true and actual inventor or designer of the utility model is premised on the fact that because of the proximity of the two, the petitioner and the respondent being brothers-in-law, and living in adjoining residential lots, the latter has had ample time and opportunity to observe and copy the former's wheelbarrow. But the testimonial evidence thus presented is not clear, satisfactory, and free from doubt,

in the face of allegations to the contrary by the respondent." 7 The futility of such an assignment of error is thus apparent. Again, it is factual in character. It is not for us, as noted above, to review or revise the same, there being no showing of a lack of substantial evidence in support thereof.

          WHEREFORE, the decision of April 13, 1962 of respondent Director of Patents denying the petition for the cancellation of Utility Model Letters Patent No. 62 in favor of respondent Tarroza is hereby affirmed. With costs against petitioner.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Capistrano, Teehankee and Barredo, JJ., concur.1äwphï1.ñët

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-1952 December 6, 1906

CARLOS GSELL, plaintiff-appellant, vs.VALERIANO VELOSO YAP-JUE, defendant-appellee.

Coudert Brothers for appellant.

Chicote, Miranda and Sierra for appellee.

MAPA, J.:

In an action between the plaintiff and the defendant herein judgment was rendered in the court below on the 11th of December, 1903, the adjudging part of which is as follows: "It is ordered that the defendant (the accused in these proceedings) abstain from manufacturing canes and umbrellas with a curved handle by means of lamp or blowpipe fed with mineral oil petroleum, which process was protected by patent No. 19228, issued in favor of Henry Gsell, and by him transferred to Carlos Gsell." In the month of February, 1904, the plaintiff presented a petition alleging that on "the 8th of the said month, and some time prior to that date, the defendant in obedience of the aforesaid judgment, and in violation of the same, was and is now engaged in the unlawful manufacture of umbrella handles by the identical process so like the patent process as to be indistinguishable," and accordingly asked the court to punish the accused for contempt and to order the latter to indemnify the plaintiff as damages in the sum of $1,000, United States, currency, and to pay the costs.

The parties having appeared in open court and stipulated that "the defendant had used, and was still using, as a process for curving canes and umbrella handles, the same process described in the memoir which accompanied the patent, with the exception that he has substituted for an oil an alcohol-burning lamp."

The court considering that the plaintiff had only the exclusive right to the use of the coal or mineral oil-burning lamp, held that the defendant was not guilty of contempt, to which decision of the court the plaintiff duly excepted.

Patent No. 19228, referred to in the judgment of the 11th of December, 1903, does not appear in the bill of exceptions. Such these are contempt proceedings for the disobedience of said judgment, we should have before us the patent in order to determine whether there was any actual disobedience of the order of the court. It is evident that the accused had not committed any direct violation, plain and manifest, of the prohibition imposed upon him in the judgment. The violation, if there has been any, was not of such a character that it could be made patent by the mere enunciation of the acts performed by the defendant, which are alleged to constitute the said violation. These acts were not clearly and manifestly contrary to the precise terms of the prohibition. According to the express language of the judgment, the prohibition is against the manufacture of canes and umbrellas with curved handles by blowpipe, and the parties have stipulated that the defendant did not use a coal or mineral oil-burning lamp, but an alcohol-burning lamp.

The question, however, arises as to whether that prohibition included the substitution of alcohol for coal or mineral oil. In more abstract and general terms, the appellant propounds this question in his brief as follows: "The question presented by this appeal is whether or not the use of a patented process by a third person, without license or authority therefor, constitutes an infringement when the alleged infringer has substituted in a lieu of some unessential part of the patented process a well-known mechanical equivalent." It is seen that by it very terms this question implies in the present case the existence of two fundamental facts which must first be duly established, viz; (1) That the use of the lamp fed with petroleum or mineral oil was unessential part of the patented process the use of which by the accused was prohibited by the said judgment; and (2) that alcohol is equivalent and proper substitute, well known as such, for mineral oil petroleum in connection with the said process. The appellant has failed to affirmatively establish either of these two essential facts. He has merely assumed their existence, without proving the same, thus begging the whole question. Consequently the contempt with which the accused is charged has not been fully and satisfactorily proved, and the order appealed from should accordingly be affirmed in so far as it holds that the defendant is not guilty of contempt.

Having reached this conclusion, it is unnecessary for us to pass upon plaintiff's prayer for a preliminary injunction, as the same is based upon the alleged infringement of the patent upon which these proceedings for contempt were based.

The order of the court below is hereby affirmed, with the costs of this instance against the appellant. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the case be remanded to the court below for execution. So ordered.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 97343 September 13, 1993

PASCUAL GODINES, petitioner, vs.THE HONORABLE COURT OF APPEALS, SPECIAL FOURTH DIVISION and SV-AGRO ENTERPRISES, INC., respondents.

Jesus S. Anonat for petitioner.

Arturo M. Alinio for private respondent.

ROMERO, J.:

Through this petition for review in certiorari of a decision of the Court of Appeals affirming the decision of the trial court, petitioner Pascual Godines seeks to reverse the adverse decision of the Court a quo that he was liable for infringement of patent and unfair competition. The dispositive portion of the assailed decision is hereby quoted to wit:

WHEREFORE, with the elimination of the award for attorney's fees, the judgment appealed from is hereby AFFIRMED, with costs against appellant. 1

The patent involved in this case is Letters Patent No. UM-2236 issued by the Philippine Patent Office to one Magdalena S. Villaruz on July 15, 1976. It covers a utility model for a hand tractor or power tiller, the main components of which are the following: "(1) a vacuumatic house float; (2) a harrow with adjustable operating handle; (3) a pair of paddy wheels; (4) a protective water covering for the engine main drive; (5) a transmission case; (6) an operating handle; (7) an engine foundation on the top midportion of the vacuumatic housing float to which the main engine drive is detachedly installed; (8) a frontal frame extension above the quarter — circularly shaped water covering hold (sic) in place the transmission case; (9) a V-belt connection to the engine main drive with transmission gear through the pulley, and (10) an idler pulley installed on the engine foundation." 2 The patented hand tractor works in the following manner: "the engine drives the transmission gear thru the V-belt, a driven pulley and a transmission shaft. The engine drives the transmission gear by tensioning of the V-belt which is controlled by the idler pulley. The V-belt drives the pulley attached to the transmission gear which in turn drives the shaft where the paddy wheels are attached. The operator handles the hand tractor through a handle which is inclined upwardly and supported by a pair of substanding pipes and reinforced by a U-shaped G.I. pipe at the V-shaped end." 3

The above mentioned patent was acquired by SV-Agro Industries Enterprises, Inc., herein private respondent, from Magdalena Villaruz, its chairman and president, by virtue of a Deed of Assignment executed by the latter in its favor. On October 31, 1979, SV-Agro Industries caused the publication of the patent in Bulletin Today, a newspaper of general circulation.

In accordance with the patent, private respondent manufactured and sold the patented power tillers with the patent imprinted on them. In 1979, SV-Agro Industries suffered a decline of more than 50% in sales in its Molave, Zamboanga del Sur branch. Upon investigation, it discovered that power tillers similar to those patented by private respondent were being manufactured and sold by petitioner herein. Consequently, private respondent notified Pascual Godines about the existing patent and demanded that the latter stop selling and manufacturing similar power tillers. Upon petitioner's failure to comply with the demand, SV-Agro Industries filed before the Regional Trial Court a complaint for infringement of patent and unfair competition.

After trial, the court held Pascual Godines liable for infringement of patent and unfair competition. The dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, JUDGMENT is hereby rendered in favor of the plaintiff SV-Agro Industries Enterprises, Inc., and against defendant Pascual Godines:

1. Declaring the writ of preliminary injunction issued by this Court against defendant as permanent;

2. Ordering defendant Pascual Godines to pay plaintiff the sum of Fifty Thousand Pesos (P50,000.00) as damages to its business reputation and goodwill, plus the further sum of Eighty Thousand Pesos (P80,000.00) for unrealized profits during the period defendant was manufacturing and selling copied or imitation floating power tiller;

3. Ordering the defendant to pay the plaintiff, the further sum of Eight Thousand Pesos (P8,000.00) as reimbursement of attorney's fees and other expenses of litigation; and to pay the costs of the suit.

SO ORDERED. 4

The decision was affirmed by the appellate court.

Thereafter, this petition was filed. Petitioner maintains the defenses which he raised before the trial and appellate courts, to wit: that he was not engaged in the manufacture and sale of the power tillers as he made them only upon the special order of his customers who gave their own specifications; hence, he could not be liable for infringement of patent and unfair competition; and that those made by him were different from those being manufactured and sold by private respondent.

We find no merit in his arguments. The question of whether petitioner was manufacturing and selling power tillers is a question of fact better addressed to the lower courts. In dismissing the first argument of petitioner herein, the Court of Appeals quoted the findings of the court, to wit:

It is the contention of defendant that he did not manufacture or make imitations or copies of plaintiff's turtle power tiller as what he merely did was to fabricate his floating power tiller upon specifications and designs of those who ordered them. However, this contention appears untenable in the light of the following circumstances: 1) he admits in his Answer that he has been manufacturing power tillers or hand tractors, selling and distributing them long before plaintiff started selling its turtle power tiller in Zamboanga del Sur and Misamis Occidental, meaning that defendant is principally a manufacturer of power tillers, not upon specification and design of buyers, but upon his own specification and design; 2) it would be unbelievable that defendant would fabricate power tillers similar to the turtle power tillers of plaintiff upon specifications of buyers without requiring a job order where the specification and designs of those ordered are specified. No document was (sic) ever been presented showing such job orders, and it is rather unusual for defendant to manufacture something without the specification and designs, considering that he is an engineer by profession and proprietor of the Ozamis Engineering shop. On the other hand, it is also highly unusual for buyers to order the fabrication of a power tiller or hand tractor and allow defendant to manufacture them merely based on their verbal instructions. This is contrary to the usual business and manufacturing practice. This is not only time consuming, but costly because it involves a trial and error method, repeat jobs and material wastage. Defendant judicially admitted two (2) units of the turtle power tiller sold by him to Policarpio Berondo. 5

Of general acceptance is the rule imbedded in our jurisprudence that ". . . the jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's findings of fact are conclusive upon this Court." 6

The fact that petitioner herein manufactured and sold power tillers without patentee's authority has been established by the courts despite petitioner's claims to the contrary.

The question now arises: Did petitioner's product infringe upon the patent of private respondent?

Tests have been established to determine infringement. These are (a) literal infringement; and (b) the doctrine of equivalents. 7 In using literal infringement as a test, ". . . resort must be had, in the first instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is made out and that is the end of it." 8 To determine whether the particular item falls within the literal meaning of the patent claims, the court must juxtapose the claims of the patent and the accused product within the overall context of the claims and specifications, to determine whether there is exact identity of all material elements. 9

The trial court made the following observation:

Samples of the defendant's floating power tiller have been produced and inspected by the court and compared with that of the turtle power tiller of the plaintiff (see Exhibits H to H-28). In appearance and form, both the floating power tillers of the defendant and the turtle power tiller of the plaintiff are virtually the same. Defendant admitted to the Court that two (2) of the power inspected on

March 12, 1984, were manufactured and sold by him (see TSN, March 12, 1984, p. 7). The three power tillers were placed alongside with each other. At the center was the turtle power tiller of plaintiff, and on both sides thereof were the floating power tillers of defendant (Exhibits H to H-2). Witness Rodrigo took photographs of the same power tillers (front, side, top and back views for purposes of comparison (see Exhibits H-4 to H-28). Viewed from any perspective or angle, the power tiller of the defendant is identical and similar to that of the turtle power tiller of plaintiff in form, configuration, design and appearance. The parts or components thereof are virtually the same. Both have the circularly-shaped vacuumatic housing float, a paddy in front, a protective water covering, a transmission box housing the transmission gears, a handle which is V-shaped and inclined upwardly, attached to the side of the vacuumatic housing float and supported by the upstanding G.I. pipes and an engine base at the top midportion of the vacuumatic housing float to which the engine drive may be attached. In operation, the floating power tiller of the defendant operates also in similar manner as the turtle power tiller of plaintiff. This was admitted by the defendant himself in court that they are operating on the same principles. (TSN, August 19, 1987, p. 13) 10

Moreover, it is also observed that petitioner also called his power tiller as a floating power tiller. The patent issued by the Patent Office referred to a "farm implement but more particularly to a turtle hand tractor having a vacuumatic housing float on which the engine drive is held in place, the operating handle, the harrow housing with its operating handle and the paddy wheel protective covering." 11 It appears from the foregoing observation of the trial court that these claims of the patent and the features of the patented utility model were copied by petitioner. We are compelled to arrive at no other conclusion but that there was infringement.

Petitioner's argument that his power tillers were different from private respondent's is that of a drowning man clutching at straws.

Recognizing that the logical fallback position of one in the place of defendant is to aver that his product is different from the patented one, courts have adopted the doctrine of equivalents which recognizes that minor modifications in a patented invention are sufficient to put the item beyond the scope of literal infringement. 12 Thus, according to this doctrine, "(a)n infringement also occurs when a device appropriates a prior invention by incorporating its innovative concept and, albeit with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result." 13 The reason for the doctrine of equivalents is that to permit the imitation of a patented invention which does not copy any literal detail would be to convert the protection of the patent grant into a hollow and useless thing. Such imitation would leave room for — indeed encourage — the unscrupulous copyist to make unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of the law. 14

In this case, the trial court observed:

Defendant's witness Eduardo Cañete, employed for 11 years as welder of the Ozamis Engineering, and therefore actually involved in the making of the floating power tillers of defendant tried to explain the difference between the floating power tillers made by the defendant. But a careful examination between the two power tillers will show that they will operate on the same fundamental principles. And, according to establish jurisprudence, in infringement of patent, similarities or differences are to be determined, not by the names of things, but in the light of what elements do, and substantial, rather than technical, identity in the test. More specifically, it is necessary and sufficient to constitute equivalency that the same function can be performed in substantially the same way or manner, or by the same or substantially the same, principle or mode of operation; but where these tests are satisfied, mere differences of form or name are immaterial. . . . 15

It also stated:

To establish an infringement, it is not essential to show that the defendant adopted the device or process in every particular; Proof of an adoption of the substance of the thing will be sufficient. "In one sense," said Justice Brown, "it may be said that no device can be adjudged an infringement that does not substantially correspond with the patent. But another construction, which would limit these words to exact mechanism described in the patent, would be so obviously unjust that no court could be expected to adopt it. . . .

The law will protect a patentee against imitation of his patent by other forms and proportions. If two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape. 16

We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No. 165, as amended, providing, inter alia:

Sec. 37. Right of Patentees. — A patentee shall have the exclusive right to make, use and sell the patented machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the territory of the Philippines for the terms of the patent; and such making, using, or selling by any person without the authorization of the Patentee constitutes infringement of the patent. (Emphasis ours)

As far as the issue regarding unfair competition is concerned, suffice it to say that Republic Act No. 166, as amended, provides, inter alia:

Sec. 29. Unfair competition, rights and remedies. — . . .

xxx xxx xxx

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

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

xxx xxx xxx

Considering the foregoing, we find no reversible error in the decision of the Court of Appeals affirming with modification the decision of the trial court.

WHEREFORE, premises considered, the decision of the Court of Appeals is hereby AFFIRMED and this petition DENIED for lack of merit.

Bidin, Melo and Vitug, JJ., concur.

Feliciano, J., is on leave.

MAPA, J.:

In an action between the plaintiff and the defendant herein judgment was rendered in the court below on the 11th of December, 1903, the adjudging part of which is as follows: "It is ordered that the defendant (the accused in these proceedings) abstain from manufacturing canes and umbrellas with a curved handle by means of lamp or blowpipe fed with mineral oil petroleum, which process was protected by patent No. 19228, issued in favor of Henry Gsell, and by him transferred to Carlos Gsell." In the month of February, 1904, the plaintiff presented a petition alleging that on "the 8th of the said month, and some time prior to that date, the defendant in obedience of the aforesaid judgment, and in violation of the same, was and is now engaged in the unlawful manufacture of umbrella handles by the identical process so like the patent process as to be indistinguishable," and accordingly asked the court to punish the accused for contempt and to order the latter to indemnify the plaintiff as damages in the sum of $1,000, United States, currency, and to pay the costs.

The parties having appeared in open court and stipulated that "the defendant had used, and was still using, as a process for curving canes and umbrella handles, the same process described in the memoir which accompanied the patent, with the exception that he has substituted for an oil an alcohol-burning lamp."

The court considering that the plaintiff had only the exclusive right to the use of the coal or mineral oil-burning lamp, held that the defendant was not guilty of contempt, to which decision of the court the plaintiff duly excepted.

Patent No. 19228, referred to in the judgment of the 11th of December, 1903, does not appear in the bill of exceptions. Such these are contempt proceedings for the disobedience of said judgment, we should have before us the patent in order to determine whether there was any actual disobedience of the order of the court. It is evident that the accused had not committed any direct violation, plain and manifest, of the prohibition imposed upon him in the judgment. The violation, if there has been any, was not of such a character that it could be made patent by the mere enunciation of the acts performed by the defendant, which are alleged to constitute the said violation. These acts

were not clearly and manifestly contrary to the precise terms of the prohibition. According to the express language of the judgment, the prohibition is against the manufacture of canes and umbrellas with curved handles by blowpipe, and the parties have stipulated that the defendant did not use a coal or mineral oil-burning lamp, but an alcohol-burning lamp.

The question, however, arises as to whether that prohibition included the substitution of alcohol for coal or mineral oil. In more abstract and general terms, the appellant propounds this question in his brief as follows: "The question presented by this appeal is whether or not the use of a patented process by a third person, without license or authority therefor, constitutes an infringement when the alleged infringer has substituted in a lieu of some unessential part of the patented process a well-known mechanical equivalent." It is seen that by it very terms this question implies in the present case the existence of two fundamental facts which must first be duly established, viz; (1) That the use of the lamp fed with petroleum or mineral oil was unessential part of the patented process the use of which by the accused was prohibited by the said judgment; and (2) that alcohol is equivalent and proper substitute, well known as such, for mineral oil petroleum in connection with the said process. The appellant has failed to affirmatively establish either of these two essential facts. He has merely assumed their existence, without proving the same, thus begging the whole question. Consequently the contempt with which the accused is charged has not been fully and satisfactorily proved, and the order appealed from should accordingly be affirmed in so far as it holds that the defendant is not guilty of contempt.

Having reached this conclusion, it is unnecessary for us to pass upon plaintiff's prayer for a preliminary injunction, as the same is based upon the alleged infringement of the patent upon which these proceedings for contempt were based.

The order of the court below is hereby affirmed, with the costs of this instance against the appellant. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the case be remanded to the court below for execution. So ordered.

Arellano, C.J., Torres, Carson, Willard and Tracey, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 14101 September 24, 1919

ANGEL VARGAS, plaintiff-appellant, vs.F. M. YAPTICO & CO. (Ltd.), defendant-appellee.

Charles C. Cohn for appellants .John Bordman for appellee.

MALCOLM, J.:

Rude wooden implements for tilling the soil have been in use in the Philippines, possibly not since the Israelites "went down to sharpen every man his share and his coulter," but certainly for many years. Iron plows called "Urquijo" and "Pony" have latterly been the vogue.

Angel Vargas, a farmer acquainted with local conditions and alive to the commercial possibilities, took it upon himself to produce, with the native plow as the model, an improved, adjustable plow. On July 22, 1910, he made application for a United States patent to cover his so-called invention. On March 12, 1912, letters patent were issued by the United States Patent Office in favor of Vargas .On April 24, 1912, a certified copy of the patent was filed in the Division of Patents, Copyrights, and Trademarks of the Executive Bureau, Government of the Philippine Islands. The patent and its registry was also published in the newspaper, El Tiempo.

Since 1910, Vargas has engaged in the manufacture of these plows in the city of Iloilo, Philippine Islands. On the plows there was first stamped the words "Patent Applied For," later after the patent had been granted, changed to "Patented Mar. 12, 1912." Ninety per cent of the plows in use in the Visayas (Iloilo and vicinity) are said to be Vargas plows.

During this same period, the firm of F. M. Yaptico & Co. (Ltd.), was engaged in the foundry business in the City of Iloilo. It openly held itself out as a manufacturer of plow parts. It has in fact produced points, shares, shoes, and heel pieces in a considerable amount adapted to replace worn-out parts of the Vargas plow.

Such was the existing situation when, in the early part of 1918, the owner of the patent, and thus the proper party to institute judicial proceedings, began action in the Court of First Instance of Iloilo to enjoin the alleged infringement of U.S. Patent No. 1020232 by the defendant F. M Yaptico & Co. (Ltd.), and to recover the damages suffered by reason of this infringement. The court issued the preliminary injunction as prayed for. The defendant, in addition to a general denial, alleged, as special defenses, that the patent lacked novelty or invention, that there was no priority of ideas or device in the principle and construction of the plow, and that the plow, whose manufacture it was sought to have enjoined by the plaintiff, had already been in public use for more than two years before the application of the plaintiff for his patent. The parties subsequently entered into a stipulation that the court should first resolve the question of whether or not there had been an infraction of the patent, reserving the resultant question of damages for later decision. After the taking of evidence, including the presentation of exhibits, the trial judge, the Honorable Antonio Villareal, in a very exhaustive and learned decision, rendered judgment in favor of the defendant and against the plaintiff, declaring null and without effect the patent in question and dismissing the suit with costs against the plaintiff .The preliminary injunction theretofore issued was dissolved.

From this judgment the plaintiff has appealed, specifying five errors. The principal assignment No. 1 is, that the trial court erred in finding that the patented invention of the plaintiff is lacking in novelty and invention. Defendant, in reply, relies on three propositions, namely: (1) The judgment of the trial court in finding the patent granted plaintiff void for lack of novelty and invention should be affirmed; (2) The patent granted plaintiff is void from the public use of his plow for over two years prior to his application for a patent, and (3) If the patent is valid, there has been no contributory infringement by defendant.

Before resolving these rival contentions, we should have before us the relevant law. Act No. 2235 of the Philippine Legislature, enacted on February 10, 1913, in effect makes the United States Patent Laws applicable in the Philippine Islands. It provides that "owners of patents, including design patents, which have been issued or may hereafter be issued, duly registered in the United States Patent Office under the laws of the United States relating to the grant of patents, shall receive in the Philippine Islands the protection accorded them in the United States under said laws." (Sec. 1.) Turning to the United States Patent Laws, we find the Act of Congress of March 3, 1897, amendatory of section 4886 of the United States Revised Statutes, reading as follows:

Any person who has invented or discovered any new and useful art, machine, manufacture, or composition of matter, or any new an useful improvements thereof, not

known or used by others in this country, before his invention or discovery thereof, and not patented or described in any printed publication in this or any foreign country, before his invention or discovery thereof, or more than two years prior to his application, and not in public use or on sale in this country for more than two years prior to his application, unless the same is proved to have been abandoned, may upon payment of the fees required by law, and other due proceeding had, obtain a patent therefor. (29 Stat. L., 692, 7 Fed .Stat. Ann. [2d Ed.], p. 23.)

When a patent is sought to be enforced, "the question of invention, novelty, or prior use, and each of them, are open to judicial examination." The burden of proof to substantiate a charge of infringement is with the plaintiff. Where, however, the plaintiff introduces the patent in evidence, if it is in due form, it affords a prima facie presumption of its correctness and validity. The decision of the Commissioner of Patents in granting the patent is always presumed to be correct. The burden then shifts to the defendant to overcome by competent evidence this legal presumption .With all due respect, therefore, for the critical and expert examination of the invention by the United States Patent Office, the question of the validity of the patent is one for judicial determination, and since a patent has been submitted, the exact question is whether the defendant has assumed the burden of proof as to anyone of his defenses. (See Agawan Co. vs. Jordan [1869], 7 Wall., 583; Blanchard vs .Putnam [1869], 8 Wall., 420; Seymour vs. Osborne [1871], 11 Wall., 516; Reckendorfer vs. Faber [1876], 92 U.S., 347; 20 R. C. L., 1112, 1168, 1169.)

As herein before stated, the defendant relies on three special defenses. One such defense, on which the judgment of the lower court is principally grounded, and to which appellant devotes the major portion of his vigorous argument, concerns the element of novelty, invention, or discovery, that gives existence to the right to a patent. On this point the trial court reached the conclusion that "the patented plow of the plaintiff, Exhibit D, is not different from the native plow, Exhibit 2, except in the material, in the form, in the weight and the grade of the result, the said differences giving it neither a new function nor a new result distinct from the function and the result obtained from the native plow; consequently, its production does not presuppose the exercise of the inventive faculty but merely of mechanical skill, which does not give a right to a patent of an invention under the provisions of the Patent Law." In thus finding, the court may have been right, since the Vargas plow does not appear to be such a "combination" as contains a novel assemblage of parts exhibiting invention. (See Stimpson vs. Woodman [1870], 10 Wall., 117 — rollers; Hicks vs. Kelsey [1874], 20 Wall., 353 — stoves; Washburn & Moen Mfg. Co. vs. Beat 'Em All Barbed Wire Co. [1892], 143 U.S., 275 — barbed wire; Lynch vs .Dryden [1873], C. D., 73 — walking cultivators; Torrey vs. Hancock [1910], 184 Fed., 61 — rotary plows.)

A second line of defense relates to the fact that defendant has never made a complete Vargas plow, but only points, shares, shoes, and heel pieces, to serve as repairs. Defendant's contention is, that in common with other foundries, he has for years cast large numbers of plow points and shares suitable for use either on the native wooden plow, or on the Vargas plow. A difference has long been recognized between repairing and reconstructing a machine. If, for instance, partial injuries, whether they occur from accident or from wear and tear, to a machine for agricultural purposes, are made this is only re-fitting the machine for use, and thus permissible. (Wilson vs. Simpson [1850], 9 How., 109.) Even under the more rigorous doctrine of Leeds & Catlin Co. vs. Victor Talking Machine Co. ([1909], 213 U.S., 325), it may be possible that all the defendant has done is to manufacture and sell isolated parts to be used to replace worn-out parts.

The third defense is, that under the provisions of the statute, an inventor's creation must not have been in public use or on sale in the United States (and the Philippine Islands) for more than two years prior to his application .Without, therefore, committing ourselves as to the first two defenses, we propose to base our decision on the one just suggested as more easily disposing of the case. (See 20 R. C. L., 1140-1142.) We do so with full consciousness of the doubt which arose in the mind of the trial court, but with the belief that since it has been shown that the invention was used in public at Iloilo by others than Vargas, the inventor, more than two years before the application for the patent, the patent is invalid.

Although we have spent some time in arriving at this point, yet having reached it, the question in the case is single and can be brought to a narrow compass. Under the English Statute of Monopolies (21 Jac. Ch., 3), and under the United States Patent Act of February 21, 1793, later amended to be as herein quoted, it was always the rule, as stated by Lord Coke, Justice Story and other authorities, that to entitle a man to a patent, the invention must be new to the world. (Pennock and Sellers vs. Dialogue [1829], 2 Pet., 1.) As said by the United States Supreme Court, "it has been repeatedly held by this court that a single instance of public use of the invention by a patentee for more than two years before the date of his application for his patent will be fatal to the validity of the patent when issued." (Worley vs. Lower Tobacco Co .[1882], 104 U. S., 340; McClurg vs. Kingsland [1843], I How., 202; Consolidated Fruit Jar Co. vs. Wright [1877], 94 U. S., 92; Egbert vs. Lippmann [1881], 104 U. S., 333; Coffin vs. Ogden [1874], 18 Wall., 120; Manning vs. Cape Ann Isinglass and Glue Co. [1883], 108 U. S., 462; Andrews vs. Hovey [1887], 123 U. S., 267; Campbell vs. City of New York [1881], 1 L. R. A., 48.)

On the facts, we think the testimony shows such a public use of the Vargas plow as to render the patent invalid Nicolas Roces, a farmer, testified that he had bought twenty Vargas plows, of which Exhibit 5 was one, in December, 1907; and Exhibit 5, the court found, was a plow completely identical with that for which the plaintiff had received a patent. The minor exception, and this in itself corroborative of Roces' testimony, is that the handle of plow Exhibit 5 is marked with the letters "A V" and not with the words "Patent Applied For" or "Patented Mar.12, 1912." Salvador Lizarraga, a clerk in a business house,

testified that he had received plows similar to Exhibits D, 5, and 4, for sale on commission on May, 1908, from Bonifacio Araneta, partner of Vargas in the plow business. Ko Pao Ko, a blacksmith, testified that he had made fifty plow frames in 1905 for Vargas and Araneta, of which Exhibit 4 is one; Exhibit 4, the court found, is a plow identical with that patented by Vargas, but without share and mould-board. Alfred Berwin, an employee in the office of Attorney John Bordman, testified that on September 21, 1908, he had knowledge of a transaction wherein Vargas and Araneta desired to obtain money to invest in a plow factory. George Ramon Saul, a mechanic of the "Taller Visayas" of Strachan and MacMurray, testified that he had made Vargas plow points and shares of the present form upon order of Araneta and Vargas in 1906 and 1907 .William MacMurray, proprietor of the "Taller Visayas," corroborated the evidence of the witness Saul by the exhibition of the account against Vargas and Araneta wherein, under date of December 13, 1906, appears the item "12 new soft steel plow shares forged and bored for rivets as per sample." Against all this, was the testimony of the plaintiff Angel Vargas who denied that Saul could have been seen the Vargas plow in 1907 and 1907, who denied that Roces purchased the Vargas plow in 1907, who denied that Lizarraga could have acted as an agent to sell two plows in November, 1908, who denied any remembrance of the loan mentioned by Berwin as having been negotiated in September, 1908, who denied that Ko Pao Ko made fifty plows one of which is Exhibit 4, for Araneta and Vargas in 1905. Plaintiff introduced his books to substantiate his oral testimony .It is hardly believable that five or six witnesses for the defense would deliberately perjure themselves under oath. One might, but that all together, of different nationalities, would enter into such a conspiracy, is to suppose the improbable.

Tested by the principles which go to make the law, we think a preponderance of the evidence is to the effect that for more than two years before the application for the original letters patent, or before July 22, 1908, there was, by the consent and allowance of Vargas, a public use of the invention covered by them.

To conclude, we are not certain but that appellee has proved every one of his defenses. We are certain that he has at least demonstrated the public use of the Vargas plow over two years prior to the application for a patent. Such being the case, although on a different ground, we must sustain the judgment of the lower court, without prejudice to the determination of the damages resulting from the granting of the injunction, with the costs of this instance against the appellant. So ordered.

Arellano, C.J. Torres, Johnson, Araullo, Street, Avanceña and Moir, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-27361 May 29, 1981

PARKE, DAVIS & COMPANY, plaintiff-appellant, vs.DOCTORS' PHARMACEUTICALS, INC. and V-LAB DRUGHOUSE CORPORATION, defendants-appellees.

ABAD SANTOS, J.:1äwphï1.ñët

This is an appeal from the order of the Court of First Instance of Rizal dated August 22, 1966, in Civil Case No. C-712, dismissing, on the ground of lack of cause of action, the complaint for damages for infringement of patent and unfair competition, with preliminary injunction, filed by the herein appellant against the herein appellees.

On May 5, 1966, Parke, Davis & Company filed with the Court of First Instance of Rizal, Caloocan City Branch, the said Complaint with Preliminary Injunction against Doctors' Pharmaceuticals, Inc., otherwise referred to as defendant No. 1 and V-LAB Drughouse Corporation, otherwise referred to as defendant No. 2, alleging, among others, that plaintiff is a foreign corporation organized and existing under the laws of the State of Michigan, U.S.A., with principal office situated in Detroit Michigan, U.S.A.; that the laws of the United States of America allow corporate or juristic citizens of the Philippines to file in said country, actions for infringement of patents and for unfair competition: that defendants 1 and 2 are corporations organized and existing under the laws of the Philippines with offices respectivrely located at 354-B San Diego Street, Grace Park, Caloocan City and 126 Gen. Evangelista Street, Caloocan City; that on March 21, 1957, Letters Patent No. 279 was legally issued to plaintiff' by the Patent Office of the Republic of the Philippines for an invention entitled "Therapeutically Valuable Esters and Method for Obtaining the same"; that since that date, plaintiff has been and still is, the owner of said Letters Patent No. 279 which is still in force in the Philippines; that defendant No. 1 has knowingly infringed and is still knowingly infringing Claim 4 of said Letters Patent No. 279 of plaintiff by selling, causing to be sold, using or causing to be used, "Chloramphenicol Palmitate", the substance covered by said Claim 4 of said plaintiff's Letters Patent No. 279, under the name "Venimicetin Suspension", willfully and without the consent or authorization of plaintiff; that defendant No. 2 has likewise, knowingly infringed and is still knowingly investigation Claim 4 of said letters Patent No. 279 by acting as distributor of defendant No. 1 of the latter's medicine called "Venimicetin Suspension" which contains "Chloramphenicol Palmitate": that plaintiff, through its wholly-owned local subsidiary, Parke, Davis & Company, Inc. a domestic corporation with main office at Mandaluyong, Rizal, has at great expense, established a market and a continuing demand for "Chloramphenicol Palmitate" in the Philippines and has for many years sold and is still selling this product in the Philippines that defendants have derived unlawful gains and profits from the aforesaid infringement to the great and irreparable injury, damage and prejudice of plaintiff, and have deprive plaintiff of legitimate returns which plaintiff would have otherwise would have falsely and deseptively concealed that the same contains "Chloramphenicol" and "Chloramphenicol Palmitate" are entirely different substances; that defendants, advertising and selling "Venimicetin Suspension", have falsely and deceptively use plaintiffs name and represented that defendant No. 1 holds a license from plaintiff for said medicine with, inter alia, the following words: 1äwphï1.ñët

First Compulsory License in the Philippines by Parke-Davis Company Detroit Michigan, U.S.A.;

that plaintiff has never granted defendant No. 1 any kind of license for any product; that defendant No. 1 has not even applied for a compulsory license under plaintiff's Letters Patent No. 279, the only patent which covers "Chloramphenicol Palmitate"; that the compulsory licensing case between plaintiff and defendant No. 1 in the Philippine Patent Office (Inter Partes Case No. 181) dealt with plaintiff's Letters Patent No. 50 (which covers "Chloramphenicol") and not with plaintiff's Letters Patent No. 279 (which covers "Chloramphenicol Palmitate"); that the resolution of the Director of Patents fixing the terms and conditions of the compulsory license for "Chloramphenicol" has not yet become final as the same is still subject to a pending motion for reconsideration; that even if said resolution does become final, the compulsory license will not cover defendants' "Venimicetin Suspension" which actually contains "Chloramphenicol Palmitate" and, therefore, defendants' statement will still be false and misleading; and that defendants' use of the aforesaid false statement is designed to induce persons to purchase and physicians to prescribe the use of "Venimicetin Suspension" in the mistaken belief that it is Identical with the "Chloramphenicol Palmitate" product manufactured and sold in the Philippines by plaintiff's subsidiary or that the active ingredient in said product has been obtained from plaintiff and/or that said product has been made under the supervision or control of plaintiff – thereby causing damage or loss to plaintiff. On the basis of the foregoing allegations, the plaintiff prayed, among others, that defendants be enjoined from performing the acts complained of as infringement of patent and unfair competition and to pay the plaintiff all damages due thereto by reason of said acts.

On May 6, 1966, the Court of First Instance issued an order which, among others, temporarily restrained the defendants "from directly or indirectly selling, using, causing to be sold or causing to be used any 'Chloramphenicol Palmitate' not manufactured by plaintiff or plaintiff's wholly-owned subsidiary, Parke, Davis & Company, Inc." Alleging that the defendants have not complied with such order, the plaintiff filed on May 24, 1966, a motion to punish defendants for contempt.

Before the court could act on the plaintiff's motion for contempt, the defendants filed a Motion to Dismiss, dated May 25, 1966, alleging, among others, that the complaint states no cause of action against them since defendant No. 1 "was granted a compulsory license to manufacture, use and sell its own brands of medicinal preparation containing 'chloramphenicol'."

On June 17, 1966, the plaintiff filed its Opposition to Motion to Dismiss controverting, among others, defendants' contention that the complaint states no cause of action. Plaintiff pointed out that the defendants have confused the substance which is the subject matter of the complaint, namely, "Chloramphenicol Palmitate", with the substance covered by the compulsory licensing case, namely, "Chloramphenicol", and the Letters Patent subject of the complaint, namely, Letters Patent No. 279, with the Letters Patent subject of the compulsory licensing case, namely, Letters Patent No. 50.

On June 27, 1966, the defendants filed their Reply to Opposition alleging, among others, that in advertising and selling their product "Venimicetin Suspension," never do they state that the same contains "Chloramphenicol Palmitate" They pointed out that even in the annexes of plaintiff's complaint (consisting of the packages and labels allegedly used by the defendants in said product), only the substance "Chloramphenicol" is stated – showing that the substance involved is Cloramphenicol and not "Chloramphenicol Palmitate".

On July 5, 1966, the plaintiff filed its Rejoinder to Reply to Opposition alleging among others, that while the packages and labels of defendants' "Venimicetin Suspension" indicate that the same contains "Chloramphenicol", the truth of the matter is that said product does not contains said substance but the subtance covered by letters Patents No.279, namely, "Chloramphenicol Palmitate". This, plaintiff pointed out, is expressly alleged in the complaint; thus, applying the rule that a motion to dismiss hypothetically admits the truth of the allegations of the complaint, defendants are guilty of (1) infringement of patent, by selling, causing to be sold, using or causing to be used "Chloramphenicol Palmitate" in their medicine called "Venimicetin Suspension", and (2) unfair competition, by concealing that said medicine contains "Chloramphenicol", and, by deceiving and misleading the purchasers who are trade to believe that "Venimicetin Suspension" is covered by a compulsory license from the plaintiff.

On the basis of the foregoing pleadings, the Court of First Instance of Rizal issued the order dated August 22, 1966, which dismissed the complaint on the ground of lack of cause of action, to wit: 1äwphï1.ñët

xxx xxx xxx

After a careful consideration of the arguments for and against the motion to dismiss, and in view of the fact that the substance covered by Letters Patent No. 50 and Letters Patent No. 279 is the same and that is, the substance known as "Chloramphenicol", because while under Letters Patent No. 50, the substance is referred to as "Chloramphenicol", in Letters Patent No. 279; THE SUBSTANCE HAS BEEN DENOMINATED AS Chloramphenicol Palmitate it is the opinion of the Court that "Chloramphenicol" and "Chloramphenicol Palmitate are the same, the difference being merely in the taste, and this Court to state that there was infringement of Patent with respect to Letters Patent No. 279 would be tantamount to preventing the defendant, Doctors" Pharmaceuticals, Inc., from exercising the right granted it by Letters Patent No. 50. It would further render nugatory the decision of the Director of Patents, affirmed by the Supreme Court, granting the defendant, Doctors' Pharmaceuticals, Inc., the right to use and import "Chloramphenicol".

The defendant, V-Lab Drughouse Corporation being merely a sales representative of the defendant, Doctors' Pharmaceuticals, Inc., and the Court being of the opinion that there is no cause of action with respect to the principal defendant, is likewise of the opinion that there is no cause of action with respect to the defendant, V-LAB Drughouse Corporation.

It is likewise the opinion of this Court that there is no cause of action for unfair competition because a perusal of the records of this case will show that under paragraph 7 of the Resolution of the Director of Patents, Annex "C" of the Motion to Dismiss, the petitioner (Doctors' Pharmaceuticals, Inc.) shall adopt and use its owntrademarks or labels on all its products containing Chloramphenicol under license from Parke. Davis, & Co., Inc., of Michigan, U.S.A.

The claim of the plaintiff that the representation:

First Compulsory License in the Philippines by Parke Davis Company, Detroit Michigan, U.S.A.

is false and has a definite tendency to deceive possible purchasers and distort the facts is not well-taken in view of the above-mentioned (Par. 7) of the Resolution of the Director of Patents. 1äwphï1.ñët

WHEREFORE, finding the ground of lack of cause of action to be well-taken, this case is ordered DISMISSED, without pronouncement as to costs. The restraining order heretofore issued is hereby lifted and set aside. Having reached the above conclusion, the Court will no longer pass upon the issue of contempt.

SO ORDERED.

Hence, the present appeal.

We are thus tasked with the resolution of the issue of whether or not the lower court correctly dismissed the complaint for damages for infringement of patent and unfair competition on the ground of failure to state a cause of action.

It is axiomatic that in resolving a motion to dismiss a complaint on the ground of failure to state a cause of action, the court should hypothetically assume the truth of the factual allegations of the complaint (except allegations of facts the falsity of which the court may take judicial notice of) and determine whether on the basis thereof, the complainant is entitled to the relief demanded. Had the lower court applied the foregoing formula, it would not have Dismissed, on the ground of failure to state a cause of action, the complaint for damages for infringement of patent and unfair competition. For, instead of hypothetically assuming the truth of the factual allegations of the complaint, the lower court had ruled against their veracity and consequently concluded that the complaint states no cause of action.

As can be gleaned from the appealed order, the pertinent portions of which We have heretofore quoted, the lower court premised its ruling that there is no cause of action for infringement of patent on the assumption that "Chloramphenicol" (the substance covered by Letters Patent No. 50) and "Chloramphenicol Palmitate" (the substance covered by Letters Patent No. 279) are the same. Thus, instead of hypothetically assuming the truth of the plaintiff's allegation that "Chloramphenicol" and "Chloramphenicol Palmitate are two different substances, the lower court had ruled against its veracity. This is clearly an error considering that the said assumed fact cannot qualify as something which the court could take judicial notice of nor was it competent to so find in the absence of evidence formally presented to that effect. The existence of two patents separately covering said substances simply militates against said factual assumption and requires the presentation of evidence sufficient to convince the court that said substances are indeed the same.

Had the lower court hypothetically assumed as true, for the purpose of the motion to dismiss, the allegations in the complaint that "Chloramphenicol" and "Chloramphenicol Palmitate" are entirely different substances and that "Venimicetin Suspension" actually contains "Chloramphenicol Palmitate" and not "Chloramphenicol" as indicated in its package and label, it necessarily would have to conclude that the complaint states causes of action for infringement of patent and for unfair competition. For defendants would then be guilty of infringement of patent by selling, causing to be sold, using and causing to be used "Chloramphenicol Palmitate", without the consent or authority of the plaintiff as the holder of Letters Patent No. 279, Claim 4 of which allegedly covers said substance. Sections 37 and 42 of R.A. No. 165 provide:1äwphï1.ñët

SEC. 37. RIGHTS OF PATENTEES. – A patentee shall have the exclusive right to make, use and sell the patented machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the territory of the Philippines for the term of the patent; and such making, using, or selling by any person without the authorization of the patentee, constitutes infringement of the patent. (Emphasis supplied.)

SEC. 42. CIVIL ACTION FOR INFRINGEMENT . – Any patentee, or anyone possessing any right, title or interest in and to the patented invention, whose rights have been infringed, may bring a civil action before the proper Court of First Instance, to recover from the infringed, damages sustained by reason of the infringement and to secure an injunction for the protection of his rights.

Likewise, the defendants would be guilty of unfair competition by falsely stating that defendant No. l's medicine called "Venimicetin Suspension" contains "Chloramphenicol" when in fact it actually contains "Chloramphenicol Palmitate", and that it is covered by a compulsory license from the plaintiff. Section 29 of R.A. No. 166 provides, inter alia;1äwphï1.ñët

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

xxx xxx xxx

(c) Any person who shall make any false statement in the course of trade ... .

Clearly, the lower court erred in dismissing, on the ground of failure to state a cause of action, the complaint for damages for infringement of patent and unfair competition.

WHEREFORE, the appealed order of dismissal is hereby set aside and the complaint for damages for infringement of patent and unfair competition is hereby reinstated. Without pronouncement as costs.

Barredo (Chairman), Aquino, Guerrero * and De Castro, JJ., concur.1äwphï1.ñët

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. NO. 156041 February 21, 2007

PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), represented by its President, MANUEL J. CHAVEZ, Petitioner, vs.FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT OF AGRICULTURE, FPA OFFICER- IN-CHARGE CESAR M. DRILON, AND FPA DEPUTY DIRECTOR DARIO C. SALUBARSE, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking to set aside the Decision1 of the Regional Trial Court of Quezon City, Branch 90 (RTC) dated November 5, 2002.

The case commenced upon petitioner’s filing of a Petition For Declaratory Relief With Prayer For Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining Order with the RTC on January 4, 2002. Petitioner, a non-stock corporation duly organized and existing under the laws of the Philippines, is an association of pesticide handlers duly licensed by respondent Fertilizer and Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory Policies and Implementing Guidelines, which provides thus:

3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a pesticide active ingredient in the Philippines will be granted proprietary protection for a period of seven years from the date of such registration. During this period subsequent registrants may rely on these data only with third party authorization or otherwise must submit their own data. After this period, all data may be freely cited in support of registration by any applicant, provided convincing proof is submitted that the product being registered is identical or substantially similar to any current registered pesticide, or differs only in ways that would not significantly increase the risk of unreasonable adverse effects.

Pesticides granted provisional registration under P.D. 1144 will be considered first registered in 1977, the date of the Decree.

Pesticide products in which data is still under protection shall be referred to as proprietary pesticides, and all others as commodity pesticides. (Emphasis supplied)

Petitioner argued that the specific provision on the protection of the proprietary data in FPA’s Pesticide Regulatory Policies and Implementing Guidelines is unlawful for going counter to the objectives of Presidential Decree No. 1144 (P.D. No. 1144); for exceeding the limits of delegated authority; and for encroaching on the exclusive jurisdiction of the Intellectual Property Office.

On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of merit. The RTC held that "the FPA did not exceed the limits of its delegated authority in issuing the aforecited Section 3.12 of the Guidelines granting protection to proprietary data x x x because the issuance of the aforecited Section was a valid exercise of its power to regulate, control and develop the pesticide industry under P.D. 1144"2 and the assailed provision does "not encroach on one of the functions of the Intellectual Properly Office (IPO)."3

Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for review on certiorari where the following issues are raised:

I

WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE OF ITS DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY PROTECTION TO DATA SUBMITTED TO SUPPORT THE FIRST FULL OR CONDITIONAL REGISTRATION OF A PESTICIDE INGREDIENT IN THE PHILIPPINES;

II

WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS PESTICIDE REGULATORY

POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR PROPRIETARY DATA PROTECTION;

III

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL RESTRAINT OF FREE TRADE;

IV

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS COUNTER TO THE OBJECTIVES OF P.D. NO. 1144;

V

WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 90, COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE VALIDITY OF SECTION 3.12 OF THE PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES ISSUED BY RESPONDENT FPA.

Respondents, on the other hand, maintain that the provision on the protection of proprietary data in the FPA's Pesticide Regulatory Policies and Implementing Guidelines is valid and legal as it does not violate the objectives of P.D. No. 1144; the proprietary data are a substantial asset which must be protected; the protection for a limited number of years does not constitute unlawful restraint of free trade; and such provision does not encroach upon the jurisdiction of the Intellectual Property Office.

Respondents expound that since under P.D. No. 1144, the FPA is mandated to regulate, control and develop the pesticide industry, it was necessary to provide for such protection of proprietary data, otherwise, pesticide handlers will proliferate to the the detriment of the industry and the public since the inherent toxicity of pesticides are hazardous and are potential environmental contaminants.

They also pointed out that the protection under the assailed Pesticide Regulatory Policies and Implementing Guidelines is warranted, considering that the development of proprietary data involves an investment of many years and large sums of money, thus, the data generated by an applicant in support of his application for registration are owned and proprietary to him. Moreover, since the protection accorded to the proprietary data is limited in time, then such protection is reasonable and does not constitute unlawful restraint of trade.

Lastly, respondents emphasize that the provision on protection of proprietary data does not usurp the functions of the Intellectual Property Office (IPO) since a patent and data protection are two different matters. A patent prohibits all unlicensed making, using and selling of a particular product, while data protection accorded by the FPA merely prevents copying or unauthorized use of an applicant's data, but any other party may independently generate and use his own data. It is further argued that under Republic Act No. 8293 (R.A. No. 8293), the grant of power to the IPO to administer and implement State policies on intellectual property is not exclusionary as the IPO is even allowed to coordinate with other government agencies to formulate and implement plans and policies to strengthen the protection of intellectual property rights.

The petition is devoid of merit.

The law being implemented by the assailed Pesticide Regulatory Policies and Implementing Guidelines is P.D. No. 1144, entitled Creating the Fertilizer and Pesticide Authority and Abolishing the Fertilizer Industry Authority. As stated in the Preamble of said decree, "there is an urgent need to create a technically-oriented government authority equipped with the required expertise to regulate, control and develop both the fertilizer and the pesticide industries." (Underscoring supplied) The decree further provided as follows:

Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing handlers of pesticides, fertilizers and other agricultural chemical inputs. The FPA shall have the following powers and functions:

I. Common to Fertilizers, Pesticides and other Agricultural Chemicals

x x x

4. To promulgate rules and regulations for the registration and licensing of handlers of these products, collect fees pertaining thereto, as well as the renewal, suspension, revocation, or cancellation of such registration or licenses and such other rules and regulations as may be necessary to implement this Decree;

x x x

Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is hereby authorized to issue or promulgate rules and regulations to implement, and carry out the purposes and provisions of this Decree.

Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144 by issuing regulations that provide for protection of proprietary data? The answer is in the negative.

Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to implement and carry out the purposes and provisions of said decree, i.e., to regulate, control and develop the pesticide industry. In furtherance of such ends, the FPA sees the protection of proprietary data as one way of fulfilling its mandate. In Republic v. Sandiganbayan,4 the Court emphasized that:

x x x [t]he interpretation of an administrative government agency, which is tasked to implement a statute is generally accorded great respect and ordinarily controls the construction of the courts. The reason behind this rule was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise:

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to the accumulation of experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs. Commissioner of Customs, the Court stressed that executive officials are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the law, and to have formed an independent, conscientious and competent expert opinion thereon. The courts give much weight to the government agency officials charged with the implementation of the law, their competence, expertness, experience and informed judgment, and the fact that they frequently are the drafters of the law they interpret."

x x x.5 [Emphasis supplied]

Verily, in this case, the Court acknowledges the experience and expertise of FPA officials who are best qualified to formulate ways and means of ensuring the quality and quantity of pesticides and handlers thereof that should enter the Philippine market, such as giving limited protection to proprietary data submitted by applicants for registration. The Court ascribes great value and will not disturb the FPA's determination that one way of attaining the purposes of its charter is by granting such protection, specially where there is nothing on record which shows that said administrative agency went beyond its delegated powers.

Moreover, petitioner has not succeeded in convincing the Court that the provision in question has legal infirmities.1awphi1.net

There is no encroachment upon the powers of the IPO granted under R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines. Section 5 thereof enumerates the functions of the IPO. Nowhere in said provision does it state nor can it be inferred that the law intended the IPO to have the exclusive authority to protect or promote intellectual property rights in the Philippines. On the contrary, paragraph (g) of said Section even provides that the IPO shall "[c]oordinate with other government agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual property rights in the country." Clearly, R.A. No. 8293 recognizes that efforts to fully protect intellectual property rights cannot be undertaken by the IPO alone. Other agencies dealing with intellectual property rights are, therefore, not precluded from issuing policies, guidelines and regulations to give protection to such rights.

There is also no evidence whatsoever to support petitioner's allegation that the grant of protection to proprietary data would result in restraining free trade. Petitioner did not adduce any reliable data to prove its bare allegation that the protection of proprietary data would unduly restrict trade on pesticides. Furthermore, as held in Association of Philippine Coconut Desiccators v. Philippine Coconut Authority,6 despite the fact that "our present Constitution enshrines free enterprise as a policy, it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare." There can be no question that the unregulated use or proliferation of pesticides would be hazardous to our environment. Thus, in the aforecited case, the Court declared that "free enterprise does not call for removal of ‘protective regulations’."7 More recently, in Coconut Oil Refiners Association, Inc. v. Torres,8 the Court held that "[t]he mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition." It must be clearly explained and proven by competent evidence just exactly how such protective regulation would result in the restraint of trade.

In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and Implementing Guidelines granting protection to proprietary data is well within the authority of the FPA to issue so as to carry out its purpose of controlling, regulating and developing the pesticide industry.

WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court of Quezon City, Branch 90, in SP. Civil Case No. Q-01-42790 is AFFIRMED.

SO ORDERED.

FIRST DIVISION

[G.R. Nos. 160054-55. July 21, 2004]

MANOLO P. SAMSON, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari is the March 26, 2003 Order[1] of the Regional Trial Court of Quezon City, Branch 90, which denied petitioner’s – (1) motion to quash the information; and (2) motion for reconsideration of the August 9, 2002 Order denying his motion to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. Petitioner also questioned its August 5, 2003 Order[2] which denied his motion for reconsideration.

The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3 (a), in relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save for the dates and places of commission, were filed against petitioner Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said informations read:

That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng Corporation located at Robinson’s Galleria, EDSA corner Ortigas Avenue, Quezon City, did then and there willfully, unlawfully and feloniously distribute, sell and/or offer for sale CATERPILLAR products such as footwear, garments, clothing, bags, accessories and paraphernalia which are closely identical to and/or colorable imitations of the authentic Caterpillar products and likewise using trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of the buying public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and owner of the following internationally: “CATERPILLAR”, “CAT”, “CATERPILLAR & DESIGN”, “CAT AND DESIGN”, “WALKING MACHINES” and “TRACK-TYPE TRACTOR & DESIGN.”

CONTRARY TO LAW.[3]

On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition pending with the same branch; and also in view of the pendency of a petition for review filed with the Secretary of Justice assailing the Chief State Prosecutor’s resolution finding probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the trial court denied the motion to suspend arraignment and other proceedings.

On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of the order denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense charged. He contended that since under Section 170 of R.A. No. 8293, the penalty5

of imprisonment for unfair competition does not exceed six years, the offense is cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691.

In its assailed March 26, 2003 Order, the trial court denied petitioner’s twin motions.6 A motion for reconsideration thereof was likewise denied on August 5, 2003.

Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed orders.

The issues posed for resolution are – (1) Which court has jurisdiction over criminal and civil cases for violation of intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44 on the ground of – (a) the existence of a prejudicial question; and (b) the pendency of a petition for review with the Secretary of Justice on the finding of probable cause for unfair competition?

Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to Two Hundred Thousand Pesos, to wit:

SEC. 170. Penalties. – Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition] and Section 169.1 [False Designation of Origin and False Description or Representation].

Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150, 155, 164, 166, 167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws, thus –

SEC. 163. Jurisdiction of Court. – All actions under Sections 150, 155, 164 and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. (Emphasis supplied)

The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law) which provides that jurisdiction over cases for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is lodged with the Court of First Instance (now Regional Trial Court) –

SEC. 27. Jurisdiction of Court of First Instance. – All actions under this Chapter [V – Infringement] and Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or Representation], hereof shall be brought before the Court of First Instance.

We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The repealing clause of R.A. No. 8293, reads –

SEC. 239. Repeals. – 239.1. All Acts and parts of Acts inconsistent herewith, more particularly Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed. (Emphasis added)

Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not have used the phrases “parts of Acts” and “inconsistent herewith;” and it would have simply stated “Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended are hereby repealed.” It would have removed all doubts that said specific laws had been rendered without force and effect. The use of the phrases “parts of Acts” and “inconsistent herewith” only means that the repeal pertains only to provisions which are repugnant or not susceptible of harmonization with R.A. No. 8293.7 Section 27 of R.A. No. 166, however, is consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction over violations of intellectual property rights with the Metropolitan Trial Courts, it would have expressly stated so under Section 163 thereof.

Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over that granted by a general law to Municipal Trial Courts.8

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws9 conferring jurisdiction over violations of intellectual property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691, which is a general law.10 Hence, jurisdiction over the instant criminal case for unfair competition is properly lodged with the Regional Trial Court even if the penalty therefor is imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from P50,000.00 to P200,000.00.

In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002 designating certain Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution consolidating jurisdiction to hear and decide Intellectual Property Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated as Special Commercial Courts.

The case of Mirpuri v. Court of Appeals,11 invoked by petitioner finds no application in the present case. Nowhere in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did we make a categorical ruling therein that jurisdiction over cases for violation of intellectual property rights is lodged with the Municipal Trial Courts. The passing remark in Mirpuri on the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement in cases for violation of intellectual property rights.

Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer in his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial question.

At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other.12 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil

action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence.

In the case at bar, the common element in the acts constituting unfair competition under Section 168 of R.A. No. 8293 is fraud.13 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which as admitted14 by private respondent also relate to unfair competition, is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of the criminal cases at bar.

Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides –

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

x x x x x x x x x

(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.

While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited 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.

In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his motion to suspend. His pleadings and annexes submitted before the Court do not show the date of filing of the petition for review with the Secretary of Justice.15 Moreover, the Order dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus failed to discharge the burden of proving that he was entitled to a suspension of his arraignment and that the questioned orders are contrary to Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges must prove his allegations.

In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court committed grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. — The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto.

x x x x x x x x x

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. (Emphasis added)

WHEREFORE, in view of all the foregoing, the petition is DISMISSED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

THIRD DIVISION

ANDREA TAN, CLARITA G.R. No.148420LLAMAS, VICTOR ESPINA and LUISA ESPINA, Petitioners,

Present:PANGANIBAN, J., ChairmanSANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,CARPIO MORALES and GARCIA, JJ.

BAUSCH & LOMB, INC.Respondent. Promulgated:

December 15, 2005x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N CORONA, J.:Assailed in this petition for review[1] are the decision[2] and resolution[3] of the Court of

Appeals which set aside the December 22, 1998 order[4] of Judge Genis Balbuena of Branch

21, Regional Trial Court (RTC), Cebu City and ordered the transfer of Criminal Case No. CBU-

45890 to Branch 9, RTC, Cebu City.

The antecedents follow.

On April 8, 1997, an information[5] for violation of paragraph 1, Article 189 [6] of the

Revised Penal Code (RPC) was filed before Branch 21, RTC, Cebu City against petitioners

Andrea Tan, Clarita Llamas, Victor Espina and Luisa Espina of Best Buy Mart, Inc. The

information read:

That on or about June 27, 1996 and sometime prior or subsequent thereto, in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, abovementioned accused, conspiring and mutually helping each other, did then and there willfully, unlawfully and feloniously distribute and sell counterfeit RAY BAN sunglasses bearing the appearance and trademark of RAY BAN in the aforesaid store wherein they have direct control, supervision and management thereby inducing the public to believe that these goods offered by them are those of RAY BAN to the damage and prejudice of BAUSCH AND LOMB, INC., the exclusive owner and user of trademark RAY BAN on sunglasses.[7]

On January 21, 1998, respondent filed a motion to transfer the case to Branch 9, RTC, Cebu

City. Administrative Order No. 113-95[8] (A.O. No. 113-95) designated the said branch as the

special court in Region VII to handle violations of intellectual property rights.

On March 2, 1998, petitioners filed a motion to quash[9] the information on the ground

that the RTC had no jurisdiction over the offense charged against them. The penalty [10]

provided by the RPC for the crime was within the jurisdiction of the Municipal Trial Court in

Cities (MTCC).

On March 6, 1998, respondent filed an opposition to the motion to quash, [11]

explaining that BP 129 had already transferred the exclusive jurisdiction to try and decide

violations of intellectual property rights from the MTC and MTCC to the RTC and that the

Supreme Court had also issued Administrative Order No. 104-96 (A.O. No. 104-96) [12]

deleting and withdrawing the designation of several branches of the MTC and MTCC as

special intellectual property courts.

On December 22, 1998, the court a quo denied respondent’s motion to transfer the

case and granted petitioners’ motion to quash. It ruled:

Accused [wa]s charged for violation of Art. 189 of Revised Penal Code the penalty for which is prision correccional in its minimum period or a fine ranging from P500.00 to P2,000.00, or both. Hence, within the jurisdiction of the metropolitan and municipal trial courts (Sec. 32(2), B.P. Blg. 129, as amended).Administrative Orders Nos. 113-95 and 104-96, cited by plaintiff, cannot prevail over the express provisions of Batas Pambansa Blg. 129, as amended, jurisdiction of courts being a matter of substantive law.If this Court has no jurisdiction over the case, the same is true with Branch 9 of the same court, Therefore, the motion to transfer the case to the latter should fail.WHEREFORE, premises considered, the motion to transfer is denied, while the motion to quash is granted. The case is thus dismissed.SO ORDERED.[13]

Respondent received the order on January 21, 1999 but filed neither an appeal nor a

motion for reconsideration. Rather, it filed a petition for certiorari[14] in the Court of Appeals

on March 23, 1999 or one (1) day beyond the period allowed in Section 4, Rule 65 [15] of the

Rules of Court.

Respondent’s procedural lapses notwithstanding, the appellate court gave due

course to the petition and set aside the trial court order:

WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The assailed Order of December 22, 1998 is VACATED and another is entered ordering the transfer of Crim. Case No. CBU-45890 to Branch 9 of the Regional Trial Court of Cebu City, and directing the public respondent to accordingly transmit the records thereof.SO ORDERED.[16]

Hence, the present petition for review, centered on the following issues:

I. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT DISMISSING THE PETITION OF RESPONDENT THAT IS FRAUGHT WITH FATAL INFIRMITIES.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE CORRECT RULING OF THE TRIAL COURT THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE OFFENSE OF UNFAIR COMPETITION UNDER ARTICLE 189 OF THE REVISED PENAL CODE.[17]

There is no merit in the petition.

As to the first assigned error, petitioners contend that the Court of Appeals erred in giving

due course to the petition for certiorari because respondent failed to appeal or file a motion

for reconsideration of the trial court’s order granting the motion to quash. Worse, respondent

filed the petition in the appellate court one day after the reglementary period expired.

Needless to state, the acceptance of a petition for certiorari as well as the grant of due

course thereto is, in

general, addressed to the sound discretion of the court.[18]

Besides, the provisions of the Rules of Court, which are technical rules, may be

relaxed in certain exceptional situations.[19] Where a rigid application of the rule that

certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of

justice, it is within our power to suspend the rules or exempt a particular case from its

operation.[20]

Under certain special circumstances,[21] a petition for certiorari may be given due

course notwithstanding that no motion for reconsideration was filed in the lower court. The

exception applies in this case since the order of the trial court was, as will be discussed later,

a patent nullity.

Likewise, the one-day delay in the filing of the petition may be excused on the basis

of equity to afford respondent the chance to prove the merits of the complaint.

In Yao v. Court of Appeals,[22] we held:

In the interest of substantial justice, procedural rules of the most mandatory character in terms of compliance may be relaxed. In other words, if strict adherence to the letter of the law would result in absurdity and manifest injustice or where the merit of a party’s cause is apparent and outweighs consideration of non-compliance with certain formal requirements, procedural rules should definitely be liberally construed. A party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on mere technicalities.Hence, the only relevant issue left for our resolution is whether or not the jurisdiction

over the crime allegedly committed by petitioners is vested on the RTC.

Section 5 (5) of the 1987 Constitution empowers the Supreme Court to promulgate rules

concerning pleading, practice and procedure in all courts. The limitations to this rule-making

power are the following: the rules must (a) provide a simplified and inexpensive procedure

for the speedy disposition of cases; (b) be uniform for all courts of the same grade and (c)

not diminish, increase or modify substantive rights.[23] As long as these limits are met, the

argument used by petitioners that the Supreme Court, through A.O. Nos. 113-95 and 104-

96, transgressed on Congress’ sole power to legislate, cannot be sustained.

A.O. No. 113-95 designated special intellectual property courts to promote the

efficient administration of justice and to ensure the speedy disposition of intellectual

property cases.

A.O. No. 104-96,[24] on the other hand, was issued pursuant to Section 23 of BP 129 [25]

which transferred the jurisdiction over such crimes from the MTC and MTCC to the RTC and

which furthermore gave the Supreme Court the authority to designate certain branches of

the RTC to exclusively handle special cases in the interest of the speedy and efficient

administration of justice. Accordingly, the RTC was vested with the exclusive and original

jurisdiction to try and decide intellectual property cases.

The transfer of jurisdiction from the MTC and MTCC to the RTC did not in any way

affect the substantive rights of petitioners. The administrative orders did not change the

definition or scope of the crime of unfair competition with which petitioners were charged.

Both administrative orders therefore have the force and effect of law, having been

validly issued by the Supreme Court in the exercise of its constitutional rule-making power.

The trial court, being a subordinate court, should have followed the mandate of the later

A.O. 104-96 which vested jurisdiction over the instant case on the RTC. Thus, the appellate

court correctly found that the court a quo committed grave abuse of discretion.

Furthermore, the order of the trial court was a patent nullity. In resolving the pending

incidents of the motion to transfer and motion to quash, the trial court should not have

allowed petitioners to collaterally attack the validity of A.O. Nos. 113-95 and 104-96. We

have ruled time and again that the constitutionality or validity of laws, orders, or such other

rules with the force of law cannot be attacked collaterally. There is a legal presumption of

validity of these laws and rules. Unless a law or rule is annulled in a direct proceeding, the

legal presumption of its validity stands.[26] The trial court’s order was consequently null and

void.

The transfer of this case to Branch 9, RTC, Cebu City, however, is no longer possible.

A.M. No. 03-03-03-SC[27] consolidated the intellectual property courts and commercial SEC

courts in one RTC branch in a particular locality to streamline the court structure and to

promote expediency. The RTC branch so designated will try and decide cases involving

violations of intellectual property rights, and cases formerly cognizable by the Securities and

Exchange Commission. It is now called a special commercial court. In Region VII, the

designated special commercial court is Branch 11, RTC, Cebu City. The transfer of this case

to that court is therefore warranted.

WHEREFORE, the Court of Appeals decision dated October 20, 2000 is hereby

AFFIRMED with the MODIFICATION that Criminal Case No. CBU-45890 shall be transferred

to Branch 11, RTC, Cebu City. Let the records of the case be transmitted thereto and the

case tried and decided with dispatch.

Costs against petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 179127 December 24, 2008

IN-N-OUT BURGER, INC., petitioner, vs.SEHWANI, INCORPORATED AND/OR BENITA’S FRITES, INC., respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1 dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision2 dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition.

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. 3

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for "IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark "IN N OUT (the inside of the letter "O" formed like a star)."5 By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated.

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo." These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use.6 Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioner’s products.7

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner’ demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the "IN N OUT" trademark for a fair and reasonable consideration. 8

Petitioner was able to register the mark "Double Double" on 4 July 2002, based on their application filed on 2 June 1997.9 It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benita’s receipts bore the phrase, "representing IN-N-OUT Burger."10 It should be noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as "IN N OUT (the inside of the letter "O" formed like a star)," respondents used the mark "IN-N-OUT."11

To counter petitioner’s complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark "IN N OUT" in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks

and Technology Transfer (BPTTT) an application for the registration of the mark "IN N OUT (the inside of the letter "O" formed like a star)." Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, "IN N OUT." Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark "IN N OUT," should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.12

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioner’s marks are internationally well-known, given the world-wide registration of the mark "IN-N-OUT," and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that "In-N-Out Burger and Arrow Design" was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN N OUT" in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioner’s goodwill by copying the mark "IN-N-OUT Burger" exactly. The inside of the letter "O" in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the "IN-N-OUT" mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT" (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benita’s Frites are hereby ordered to permanently cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods and in its business. With regards the mark "Double-Double," considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from using the mark Double-Double. NO COSTS. 14

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents’ Motion for Reconsideration15 and petitioner’s Motion for Partial Reconsideration16 were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively.

Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar.

G.R. No. 171053

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal.

Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY

THE BUREAU OF LEGAL AFFAIR’S (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENT’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.

Respondents thus prayed:

WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]’s Appeal No. 14-2004-00004.

Other reliefs, just and equitable under the premises, are likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents’ Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents’ appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration.

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008.

G.R. No. 179127

Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005.

During the pendency of petitioner’s appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents’ Petition in CA-G.R. SP No. 88004.

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioner’s appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents’ claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark "IN-N-OUT." Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter "O," a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents’ reasoning for the non-use of the star symbol. The IPO Director General also considered respondents’ use of petitioner’s registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents’ acts of unfair competition, exemplary damages, and attorney’s fees.21 The fallo of the Decision reads:

WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows:

[Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]:

1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28);

2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00);

3. Attorney’s fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00).

All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce.

Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes.22

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEY’S FEES TO RESPONDENTS

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIR’S DECISION (1) CANCELLING PETITIONER’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS

Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioner’s complaint was already barred by laches.23

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer:

WHEREFORE, [respondents herein] respectfully pray that this Honorable Court:

(a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director General’s Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court.

(b) after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and

(c) after giving due course to this petition:

(i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorney’s fees to the respondent

(ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable to the [petitioner] for damages and attorney’s fees;

(iii) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]’s legal capacity to sue; that [petitioner]’s trademarks are well-known; and that respondent has the exclusive right to use the same; and

(iv) make the injunction permanent.

[Respondents] also pray for other reliefs, as may deemed just or equitable.24

On 18 July 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General.

The Court of Appeals, in its Decision, initially addressed petitioner’s assertion that respondents had committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents’ two Petitions. The subject of Respondents’ Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents’ appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents’ Petition in CA-G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorney’s fees, to petitioner.

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to

rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code.

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondent’s claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26

The Court of Appeals, in a Resolution dated 31 July 2007,27 denied petitioner’s Motion for Reconsideration of its aforementioned Decision.

Hence, the present Petition, where petitioner raises the following issues:

I

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER.28

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision29 in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director General’s dismissal of respondents’ appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks.

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other.

Formal Defects of the Petition

Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition.

Respondents point out that the Secretary’s Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretary’s Certificate reads:

Subscribed and sworn to me this 20th day of August 2007 in Irving California.

Rachel A. Blake (Sgd.)Notary Public30

Respondents aver that the said Secretary’s Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1) petitioner’s Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31

Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Baranda’s Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys’ number and the

IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary public’s territorial jurisdiction, as required under the 2004 Rules on Notarial Practice. 32

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat.

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed.33 A Secretary’s Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34

Even assuming that the Secretary’s Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. 35 The party itself need not sign the verification. A party’s representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36 Atty. Barranda, as petitioner’s counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such.

Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Baranda’s Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons.37 The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits.

This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Court’s zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts.

Forum Shopping

Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004.

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.38

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.39

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping.

There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal Affair’s (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the mark ‘IN-N-OUT’ and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence."40 The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: "The IPO Director General committed grave error in affirming the Bureau of Legal Affair’s (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business."41 Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of

the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of res judicata.

Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner.

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals.

True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.42 Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances.

The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances.

The Jurisdiction of the IPO

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision:

Section 163. Jurisdiction of Court.–All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation.

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus:

Section 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs shall have the following functions:

10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents;

10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings.

(b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties:

(i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order;

(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following:

(1) An assurance to comply with the provisions of the intellectual property law violated;

(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation

(3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and

(4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs.

The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking.

(iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide;

(iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense;

(v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation;

(vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year;

(vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office;

(viii) The assessment of damages;

(ix) Censure; and

(x) Other analogous penalties or sanctions.

10.3 The Director General may by Regulations establish the procedure to govern the implementation of this Section.43 (Emphasis provided.)

Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioner’s intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs.

The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit:

Section 7. The Director General and Deputies Director General. 7.1 Fuctions.–The Director General shall exercise the following powers and functions:

x x x x

b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts.

Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.–Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws.

x x x x

Section 170. Penalties.–Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner’s administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs.

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the "IN-N-OUT" trademarks vis-à-vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.45

Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner.

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. 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. Actual fraudulent intent need not be shown.46

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz:

The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioner’s] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioner’s] IN-N-OUT Burger’s name and trademark IN-N-OUT with Arrow design.

There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter’s marks in the business. [Respondents’] explanation that they are not using their own registered trademark due to the difficulty in printing the "star" does not justify the unauthorized use of the [petitioner’s] trademark instead.

Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x.

x x x x

[Respondents’] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit "GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioner’s] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held:

"We also note that In-N-Out Burger is likewise, [petitioner’s] corporate name. It has used the "IN-N-OUT" Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems "In-N-Out" Burger in the Philippines and the respondents’ are unlawfully using and appropriating the same."

The Office cannot give credence to the [respondent’s] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents’ practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable.

In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not.

[Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants’] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 47

Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.48 As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition.

With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner:

Section 156. Actions, and Damages and Injunction for Infringement.–156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents’ gross sales, and then doubling the amount thereof on account of respondents’ actual intent to mislead the public or defraud the petitioner,49 thus, arriving at the amount of actual damages of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.50 While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered.51 Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorney’s fees may likewise be awarded to petitioner since exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondent’s failure to present countervailing evidence. Considering moreover the reputation of petitioner’s counsel, the actual attorney’s fees paid by petitioner would far exceed the amount that was awarded to it.52

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGOAssociate Justice

Chairperson

MA. ALICIA AUSTRIA-MARTINEZAssociate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

RUBEN T. REYESAssociate Justice