G.R. L-24919 January 28, 1980

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

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 onMarch 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:

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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 inex 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:

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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.

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

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

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

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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:

(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.

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

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." 11Indeed, 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 totality of all these features are viewed in combination with the combination with the Ideal composition of cement, sodium silicate 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 presumption of validity of appellee's patent. There is no indication no indication in the records of this case and this Court is unaware

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, or known to, others previous to his discovery thereof. 13

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 infringement committed by the defendants who knew all the time knew all the time about the existence of plaintiff's patent, the patent, the Court feels there is reason to grant plaintiff maximum plaintiff maximum damages in the sum of P10,020.99. And in P10,020.99. And in order to discourage patent infringements and infringements and to give more teeth to the provisions of the provisions of the patent law thus promoting a stronger public stronger public policy committed to afford greater incentives and incentives and protection to inventors, the Court hereby awards hereby awards plaintiff exemplary damages in the sum of sum of P5,000.00 to be paid jointly and severally by defendants. defendants. Considering the status of plaintiff as a reputable reputable businessman, and owner of the likewise reputed House reputed House of Pre-Cast, he is entitled to an award of moral award of moral damages in the sum of P50,000.00. 23

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. valid patent. Necessarily, said acts of defendants have caused have caused plaintiff considerable mental suffering, considering 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 amount of P50,000.00 awarded by the lower court is warranted warranted by the circumstances. We feel that said amount should amount should be reduced to P3,000.00 by way of compensating compensating appellee for his moral suffering. "Willful injury to "Willful injury to property may be a legal ground for awarding awarding moral damages if the court should find that, under the that, under the circumstances such damages are justly due" (Art. 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.

G.R. No. L-27004 August 16, 1983

PARKE, DAVIS & COMPANY, petitioner, vs. DOCTOR'S PHARMACEUTICALS, INC. and TIBURCIO S. EVALLE, in his capacity as Director of Patents,respondents.

In G.R. No. L-22221, 1 which involved the same parties in the instant case, the Court affirmed, in a decision dated August 31, 1965 respondent Director of Patents decision rendered on November 15, 1963 in Inter Partes Case No. 181 ordering petitioner Parke Davis & Co. to grant respondent Doctor's Pharmaceuticals, Inc. a license to manufacture. use and sell in the Philippines its own products containing petitioner's chemical called "chloramphenicol."

The dispositive portion of respondent official's decision reads:

Wherefore, the Respondent-Patentee is hereby ordered to grant the Petitioner a license under Letters Patent No. 50. The parties hereto are hereby ordered to submit to me, within THIRTY (30) days from their receipt of a copy of this decision a licensing agreement, and in default thereof, they may submit within the same period their respective proposals, It must be shown that the negotiations as to the terms and conditions thereof have been made between the parties, and if there are points of disagreement I shall fix such terms and conditions.

If, within the said period, no licensing agreement is filed or no negotiations therefor transpires between the parties, I shall issue the licensing agreement in such terms and conditions as may be just and reasonable under the circumstances.

Under Section 36 of Republic Act 165 (Patent Law), the Director of Patents is authorized, in case the parties failed to submit a licensing agreement, to fix the terms and conditions of the license. Thus, after the Court's decision in G.R. No. L-22221 became final and executory, without the parties submitting a licensing agreement, the Director of Patents, in a resolution dated March 25, 1966, and amended on November 25, 1966, issued a license in favor of respondent company under petitioner's Letters Patent No. 50 for the patented chemical "chloramphenicol", fixing the terms and conditions thereof and declaring that the license should take effect immediately. The license provides, among others, that respondent company should pay petitioner Parke, Davis & Co., a royalty, on all licensed products containing "chloramphenicol" made and sold by respondent company in an amount equivalent to Eight Percent (8%) of the net sales which petitioner company now claims as grossly inadequate and proposes that it be increased to 15%. Petitioner insists that the fixing of the royalty rate by the Director of Patents is arbitrary and without any support in evidence pointing out that the prevailing rate for compulsory licensing on the net sales of medicines containing the patented article is 15% and 18% of the selling price. In asking for a 15% royalty rate, petitioner alleges that it is the same rate prevailing in two compulsory licenses for patents on medicine in Great Britain, and that in the case of J.R. Geigy S.A.'s Patent in Canada, the rate of 12 1/2 % based on net sales was allowed. On the other hand respondent company points out that in a licensing agreement between Collett & Co. of Norway and Lexal Laboratories of the Philippines, royalties of 5% on a vitamin preparation and 7%, on a pharmaceutical pellet based on net sales, were agreed upon.

It is settled that findings of fact of administrative bodies will not be interfered with by courts of justice in the absence of a grave abuse of discretion on the part of said bodies or unless the aforementioned findings are not supported by substantial evidence. 2

The Court finds no abuse of discretion on the part of respondent Director of Patents considering that in fixing the royalty rate he made a compromise on the rate proposed by petitioner and those prevailing in other countries. The 8% royalty rate is midway between the rates in Canada and Norway. In developing countries like the Philippines, 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 giants 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." 3

The Court agrees with then Solicitor General, now retired Justice Antonio P. Barredo and then Asst. Solicitor General Pacifico de Castro, now Justice of the Supreme Court, that the 8% royalty rate is reasonable "considering that Doctor's Pharmaceutical, Inc. is a small manufacturing venture compared with Parke, Davis & Company, Inc. which is a subsidiary of the huge mother firm, Parke, Davis & Company of Michigan, U.S.A." (Annex D, Petition for Review). If Doctor's is making sufficient profit to justify an increase of royalty later, Parke, Davis & Co., Inc. can easily demand an increase, considering that the latter has access to the books and records of the former. 4

The Solicitor General correctly states that "there is no showing that Parke, Davis & Co., Inc. would tend to suffer business losses by the imposition of the 8 % royalty nor does it appear that it would cause other effects on the saleability of the antibiotics and consequently the health of the consuming public by the imposition of 8 %." 5

Petitioner's argument that respondent Director of Patents has no authority to declare that the resolution containing the licensing agreement "shall take effect immediately" is untenable for any award, order or decision of the Patent Office is immediately executory. This is clear from the provisions of Sec. 4, Rule 44 of the Rules of Court which provides that appeal shall not stay the

award, order or decision of the Public Service Commission, the Patent Office, and the Agricultural Inventions Board. Moreover, the resolution of respondent official was issued only after the herein parties failed to submit a licensing agreement and had left the same to the discretion of the Director of Patents. 6 As correctly argued by the Solicitor General "to hold that said Amended Resolution could not be made effectively would open the door for interminable litigation, thus rendering nugatory said compulsory licensing agreement sanctioned by the Director of Patents, as any implementing condition imposed therein could be the subject of litigation."

At any rate, the letter patent granted to petitioner on the particular process was to expire after seventeen years, and having been granted on February 9, 1950, the same already expired on February 9, 1967.

WHEREFORE, the instant petition is hereby dismissed and the questioned resolution of the Director of Patents is hereby affirmed in all respects. No costs.

G. R. No. 126627 August 14, 2003

SMITH KLINE BECKMAN CORPORATION, Petitioner, vs. THE HONORABLE COURT OF APPEALS and TRYCO PHARMA CORPORATION, Respondents.

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

On September 24, 1981, Letters Patent No. 145611 for the aforesaid invention was issued to petitioner for a term of seventeen (17) years.

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

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

Petitioner sued private respondent for infringement of patent and unfair competition before the Caloocan City Regional Trial Court

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

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

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

Private respondent lodged a Counterclaim against petitioner for such amount of actual damages as may be proven;P1,000,000.00 in moral damages; P300,000.00 in exemplary damages; and P150,000.00 in attorney’s fees.

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

WHEREFORE, in view of the foregoing, plaintiff’s complaint should be, as it is hereby, DISMISSED. The Writ of injunction issued in connection with the case is hereby ordered DISSOLVED.

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

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

Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages and P100,000.00 attorney’s fees as prayed for in its counterclaim but said amount awarded to defendant is subject to the lien on correct payment of filing fees.

SO ORDERED. (Underscoring supplied)

On appeal, the Court of Appeals, by Decision of April 21, 1995,10 upheld the trial court’s finding that private respondent was not liable for any infringement of the patent of petitioner in light of the latter’s failure to show that Albendazole is the same as the compound subject of Letters Patent No. 14561. Noting petitioner’s admission of the issuance by the U.S. of a patent for Albendazole in the name of Smith Kline and French Laboratories which was petitioner’s former corporate name, the appellate court considered the U.S. patent as implying that Albendazole is different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found that private respondent was not guilty of deceiving the public by misrepresenting that Impregon is its product.

The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained petitioner’s explanation that Patent Application Serial No. 18989 which was filed on October 8, 1976 was a divisional application of Patent Application Serial No.

17280 filed on June 17, 1975 with the Philippine Patent Office, well within one year from petitioner’s filing on June 19, 1974 of its Foreign Application Priority Data No. 480,646 in the U.S. covering the same compound subject of Patent Application Serial No. 17280.

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

WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the orders for the nullification of Letters Patent No. 14561 and for its cancellation are deleted therefrom.

SO ORDERED.

Petitioner’s motion for reconsideration of the Court of Appeals’ decision having been denied11 the present petition for review on certiorari12 was filed, assigning as errors the following:

I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCO’S "IMPREGON" DRUG, IS INCLUDED IN PETITIONER’S LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT.

II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE RESPONDENT TRYCO PHARMA

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

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

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

Petitioner concedes in its Sur-Rejoinder13 that although methyl 5 propylthio-2-benzimidazole carbamate is not identical with Albendazole, the former is an improvement or improved version of the latter thereby making both substances still substantially the same.

With respect to the award of actual damages in favor of private respondent in the amount of P330,000.00 representing lost profits, petitioner assails the same as highly speculative and conjectural, hence, without basis. It assails too the award of P100,000.00 in attorney’s fees as not falling under any of the instances enumerated by law where recovery of attorney’s fees is allowed.

In its Comment,14 private respondent contends that application of the doctrine of equivalents would not alter the outcome of the case, Albendazole and methyl 5 propylthio-2-benzimidazole carbamate being two different compounds with different chemical and physical properties. It stresses that the existence of a separate U.S. patent for Albendazole indicates that the same and the compound in Letters Patent No. 14561 are different from each other; and that since it was on account of a divisional application that the patent for methyl 5 propylthio-2-benzimidazole carbamate was issued, then, by definition of a divisional application, such a compound is just one of several independent inventions alongside Albendazole under petitioner’s original patent application.

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

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

The burden of proof to substantiate a charge for patent infringement rests on the plaintiff.16 In the case at bar, petitioner’s evidence consists primarily of its Letters Patent No. 14561, and the testimony of Dr. Orinion, its general manager in the

Philippines for its Animal Health Products Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2-benzimidazole carbamate also covers the substance Albendazole.

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

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

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

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

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

The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the patentee having the burden to show that all three components of such equivalency test are met.22

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

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

The foregoing discussions notwithstanding, this Court does not sustain the award of actual damages and attorney’s fees in favor of private respondent. The claimed actual damages of P330,000.00 representing lost profits or revenues incurred by private respondent as a result of the issuance of the injunction against it, computed at the rate of 30% of its alleged P100,000.00 monthly gross sales for eleven months, were supported by the testimonies of private respondent’s President25 and Executive Vice-President that the average monthly sale of Impregon wasP100,000.00 and that sales plummeted to zero after the issuance of the injunction.26 While indemnification for actual or compensatory damages covers not only the loss suffered (damnum emergens) but also profits which the obligee failed to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the actual amount of damages with a reasonable degree of certainty based on competent proof and on the best evidence obtainable by the injured party.27 The testimonies of private respondent’s officers are not the competent proof or best evidence obtainable to establish its right to actual or compensatory damages for such damages also require presentation of documentary evidence to substantiate a claim therefor.28

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

This Court, however, grants private respondent temperate or moderate damages in the amount of P20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary loss the amount of which cannot, from the nature of the case, be established with certainty.30

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

SO ORDERED.

G.R. No. 113407 July 12, 2000

LOTHAR SCHUARTZ, FRIEDEL VERDERBERG, UDOLF KUEHNE, DIETER FISCHER, JOHN BERNARD WATKINS, HARRY GREAVES, CHEN WOO CHIN, YOSHIMI IWASAKI, FABIO CARLI, MORTIMER THOMPSON, MALCOLM JOHN LAW, MICHIBAZU OCHI, KENJI SHIGEMATSU, ENI SHINOZAKI, ROBERT CABI-AKMAN, ARTHUR SPRENGER, REMY SIMOND and HEINRICH EVBERGGER, petitioners, vs. THE HONORABLE COURT OF APPEALS (SPECIAL FIFTH DIVISION) and THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER, respondents.

Petitioners appeal via certiorari from the decision1 of the Court of Appeals dismissing their appeal from the resolution of the Director of Patents that denied with finality their petition for revival of patent applications.

On different dates, petitioners applied to the Bureau of Patents, Trademarks and Technology Transfer for registration of patents. They hired the law firm Siguion Reyna, Montecillo and Ongsiako to process their patent applications in the Philippines, respectively identified as follows:

Applicant Serial No.

(1) Michibazu Ochi, Kenji Shigematsu and Eni Shinozaki- Issuance of letters patent for "Hackling Drum Room or Chamber at the Self-Feeding Equipment for Threshing of Upper Hackling System"

233542

(2) Robert Cabi-Akman, Arthur Sprenger and Remy Simond- Issuance of letters patent for "Colour Value Measurement"

296303

(3) Heinrich Evbergger- Issuance of letters patent for "Tool for Moulding the Top Past of a Plastic Container"

298984

(4) Mortimer Thompson- Issuance of letters patent for "Tamper 301125

Evident Closures and Packages"

(5) Yoshimi Iwasaki- Issuance of letters patent for "Method Generation for Hot Gas by Incinerators"

305486

(6) John Bernard Watkins, Harry Greaves and Chen Woo Chin- Issuance of letters patent for "Preservation Composition"

308197

(7) Fabio Carli- Issuance of letters patent for "Pharmaceutical Compositions"

319688

(8) Lothar Schuartz, Friedel Verderberg, Rudolf Kuehne, and Dieter Fischer- Issuance of letters patent for "Process for Producing Copper-Laminated Base Material for Printed Circuit Boards"

319749

(9) Malcolm John Law- Issuance of letters patent for "Electrodeposition of Chromium and Chromium Bearing Alloys." 11

3205010

Petitioners’ patent applications lacked certain requirements and the Bureau informed the law firm about it, through correspondences called Office Actions. As petitioners’ law firm did not respond to these office actions within the prescribed time, notices of abandonment were sent on the following dates:

Serial Nos. Date of Office Action Date of Abandonment

(1) 23354 March 20, 1987 July 21, 1987

(2) 29630 June 18, 1986 October 21, 1986

(3) 29898 June 11, 1987 June 22, 1987

(4) 30112 June 3, 1987 August 6, 1987

(5) 30548 June 10, 1987 August 18, 1987

(6) 30819 January 28, 1987 July 28, 1987

(7) 31968 January 14, 1987 July 15, 1987

(8) 31974 July 23, 1987 September 24, 1987

(9) 32050 March 31, 1987 June 1, 198712

On December 7, 1987, two employees of the law firm, George Bangkas and Rafael Rosas were dismissed from employment. Prior to the dismissal, these employees worked with the patent group of the law firm and had the duty, among others, of getting the firm’s letters and correspondence from the Bureau of Patents.

Immediately after their dismissal, the law firm conducted an inventory of all the documents entrusted to them. It was then that the firm learned about the notices of abandonment.

Thereafter, petitioners, through the law firm, filed with the Bureau of Patents separate petitions for revival of the patent applications on the following dates:

Serial Nos. Date Petition Filed

(1) 23354 March 3, 1988

(2) 29630 March 3, 1988

(3) 30122 January 15, 1988/February 29, 1988

(4) 30548 January 25, 1988/March 1, 1988

(5) 30819 May 27, 1988/July 15, 1988

(6) 31968 January 21, 1988/March 1, 1988

(7) 31974 March 14, 1988

(8) 32050 March 17, 1988

For Serial No. 29898, the applicant abandoned his application, for which reason no petition for revival was filed.13

On January 31, 1991, Director Luis M. Duka, Jr. of the Bureau of Patents denied all the petitions for revival because they were filed out of time. The dispositive portion specifically provides:

"WHEREFORE, in consideration of the foregoing premises, all the petitions for revival of the above-captioned abandoned applications bearing Serial Nos. 23354, 29630, 29898, 30112, 30548, 30819, 31968, 31974, and 32050, are hereby denied and no further petitions nor requests for reconsideration hereof shall be entertained hereafter.

"SO ORDERED.

"Makati, Metro Manila, Philippines, this 31st day of January 1991.

LUIS M. DUKA, JR. Director III" 14

On February 14, 1991, petitioners appealed the above resolution of the Bureau of Patents to the Court of Appeals.15

On August 13, 1992, the Court of Appeals dismissed the consolidated appeal for being filed beyond the 15-day reglementary period to appeal. There was an unreasonable delay before the petitions to revive applications were filed. Moreover, petitioners’ patent applications could not be a proper subject of a consolidated appeal because they covered separate and distinct subjects and had been treated by the Bureau of Patents as separate and individual applications. Specifically the decision provides:

"WHEREFORE, for reasons above stated and in the light of the applicable law on the matter, this petition for review on appeal from the order/decision of the Director of Bureau of Patents is hereby DISMISSED with costs against the appellants.1âwphi1

SO ORDERED." 16

On September 14, 1992, petitioners moved for reconsideration of the Court of Appeals’ decision, which the court denied on January 7, 1994. The appellate court found no cogent reason to justify the reversal or modification of its decision.17

Aggrieved, petitioners filed the instant petition for review on certiorari.18

At issue is the validity of the Court of Appeals’ dismissal of the consolidated appeal of petitioners from the Director of Patents’ denial of the revival of their patent applications.

Petitioners contend that the Court of Appeals committed grave abuse of discretion when it held that the consolidated appeal was filed out of time. They were appealing from the resolution of the Director of Patents dated January 31, 1991, which denied the petition for revival of the patent applications. They received a copy of the resolution, through their patent attorneys, on February 7, 1991, and filed the consolidated appeal seven (7) days after, or on February 14, 1991. According to petitioners, these dates clearly established that their appeal was seasonably filed.

The contention is not meritorious. If the facts above-mentioned were the sole basis of determining whether the appeal was filed on time, petitioners’ argument would be correct. However, petitioners lost sight of the fact that the petition could not be granted because of laches. Prior to the filing of the petition for revival of the patent application with the Bureau of Patents, an unreasonable period of time had lapsed due to the negligence of petitioners’ counsel. By such inaction, petitioners were deemed to have forfeited their right to revive their applications for patent.

Facts show that the patent attorneys appointed to follow up the applications for patent registration had been negligent in complying with the rules of practice prescribed by the Bureau of Patents. The firm had been notified about the abandonment as

early as June 1987, but it was only after December 7, 1987, when their employees Bangkas and Rosas had been dismissed, that they came to know about it. This clearly showed that petitioners’ counsel had been remiss in the handling of their clients’ applications.19

"A lawyer’s fidelity to the cause of his client requires him to be ever mindful of the responsibilities that should be expected of him. A lawyer shall not neglect a legal matter entrusted to him."20 In the instant case, petitioners’ patent attorneys not only failed to take notice of the notices of abandonment, but they failed to revive the application within the four-month period, as provided in the rules of practice in patent cases. These applications are deemed forfeited upon the lapse of such period.21

Hence, we can not grant the present petition.22 The Court of Appeals did not err or gravely abuse its discretion in dismissing the petition for review.

WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS the decision of the Court of Appeals in CA-G. R. SP No. 24175.

No costs.

SO ORDERED.

G.R. No. 134217 May 11, 2000

KENNETH ROY SAVAGE/K ANGELIN EXPORT TRADING, owned and managed by GEMMA DEMORAL-SAVAGE, petitioners, vs. JUDGE APRONIANO B. TAYPIN, Presiding Judge, RTC-BR. 12, Cebu City, CEBU PROVINCIAL PROSECUTOR'S OFFICE, NATIONAL BUREAU OF INVESTIGATION, Region VII, Cebu City, JUANITA NG MENDOZA, MENDCO DEVELOPMENT CORPORATION, ALFREDO SABJON and DANTE SOSMEÑA,respondents.

Petitioners KENNETH ROY SAVAGE and K ANGELIN EXPORT TRADING, owned and managed by GEMMA DEMORAL-SAVAGE, seek to nullify the search warrant issued by respondent Judge Aproniano B. Taypin of the Regional Trial Court, Br. 12 Cebu City, which resulted in the seizure of certain pieces of wrought iron furniture from the factory of petitioners located in Biasong, Talisay, Cebu. Their motion to quash the search warrant was denied by respondent Judge as well as their motion to reconsider the denial. Hence, this petition for certiorari.

The antecedent facts: Acting on a complaint lodged by private respondent Eric Ng Mendoza, president and general manager of Mendco Development Corporation (MENDCO), 1 Supervising Agent Jose Ermie Monsanto of the National Bureau of Investigation (NBI) filed an application for search warrant with the Regional Trial Court of Cebu City. 2 The application sought the authorization to search the premises of K Angelin Export International located in Biasong, Talisay, Cebu, and to seize the pieces of wrought iron furniture found therein which were allegedly the object of unfair competition involving design patents, punishable under Art. 189 of the Revised Penal Code as amended. The assailed Search Warrant No. 637-10-1697-12 was issued by respondent Judge on 16 October 1997 and executed in

the afternoon of the following day by NBI agents. 3 Seized from the factory were several pieces of furniture, indicated in the Inventory Sheet attached to the Return of Search Warrant, and all items seized have remained in NBI custody up to the present. 4

On 30 October 1997 petitioners moved to quash the search warrant alleging that: (a) the crime they were accused of did not exist; (b) the issuance of the warrant was not based on probable cause; (c) the judge failed to ask the witnesses searching questions; and, (d) the warrant did not particularly describe the things to be seized. 5

On 10 November 1997 petitioners filed a Supplemental Motion to Quash where they additionally alleged that the assailed warrant was applied for without a certification against forum shopping. 6 On 30 January 1998 respondent Judge denied the Motion to Quash and the Supplemental Motion to Quash. 7 On 2 March 1998 petitioners moved to reconsider the denial of their motion to quash and alleged substantially the same grounds found in their original Motion to Quash but adding thereto two (2) new grounds, namely: (a) respondent court has no jurisdiction over the subject-matter; and, (b) respondent court failed to "substantiate" the order sought to be reconsidered. 8 The denial of their last motion 9 prompted petitioners to come to this Court.

The principal issues that must be addressed in this petition are: (a) questions involving jurisdiction over the offense; (b) the need for a certification of non-forum shopping; and, (c) the existence of the crime.

Petitioners claim that respondent trial court had no jurisdiction over the offense since it was not designated as a special court for Intellectual Property Rights (IPR), citing in support thereof Supreme Court Administrative Order No. 113-95 designating certain branches of the Regional Trial Courts, Metropolitan Trial Courts and Municipal Trial Courts in Cities as Special Courts for IPR. The courts enumerated therein are mandated to try and decide violations of IPR including Art. 189 of the Revised Penal

Code committed within their respective territorial jurisdictions. The sala of Judge Benigno G. Gaviola of the RTC-Br. 9, Cebu City, was designated Special Court for IPR for the 7th Judicial Region. 10 Subsequently Supreme Court Administrative Order No. 104-96 was issued providing that jurisdiction over all violations of IPR was thereafter confined to the Regional Trial Courts. 11

The authority to issue search warrants was not among those mentioned in the administrative orders. But the Court has consistently ruled that a search warrant is merely a process issued by the court in the exercise of its ancillary jurisdiction and not a criminal action which it may entertain pursuant to its original jurisdiction. 12 The authority to issue search warrants is inherent in all courts and may be effected outside their territorial jurisdiction. 1 In the instant case, the premises searched located in Biasong, Talisay, Cebu, are well within the territorial jurisdiction of the respondent court. 14

Petitioners apparently misconstrued the import of the designation of Special Courts for IPR. Administrative Order No. 113-95 merely specified which court could "try and decide" cases involving violations of IPR. It did not, and could not, vest exclusive jurisdiction with regard to all matters (including the issuance of search warrants and other judicial processes) in any one court. Jurisdiction is conferred upon courts by substantive law; in this case, BP Blg.129, and not by a procedural rule, much less by an administrative order. 15 The power to issue search warrants for violations of IPR has not been exclusively vested in the courts enumerated in Supreme Court Administrative Order No.113-95.

Petitioners next allege that the application for a search warrant should have been dismissed outright since it was not accompanied by a certification of non-forum shopping, citing as authority therefor Washington Distillers, Inc. v. Court of Appeals. 16 In that case, we sustained the quashal of the search warrant because the applicant had been guilty of forum shopping as private respondent sought a search warrant from the Manila Regional Trial Court only after he was denied by the courts of

Pampanga. The instant case differs significantly, for here there is no allegation of forum-shopping, only failure to acquire a certification against forum-shopping. The Rules of Court as amended requires such certification only from initiatory pleadings, omitting any mention of "applications." 17 In contrast, Supreme Court Circular 04-94, the old rule on the matter, required such certification even from "applications." Our ruling in Washington Distillers required no such certification from applications for search warrants. Hence, the absence of such certification will not result in the dismissal of an application for search warrant.

The last question to be resolved is whether unfair competition involving design patents punishable under Art. 189 of the Revised Penal Code exists in this case. Prosecutor Ivan Herrero seems to agree as he filed the corresponding Information against petitioners on 17 March 1998. 18 However, since the IPR Code took effect on 1 January 1998 any discussion contrary to the view herein expressed would be pointless. The repealing clause of the Code provides —

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 ours). 19

The issue involving the existence of "unfair competition" as a felony involving design patents, referred to in Art. 189 of the Revised Penal Code, has been rendered moot and academic by the repeal of the article.

The search warrant cannot even be issued by virtue of a possible violation of the IPR Code. The assailed acts specifically alleged were the manufacture and fabrication of wrought iron furniture similar to that patented by MENDCO, without securing any license or patent for the same, for the purpose of deceiving or

defrauding Mendco and the buying public. 20 The Code defines "unfair competition" thus —

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

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

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

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

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith

of a nature calculated to discredit goods, businesses or services of another. 21

There is evidently no mention of any crime of "unfair competition" involving design patents in the controlling provisions on Unfair Competition. It is therefore unclear whether the crime exists at all, for the enactment of RA 8293 did not result in the reenactment of Art. 189 of the Revised Penal Code. In the face of this ambiguity, we must strictly construe the statute against the State and liberally in favor of the accused, 22 for penal statutes cannot be enlarged or extended by intendment, implication or any equitable consideration. 2 Respondents invoke jurisprudence to support their contention that "unfair competition" exists in this case. 24 However, we are prevented from applying these principles, along with the new provisions on Unfair Competition found in the IPR Code, to the alleged acts of the petitioners, for such acts constitute patent infringement as defined by the same Code —

Sec. 76. Civil Action for Infringement. — 76.1. The making, using, offering for sale, selling, or importing a patented product or a product obtained directly or indirectly from a patented process, or the use of a patented process without authorization of the patentee constitutes patent infringement. 25

Although this case traces its origins to the year 1997 or before the enactment of the IPR Code, we are constrained to invoke the provisions of the Code. Article 22 of the Revised Penal Code provides that penal laws shall be applied retrospectively, if such application would be beneficial to the accused. 26 Since the IPR Code effectively obliterates the possibility of any criminal liability attaching to the acts alleged, then that Code must be applied here.

In the issuance of search warrants, the Rules of Court requires a finding of probable cause in connection with one specific offense to be determined personally by the judge after examination of the complainant and the witnesses he may produce, and particularly

describing the place to be searched and the things to be seized. 27 Hence, since there is no crime to speak of, the search warrant does not even begin to fulfill these stringent requirements and is therefore defective on its face. The nullity of the warrant renders moot and academic the other issues raised in petitioners' Motion to Quash and Motion for Reconsideration. Since the assailed search warrant is null and void, all property seized by virtue thereof should be returned to petitioners in accordance with established jurisprudence. 28

In petitioners' Reply with Additional Information they allege that the trial court denied their motion to transfer their case to a Special Court for IPR. We have gone through the records and we fail to find any trace of such motion or even a copy of the order denying it. All that appears in the records is a copy of an order granting a similar motion filed by a certain Minnie Dayon with regard to Search Warrant No. 639-10-1697-12. 29 This attachment being immaterial we shall give it no further attention.

WHEREFORE, the Order of the Regional Trial Court, Br. 12, Cebu City, dated 30 January 1998, denying the Motion to Quash Search Warrant No. 637-10-1697-12 dated 30 October 1997 and the Supplemental Motion to Quash dated 10 November 1997 filed by petitioners, as well as the Order dated 8 April 1998 denying petitioners' Motion for Reconsideration dated 2 March 1998, is SET ASIDE. Search Warrant No. 637-10-1697-12 issued on 16 October 1997 is ANNULLED and SET ASIDE, and respondents are ordered to return to petitioners the property seized by virtue of the illegal search warrant.

SO ORDERED.

G.R. No. 118708 February 2, 1998

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

This petition for review on certiorari assails the decision 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 of 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 it 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 for 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 rights 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, plaintiffs 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 court 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 issuance of the preliminary injunction, the plaintiff has amply has amply proven its entitlement to the relief prayed for. It is for. It is undisputed that the plaintiff has developed itsaerial itsaerial fuze way back in 1981 while the defendant began began manufacturing the same only in 1987. Thus, it is only it is only logical to conclude that it was the plaintiff's aerial plaintiff's aerial fuze that was copied or imitated which gives the

which gives the plaintiff the right to have the defendant enjoined "from manufacturing, marketing and/or sellingaerial 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 the defendant's assertion that an action for infringement may only infringement may only be brought by "anyone possessing right, possessing right, title or interest to the patented invention," invention," (Section 42, RA 165) qualified by Sec. 10, RA 165 to 10, RA 165 to include only "the first true and actual inventor, his inventor, his heirs, legal representatives or assignees, "this court assignees, "this court finds the foregoing to be untenable. Sec. 10 untenable. Sec. 10 merely enumerates the persons who may who may have an invention patented which does not necessarily not necessarily limit to these persons the right to institute an institute an action for infringement. Defendant further contends further contends that the order in issue is disruptive of the status of the status quo. On the contrary, the order issued by the Court by the Court in effect maintained the status quo. The last actual, The last actual, peaceable uncontested status existing prior to existing prior to this controversy was the plaintiff manufacturing manufacturing and selling its ownaerial fuzes PDR 77 CB4 which 77 CB4 which was ordered stopped through the defendant's defendant's letter. With the issuance of the order, the operations the operations of the plaintiff continue. Lastly, this court believes court believes that the defendant will not suffer irreparable injury irreparable injury by virtue of said order. The defendant's claim is defendant's claim is primarily hinged on its patent (Letters Patent (Letters Patent No. UM-6983) the validity of which is being 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 patentedaerial 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:

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 (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. . . .

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

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

Further, the remedy of declaratory judgment or injunctive suit on patent invalidity relied upon by petitioner cannot be likened to the civil action for infringement under Section 42 of the Patent Law. The reason for this is that the said remedy is available only to the patent holder or his successors-in-interest. Thus, anyone who has no patent over an invention 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's 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. 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 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 of 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.

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.

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 cancelling 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. Inventians 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.

xxx xxx xxx

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

xxx xxx xxx

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.

xxx xxx xxx

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.

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.

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. 9 Pertinent 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.

G.R. No. 115106 March 15, 1996

ROBERTO L. DEL ROSARIO, petitioner, vs. COURT OF APPEALS AND JANITO CORPORATION, respondents.

Roberto del Rosario petitions this Court to review the decision of the Court of Appeals 1 which set aside the order of the Regional Trial Court of Makati granting a writ of preliminary injunction in his favor.

The antecedents: On 18 January 1993 petitioner filed a complaint for patent infringement against private respondent Janito Corporation. 2 Roberto L. del Rosario alleged that he was a patentee of an audio equipment and improved audio equipment commonly known as the sing-along System or karaoke under Letters Patent No. UM-5269 dated 2 June 1983 as well as Letters Patent No. UM-6237 dated 14 November 1986 issued by the Director of Patents. The effectivity of both Letters Patents was for five (5) years and was extended for another five (5) years starting 2 June 1988 and 14 November 1991, respectively. He described his sing-along system as a handy multi-purpose compact machine which incorporates an amplifier speaker, one or two tape mechanisms, optional tuner or radio and microphone mixer with features to enhance one's voice, such as the echo or reverb to stimulate an opera hall or a studio sound, with the whole system enclosed in one cabinet casing.

In the early part of 1990 petitioner learned that private respondent was manufacturing a sing-along system bearing the trademark miyata or miyata karaoke substantially similar if not identical to the sing-along system covered by the patents issued in his favor. Thus he sought from .the trial court the issuance of a writ of preliminary injunction to enjoin private respondent, its officers and everybody elsewhere acting on its behalf, from using, selling and advertising the miyata or miyata karaoke brand, the

injunction to be made permanent after trial, and praying for damages, attorney's fees and costs of suit.

On 5 February 1993 the trial court temporarily restrained private respondent from manufacturing, using and/or selling and advertising the miyata sing-along system or any sing-along system substantially identical to the sing-along system patented by petitioner until further orders.

On 24 February 1993 the trial court issued a writ of preliminary injunction upon a bond on the basis of its finding that petitioner was a holder of a utility model patent for a sing-along system and that without his approval and consent private respondent was admittedly manufacturing and selling its own sing-along system under the brand namemiyata which was substantially similar to the patented utility mode 3 of petitioner.

Private respondent assailed the order of 24 February 1993 directing the issuance of the writ by way of a petition forcertiorari with prayer for the issuance of a writ of preliminary injunction and a temporary restraining order before respondent Court of Appeals.

On 15 November 1993 respondent appellate court granted the writ and set aside the questioned order of the trial court. It expressed the view that there was no infringement of the patents of petitioner by the fact alone that private respondent had manufactured the miyata karaoke or audio system, and that the karaoke system was a universal product manufactured, advertised and marketed in most countries of the world long before the patents were issued to petitioner. The motion to reconsider the grant of the writ was denied; 4 hence, the instant petition for review.

This petition alleges that: (a) it was improper for the Court of Appeals to consider questions of fact in a certiorariproceeding; (b) the Court of Appeals erred in taking judicial notice of private respondent's self-serving presentation of facts; (c) the Court of

Appeals erred in disregarding the findings of fact of the trial court; and, (d) there was no basis for the Court of Appeals to grant a writ of preliminary injunction in favor of private respondent. 5

Petitioner argues that in a certiorari proceeding questions of fact are not generally permitted the inquiry being limited essentially to whether the tribunal has acted without or in excess of jurisdiction or with grave abuse of discretion; that respondent court should not have disturbed but respected instead the factual findings of the trial court; that the movant has a clear legal right to be protected and that there is a violation of such right by private respondent. Thus, petitioner herein claims, he has satisfied the legal requisites to justify the order of the trial court directing the issuance of the writ of injunction. On the other hand, in the absence of a patent to justify the manufacture and sale by private respondent of sing-along systems, it is not entitled to the injunctive relief granted by respondent appellate court.

The crux of the controversy before us hinges on whether respondent Court of Appeals erred in finding the trial court to have committed grave abuse of discretion in enjoining private respondent from manufacturing, selling and advertising the miyata karaoke brand sing-along system for being substantially similar if not identical to the audio equipment covered by letters patent issued to petitioner.

Injunction is a preservative remedy for the protection of substantive rights or interests. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The controlling reason for the existence of the judicial power to issue the writ is that the court may thereby prevent a threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly investigated and advisedly adjudicated. It is to be resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation. The application of the writ rests upon an alleged existence of an emergency or of a special reason for such an order before the case can be regularly heard,

and the essential conditions for granting such temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a cause of action for injunction and that on the entire showing from both sides, it appears, in view of all the circumstances, that the injunction is reasonably necessary to protect the legal rights of plaintiff pending the litigation. 6

A preliminary injunction may be granted at any time after the commencement of the action and before judgment when it is established that the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act probably in violation of the plaintiff's rights. Thus, there are only two requisites to be satisfied if an injunction is to issue, namely, the existence of the right to be protected, and that the facts against which the injunction is to be directed are violative of said right. 7

For the writ to issue the interest of petitioner in the controversy or the right he seeks to be protected must be a present right, a legal right which must be shown to be clear and positive.

In this regard Sec. 55 of R.A. 165 as amended, known as The Patent 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) new model or 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 provide . . . .

Admittedly, petitioner is a holder of Letters Patent No. UM-5629 dated 2 June 1985 issued for a term of five (5) years from the grant of a Utility Model herein described —

The construction of an audio equipment comprising a substantially cubical casing having a window at its rear and upper corner fitted with a slightly inclined control panel, said cubical (casing) having a vertical partition wall therein defining a rear compartment and a front compartment, and said front compartment serving as a speaker baffle; a transistorized amplifier circuit having an echo section and writhed in at least the printed circuit boards placed inside said rear compartment of said casing and attached to said vertical partition wall, said transistorized amplifier circuit capable of being operated from outside, through various controls mounted on said control panel of such casing; a loud speaker fitted inside said front compartment of said casing and connected to the output of the main audio amplifier section of said transistorized amplifier circuit and a tape player mounted on the top wall of said casing and said tape player being connected in conventional manner to said transistorized amplifier circuit. 8

Again, on 14 November 1986 petitioner was granted Letters Patent No. UM-6237 for a term of five (5) years from the grant of a Utility Model described as —

In an audio equipment consisting of a first cubical casing having an opening at its rear and upper rear portion and a partition therein forming a rear compartment and a front compartment serving as a loud speaker baffle, a control panel formed by vertical and horizontal sections, a transistorized amplifier circuit wired in at least two printed circuit boards attached at the back of said control panel, a

first loud speaker fitted inside said first compartment of such first casing and connected to the output of said transistorized amplifier circuit; the improvement wherein said control panel being removably fitted to said first cubical casing and further comprises a set of tape recorder and tape player mounted on the vertical section of said control panel and said recorder and player are likewise connected to said transistorized amplifier circuit; a second cubical casing having an opening at its rear, said second cubical casing having (being?) provided with a vertical partition therein defining a rear compartment and a front compartment, said rear compartment being provided with a door and enclosing therein a set of tape racks and said front compartment serving as loud speaker baffle, said second cubical casing being adapted to said first cubical casing so that said first and second casings are secured together in compact and portable form; and a second loud speaker fitted inside said front compartment of said casing and connected to the output of said amplifier circuit. 9

The terms of both Letters Patents were extended for another five (5) years each, the first beginning 2 June 1988 and the second, 14 November 1991.

The Patent Law expressly acknowledges that any new model of implements or tools 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 utility model. 10Here, there is no dispute that the letters patent issued to petitioner are for utility models of audio equipment.

In issuing, reissuing or withholding patents and extensions thereof, the Director of Patents determines whether the patent is new and whether the machine or device is the proper subject of patent. In passing on an application, the Director decides not only

questions of law but also questions of fact, i.e. whether there has been a prior public use or sale of the article sought to be patented. 11 Where petitioner 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 Director of Patents in granting the patent is always presumed to be correct, and the burden then shifts to respondent to overcome this presumption by competent evidence. 12

Under Sec. 55 of The Patent Law 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. Respondent corporation failed to present before the trial court competent evidence that the utility models covered by the Letters Patents issued to petitioner were not new. This is evident from the testimony of Janito Cua, President of respondent Janito Corporation, during the hearing on the issuance of the injunction, to wit —

Q. Mr. Cua, you testified that there are (sic) so many other companies which already have (sic) the sing-along system even before the patent application of Mr. del Rosario and as a matter of fact you mentioned Sanyo, Sony and Sharp, is that right?

A. Musicmate and Asahi.

Q. Now do you recall that your lawyer filed with this Honorable Court an Urgent Motion to Lift Temporary Restraining Order of this Honorable Court. I am sure you were the one who provided him with the information about the many other companies selling the sing-along system, is that right? These 18 which you enumerated here.

A. More than that because. . . .

Q. Now you will agree with me that in your statement Sharp you put the date as 1985 agreed?

A. No.

Q. You mean your lawyer was wrong when he put the word Sharp 1985?

A. Maybe I informed him already.

xxx xxx xxx

Q. You mean your lawyer was wrong in alleging to this Court that Sharp manufactured and sold (in) 1985 as found in the Urgent Motion?

A. Since it is urgent it is more or less.

Q. The same also with Sanyo 1985 which you put, more or less?

A. Sanyo is wrong.

Q. It is not 1985?

A. Sanyo is 1979 I think.

Q. So this is also wrong. Panasonic 1986 is also wrong?

A. Panasonic I think.

Q. So you don't think this is also correct.

A. The date?

Q. So you don't think also that this allegation here that they manufactured in 1986 is correct?

A. Wrong. Earlier.

Q. National by Precision Electronic 1986 this is also wrong?

A. I think earlier.

Q. So that means all your allegations here from 2 to 5 are wrong? OK. By Philipps Philippines 1986, this is also correct or wrong?

A. More or less. We said more or less.

Q. Nakabutshi by Asahi Electronics that is also wrong?

A. No that is 1979.

Q. Electone by DICO 1989 is this correct or wrong?

A. Correct. More or less.

Q. Skylers 1985 is that correct or wrong?

A. It is more or less because it is urgent. We don't have time to exact the date.

Q. Musicmate of G.A. Yupangco 1981 this is more or less? You are not also sure?

A. 95% sure.

Q. Now you are sure 1981.

A. This one because. . . .

Q. Mr. Witness so you are now trying to tell this Honorable Court that all your allegations here of the dates in this Urgent Motion except for Musicmate which you are only 95% sure they are all wrong or they are also more or less or not sure, is that right?

A. More or less.

Q. Now do you have any proof, any advertisement, anything in writing that would show that all these instruments are in the market, do you have it.

A. No I don't have it because. . . .

Q. No I am satisfied with your answer. Now Mr. Witness, you don't also have a proof that Akai instrument that you said was also in the market before 1982? You don't have any written proof, any advertisement?

A. I have the product.

Q. But you have not brought the product in (sic) this Honorable Court, right?

A. No. 13

As may be gleaned herein, the rights of petitioner as a patentee have been sufficiently established, contrary to the findings and conclusions of respondent Court of Appeals. Consequently, under Sec. 37 of The Patent law, petitioner as a patentee shall have the exclusive right to make, use and sell the patented machine, article or product for the purpose of industry or commerce, throughout the territory of the Philippines for the term of the patent, and such making, using or selling by any person without authorization of the patentee constitutes infringement of his patent.

Petitioner established before the trial court that respondent Janito Corporation was manufacturing a similar sing-along system bearing the trademark miyata which infringed his patented models. He also alleged that both his own patented audio equipment and respondent's sing-along system were constructed in a casing with a control panel, the casing having a vertical partition wall defining the rear compartment from the front

compartment, with the front compartment consisting of a loud speaker baffle, both containing a transistorized amplifier circuit capable of being operated from outside through various controls mounted on the control panel, and that both had loud speakers fitted inside the front compartment of the casing and connected to the output of the main audio amplifier section both having a tape recorder and a tape player mounted on the control panel with the tape recorder and tape player being both connected to the transistorized amplifier circuit. 14

Respondent Janito Corporation denied that there was any violation of petitioner's patent rights, and cited the differences between its miyata equipment and petitioner's audio equipment. But, it must be emphasized, respondent only confined its comparison to the first model, Utility Model No. 5269, and completely disregarded Utility Model No. 6237 which improved on the first. As described by respondent corporation, 15 these differences are —

First. Under Utility Model 5269, the unit is a substantially cubical casing with a window at its rear and upper corner fitted with slightly inclined control panel, while the miyata equipment is a substantially rectangular casing with panel vertically positioned.

Second. Under Utility Model 5269, the cubical casing has a vertical partition wall defining a rear compartment and a front compartment serving as a speaker baffle, while the miyata equipment has no rear compartment and front compartment in its rectangular casing; it has only a front compartment horizontally divided into 3 compartments like a 3-storey building, the 1st compartment being a kit, the 2nd also the speaker, and the 3rd are kits.

Third. Under Utility Model No. 5269, a transistorized amplifier circuit with an echo section wired in at least 2 printed circuit boards is placed inside the

rear compartment of the casing and attached to the vertical partition wall, the printed circuit board having 1 amplifier and 1 echo, while in the miyataequipment the amplifier is mainly IC (Integrated Circuit) — powered with 8 printed circuit boards almost all of which are IC controlled, with 1 amplifier with power supply, 1 main tuner, 1 equalizer (3-band), 1 IC controlled volume control, 1 echo IC, 1 tape pream, 1 instrument and 1 wireless microphone.

Fourth. Under Utility Model 5269, 4 printed circuits are placed inside the compartment of its casing attached to the vertical partition wall, while in the miyata, the 7 printed circuit boards (PCB) are attached to the front panel and 1 attached to the horizontal divider.

Fifth. Under Utility Model 5269, there are various controls mounted on the control panel of the casing, while in miyata, the various controls are all separated from the printed circuit boards and the various controls are all attached thereto.

Sixth. Under Utility Model 5269, a loud speaker fitted inside the front compartment of the casing is connected to the output of the main audio amplifier section of the transistorized amplifier circuit, while in miyata, there is no other way but to use 2 loud speakers connected to the amplifier.

Seventh. Under Utility Model 5269, a tape player is mounted on the top wall of the casing, while inmiyata, 2 tape players are used mounted side by side at the front.

It is elementary that a patent may be infringed where the essential or substantial features of the patented invention are

taken or appropriated, or the device, machine or other subject matter alleged to infringe is substantially identical with the patented invention. In order to infringe a patent, a machine or device must perform the same function, or accomplish the same result by identical or substantially identical means and the principle or mode of operation must be substantially the same. 16

It may be noted that respondent corporation failed to present before the trial court a clear, competent and reliable comparison between its own model and that of petitioner, and disregarded completely petitioner's utility Model No. 6237 which improved on his first patented model. Notwithstanding the differences cited by respondent corporation, it did not refute and disprove the allegations of petitioner before the trial court that: (a) both are used by a singer to sing and amplify his voice; (b) both are used to sing with a minus-one or multiplex tapes, or that both are used to play minus-one or standard cassette tapes for singing or for listening to; (c) both are used to sing with a minus-one tape and multiplex tape and to record the singing and the accompaniment; (d) both are used to sing with live accompaniment and to record the same; (e) both are used to enhance the voice of the singer using echo effect, treble, bass and other controls; (g) both are equipped with cassette tape decks which are installed with one being used for playback and the other, for recording the singer and the accompaniment, and both may also be used to record a speaker's voice or instrumental playing, like the guitar and other instruments; (h) both are encased in a box-like cabinets; and, (i) both can be used with one or more microphones. 17

Clearly, therefore, both petitioner's and respondent's models involve substantially the same modes of operation and produce substantially the same if not identical results when used.

In view thereof, we find that petitioner had established before the trial court prima facie proof of violation of his rights as patentee to justify the issuance of a writ of preliminary injunction in his favor

during the pendency of the main suit for damages resulting from the alleged infringement.

WHEREFORE, the Decision of the Court of Appeals dated 15 November 1993 is REVERSED and SET ASIDE and the Order of the trial court dated 24 February 1993 granting petitioner the writ of injunction is REINSTATED.

The trial court is directed to continue with the proceedings on the main action pending before it in order to resolve with dispatch the issues therein presented.

SO ORDERED.