SECOND DIVISION

[G.R. No. 205045. January 25, 2017.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SAN

MIGUEL CORPORATION, respondent.

[G.R. No. 205723. January 25, 2017.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SAN

MIGUEL CORPORATION, respondent.

DECISION

LEONEN, J : p

These consolidated cases consider whether "San Mig Light" is a new

brand or a variant of one of San Miguel Corporation's existing beer brands,
and whether the Bureau of Internal Revenue may issue notices of
discrepancy that effectively changes "San Mig Light's" classification from new
brand to variant. The issues involve an application of Section 143 of the
1997 National Internal Revenue Code (Tax Code), as amended, on the
definition of a variant, which is subject to a higher excise tax rate than a new
brand. This case also applies the requirement in Rep. Act No. 9334 that
reclassification of certain fermented liquor products introduced between
January 1, 1997 and December 31, 2003 can only be done by an act of
Congress.
The Petition 1 docketed as G.R. No. 205045 assails the Court of Tax
Appeals En Banc's September 20, 2012 Decision 2 affirming the Third
Division's grant of San Miguel Corporation's refund claim in CTA Case No.
7708, and the December 11, 2012 Resolution 3 denying reconsideration. The
Commissioner of Internal Revenue prays for the reversal and setting aside of
the assailed Decision and Resolution, as well as the issuance of a new one
denying San Miguel Corporation's claim for tax refund or credit. 4
On the other hand, the Petition 5 docketed as G.R. No. 205723 and
consolidated with G.R. No. 205045 assails the Court of Tax Appeals En
Banc's October 24, 2012 Decision 6dismissing the Commissioner of Internal
Revenue's appeal, and the February 4, 2013 Resolution 7 denying
reconsideration. The Commissioner of Internal Revenue prays for the reversal
and setting aside of the assailed Decision and Resolution, the issuance of a
new one remanding the case to the Court of Tax Appeals for the production of
evidence in San Miguel Corporation's possession, or, in the alternative, the
dismissal of the Petitions in CTA Case Nos. 7052, 7053, and 7405. 8 CAIHTE

On October 19, 1999, Virgilio S. De Guzman (De Guzman), San Miguel

Corporation's Former Assistant Vice President for Finance, wrote the Bureau
of Internal Revenue Excise Tax Services Assistant Commissioner Leonardo
B. Albar (Assistant Commissioner Albar) to request the registration of and
authority to manufacture "San Mig Light," to be taxed at P12.15 per liter. 9 The
letter dated October 27, 1999 granted this request. 10
On November 3, 1999, De Guzman advised Assistant Commissioner
Albar that "San Mig Light" would be sold at a suggested net retail price of
P21.15 per liter or P6.98 per bottle, less value-added tax and specific tax.
"San Mig Light" would also be classified under "Medium Priced Brand" to be
taxed at P9.15 per liter. 11
On January 28, 2002, Alfredo R. Villacorte (Villacorte), San Miguel
Corporation's Vice President and Manager of the Group Tax Services, wrote
the Bureau of Internal Revenue Chief of the Large Taxpayers Assistance
Division II (LTAD II) to request information on the tax rate and classification of
"San Mig Light" and another beer product named "Gold Eagle King." 12
On February 7, 2002, LTAD II Acting Chief Conrado P. Item replied to
Villacorte's letter. 13 He confirmed that based on the submitted documents,
San Miguel Corporation was allowed to register, manufacture, and sell "San
Mig Light" as a new brand, had been paying its excise tax for a considerable
length of time, and that the tax classification and rate of "San Mig Light" as a
new brand were in order. 14
However, on May 28, 2002, Edwin R. Abella (Assistant Commissioner
Abella), Bureau of Internal Revenue Large Taxpayers Service Assistant
Commissioner, issued a Notice of Discrepancy against San Miguel
Corporation. The Notice stated that "San Mig Light" was a variant of its
existing beer products and must, therefore, be subjected to the higher excise
tax rate for variants. 15 Specifically, for the year 1999, "San Mig Light" should
be taxed at the rate of P19.91 per liter instead of P9.15 per liter; and for the
year 2000, the 12% increase should be based on the rate of P19.91 per liter
under Section 143 (C) (2) of the Tax Code. 16 Hence, the Notice demanded
payments of deficiency excise tax in the amount of P824,750,204.97,
exclusive of increments for years 1999 to April 2002. 17
 The Finance Manager of San Miguel Corporation's Beer Division wrote
a letter-reply dated July 9, 2002 requesting the withdrawal of the Notice of
Discrepancy. 18 San Miguel Corporation stated, among other things, that "San
Mig Light" was not a variant of any of its existing beer brands because of "the
distinctive shape, color scheme[,] and general appearance"; and the "different
alcohol content and innovative low calorie formulation." 19 It also emphasized
that the Escudo logo was not a beer brand logo but a corporate logo. 20
On October 14, 2002, Assistant Commissioner Abella wrote a letter-
rejoinder reiterating its finding that "San Mig Light Pale Pilsen" was truly
a variant of "San Miguel Pale Pilsen." 21 The letter-rejoinder cited certain
statements in San Miguel Corporation's publication, "Kaunlaran," and the
corporation's Annual Report as support for its finding. 22
On November 20, 2002, Villacorte replied by requesting that "San Mig
Light be reconfirmed as a new brand . . . the deficiency assessment be set
aside and the demand for payment be withdrawn." 23
Subsequently, three (3) conferences were held on the "San Mig Light"
tax classification issue. At the conference held on December 16, 2003,
Commissioner Guillermo Parayno, Jr. (Commissioner Parayno) informed San
Miguel Corporation that five (5) members of the Bureau of Internal Revenue
Management Committee voted that "San Mig Light" was a variant of "Pale
Pilsen in can," while two (2) members voted that it was a variant of
"Premium," a high-priced beer product of San Miguel Corporation. 24
On January 6, 2004, Commissioner Parayno wrote San Miguel
Corporation and validated the findings that "San Mig Light" was a variant of
"San Miguel Pale Pilsen in can," subject to the same excise tax rate of the
latter — that is, P13.61 per liter — and that an assessment for deficiency
excise tax against San Miguel Corporation was forthcoming. 25
On January 28, 2004, a Preliminary Assessment Notice (PAN) was
issued against San Miguel Corporation for deficiency excise tax in the amount
of P852,039,418.15, inclusive of increments, purportedly for the removals of
"San Mig Pale Pilsen Light," from 1999 to January 7, 2004. 26
On February 4, 2004, a Notice of Discrepancy was issued against San
Miguel Corporation on an alleged deficiency excise tax in the amount of
P28,876,108.84, from January 8, 2004 to January 29, 2004. 27
Accordingly, on March 24, 2004, Bureau of Internal Revenue Deputy
Commissioner Estelita C. Aguirre (Deputy Commissioner Aguirre) issued a
PAN against San Miguel Corporation for P29,967,465.37 representing
deficiency excise tax, inclusive of increments, from January 8, 2004 to
January 29, 2004. 28
 On April 12, 2004 and May 26, 2004, Deputy Commissioner Aguirre
issued two (2) Formal Letters of Demand 29 to San Miguel Corporation with
the accompanying Final Assessment Notice (FAN) Nos. LTS TF 004-06-02
and LTS TF 129-05-04, respectively, directing San Miguel Corporation to pay
deficiency excise taxes in the amounts of:
(a) P876,098,898.83, inclusive of interest until April 30, 2004, for the
period of November to December 1999 at P12.52 per liter, and
January 2000 to January 7, 2004 at P13.61 per liter; 30 and DETACa

(b) P30,763,133.68, inclusive of interest until June 30, 2004, for the
period January 8, 2004 to January 29, 2004. 31
San Miguel filed a Protest/Request for Reconsideration against each
FAN. 32
On August 17, 2004 and August 20, 2004, Former Large Taxpayers
Service Officer-in-Charge Deputy Commissioner Kim S. Jacinto-Henares
informed San Miguel Corporation of the denial of the Protest/Request for
Reconsiderations against the two (2) FANs "for lack of legal and factual
basis." 33
G.R. No. 205723
On September 17, 2004 and September 22, 2004, San Miguel
Corporation filed before the Court of Tax Appeals Petitions for Review,
docketed as CTA Case Nos. 7052 and 7053, assailing the denials of its
Protest/Request for Reconsiderations of the deficiency excise tax
assessments. 34
To prevent the issuance of additional excise tax assessments on San
Mig Light products and the disruption of its operations, San Miguel
Corporation paid excise taxes at the rate of P13.61 beginning February 1,
2004. 35
On December 28, 2005, San Miguel Corporation filed with the Bureau
of Internal Revenue its first refund claim. The claim sought the refund of
P782,238,161.47 for erroneous excise taxes collected on San Mig Light
products from February 2, 2004 to November 30, 2005. 36
Due to inaction on its claim, on January 31, 2006, San Miguel
Corporation filed before the Court of Tax Appeals a Petition for Review
docketed as CTA Case No. 7405. 37 The Court of Tax Appeals, upon motion,
later consolidated CTA Case No. 7405 with CTA Case Nos. 7052 and
7053. 38
The Court of Tax Appeals First Division, in its Decision 39 dated October
18, 2011, granted the Petitions in CTA Case Nos. 7052 and 7053 and partially
 granted the Petition in CTA Case No. 7405. 40 The Decision's dispositive
portion reads:
WHEREFORE, in view of the foregoing considerations, the
consolidated Petitions for Review in CTA Case Nos. 7052 and 7053
are hereby GRANTED. The (1) [sic] letters dated August 17, 2004 and
August 20, 2004 of respondents, denying petitioner's Protest/Request
for Reconsideration dated May 12, 2004 and July 7, 2004,
respectively, and (2) Assessment Notice Nos. LTS TF 004-06-02 and
LTS TF 129-05-04 issued by respondent against petitioner for the
periods of November 1999 to January 7, 2004 and January 8, 2004 to
January 29, 2004, are hereby CANCELLED and SET ASIDE.
Moreover, the Petition for Review in CTA Case No. 7405 is
hereby PARTIALLY GRANTED. Respondent CIR is hereby
ORDERED to REFUND petitioner, or to ISSUE A TAX CREDIT
CERTIFICATE in its favor in, the amount of SEVEN HUNDRED
EIGHTY ONE MILLION FIVE HUNDRED FOURTEEN THOUSAND
SEVEN HUNDRED SEVENTY TWO PESOS AND FIFTY SIX
CENTAVOUS [sic] (P781,514,772.56), as determined below:
Claims for Over-Payment of P782,238,161.47
Excise Taxes per Petition
Less: Deductions from claims:
Excise taxes due on
1. P420,252.62
SML
removals per ODI which
were not paid per
Returns
Polo Plant
2. Excise taxes due per 121,975.00
Excise Tax Returns
were Lesser than [the]
amounts per ODI Polo
Plant
3. SML Removals per
shipping Memorandum
were Greater than ODIs
San Fernando Plant 181,080.11
Bacolod Plant 81.18
723,388.91
––––––––––––––
Recomputed
P781,514,772.56
Excise Taxes for
Refund/Issuance of Tax Credit
Certificate
 ===========

SO ORDERED. 41 (Emphasis in the original)

The Commissioner filed a Motion for Reconsideration with Motion for
Production of Documents praying that San Miguel Corporation be compelled
to produce the following: (a) "Kaunlaran" publication for the months of October
1999 and January 2000; (b) 1999 Annual Report to stockholders; and (c)
copies of the video footage of two (2) San Mig Light commercials as seen in
its website. 42 The Commissioner claimed "that the admission of said
documents would lead to a better illumination of the outcome of the case." 43
The Court of Appeals First Division denied the Motions in its
Resolution 44 dated February 6, 2012:
WHEREFORE, premises considered, respondent's
[CIR's] MOTION FOR RECONSIDERATION WITH MOTION FOR
PRODUCTION OF DOCUMENTS (Re: Decision promulgated 18
October 2011) and SUPPLEMENTAL MOTION FOR PRODUCTION
OF DOCUMENTS are hereby DENIED for lack of merit. aDSIHc

SO ORDERED. 45 (Emphasis in the original)

The Court of Tax Appeals En Banc, in its Decision 46 dated October 24,
2012, dismissed the Petition and affirmed the Division. 47 It also denied
reconsideration through the Resolution 48 dated February 4, 2013.
Hence, the Commissioner on Internal Revenue filed the Petition for
Review on Certiorari 49 docketed as G.R. No. 205723.
G.R. No. 205045
On August 30, 2007, San Miguel Corporation filed its second refund
claim with the Bureau of Internal Revenue in the amount of
P926,389,172.02. 50 Due to inaction on its claim, San Miguel Corporation filed
before the Court of Tax Appeals a Petition for Review, docketed as CTA Case
No. 7708, on November 27, 2007. 51
The Court of Tax Appeals Third Division, in its Decision dated January
7, 2011, partially granted the Petition. 52 It also denied reconsideration. 53 The
Decision's dispositive portion reads:
WHEREFORE, the Petition for Review is hereby PARTIALLY
GRANTED. Accordingly, respondent is hereby ORDERED TO
REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor [of]
petitioner in the amount of P926,169,056.74, representing erroneously,
or excessively and/or illegally collected, and overpaid excise taxes on
"San Mig Light" during the period from December 1, 2005 up to July
31, 2007.
 SO ORDERED. 54 (Emphasis in the original)
On September 20, 2012, the Court of Tax Appeals En Banc 55 affirmed
the Division and thereafter also denied reconsideration. The Decision's
dispositive portion reads:
WHEREFORE, the present Petition for Review is
hereby DENIED for lack of merit. The assailed decision and resolution
of the Third Division of this Court promulgated on January 7, 2011 and
March 23, 2011, respectively, in CTA Case No. 7708 entitled "SAN
MIGUEL CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE["], are hereby AFFIRMED.
Accordingly, petitioner is ORDERED TO REFUND or ISSUE A
TAX CREDIT CERTIFICATE in favor of respondent in the amount of
P926,169,056.74, representing erroneously, excessively and/or
illegally collected and overpaid excise taxes on "San Mig Light" during
the period December 1, 2005 to July 31, 2007.
SO ORDERED. 56 (Emphasis in the original)
Hence, the Commissioner on Internal Revenue filed the Petition for
Review on Certiorari 57 docketed as G.R. No. 205045. The two (2) cases were
consolidated.
Respondent San Miguel Corporation filed its Comment 58 on the
Petitions, to which petitioner filed its Reply. 59 The parties then filed their
respective memoranda. 60
The issues for resolution are:
First, whether a motion for production of documents and objects may be
availed of after the court has rendered judgment;
Second, whether petitioner complied with all requisites of a motion for
production of documents and objects under Rule 27, such as a showing of
good cause;
Third, whether "San Mig Light" is a new brand and not a variant of "San
Miguel Pale Pilsen";
Fourth, whether the "classification freeze" in Rep. Act No. 9334 refers to
the freezing of classification of brands, and not to the freezing of net retail
prices of brands;
Fifth, whether the deficiency excise tax assessments issued by the
Bureau of Internal Revenue against respondent dated April 12, 2004 and May
26, 2004 are valid; and
Lastly, whether respondent is entitled to a refund of excess payment of
excise taxes on "San Mig Light" in the amount of P781,514,772.56 for the
period from February 1, 2004 up to November 30, 2005, and in the amount of
P926,169,056.74 for the period from December 1, 2005 up to July 31, 2007.
I
Petitioner questions the denial of its Motion for Production of
Documents and Objects. It argues that this motion may be filed after pre-trial
or during the pendency of the action since Rule 27, Section 1 of the Revised
Rules of Civil Procedure does not explicitly provide that it must be availed of
before trial or pre-trial. 61 Petitioner contends that all requisites for filing the
motion were satisfied. 62 Assuming the Motion was belatedly filed, it should
have been granted in the higher interest of justice. 63
Respondent counters that the Motions, which were filed only after the
Court of Tax Appeals Division rendered judgment, were belatedly filed since
this mode of discovery must be availed of before trial. 64 Rule 27, Section 1
used the phrase, "in which an action is pending"; thus, this defines which
court has authority to resolve the motion and does not define when the motion
must be made. 65 Respondent contends that this remedy must be availed of
before trial in order to facilitate and expedite case preparations. 66Respondent
adds that petitioner also failed to comply with the requisites for the motion.
Specifically, the Motion did not adequately describe the contents of the
documents to be produced to show their materiality and relevance to the
case. 67 ETHIDa

Respondent further submits that the documents and objects are

immaterial and irrelevant to the issues. The documents petitioner sought to
have respondent produce are referred to as having to do with the taste,
alcohol content, and calories of "San Mig Light," when the Tax Code definition
of variant has nothing to do with these matters. 68Respondent submits that in
filing the Motions after judgment, petitioner was effectively seeking new trial,
which it may only avail itself of with "newly discovered" evidence. 69
Rule 27, Section 1 of the Revised Rules of Civil Procedure provides:
SECTION 1. Motion for production or inspection; order. — Upon
motion of any party showing good cause therefore, the court in
which an action is pending may (a) order any party to produce and
permit the inspection and copying or photographing, by or on behalf of
the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not
privileged, which constitute or contain evidence material to any
matter involved in the action and which are in his possession,
custody or control; or (b) order any party to permit entry upon
designated land or other property in his possession or control for the
purpose of inspecting, measuring, surveying, or photographing the
property or any designated relevant object or operation thereon. The
 order shall specify the time, place and manner of making the
inspection and taking copies and photographs, and may prescribe
such terms and conditions as are just. (Emphasis supplied)
Rule 18, Section 6 of the Rules of Court on Pre-Trial requires that the
pre-trial briefs shall include "[a] manifestation of their having availed or
intention to avail themselves of discovery procedures."
On July 13, 2004, this Court approved A.M. No. 03-1-09-SC, otherwise
known as the Rule on Guidelines to be Observed by Trial Court Judges and
Clerks of Court in the Conduct of Pre-Trial and Use of Deposition —
Discovery Measures. Among other things, these rules direct trial courts to
require parties to submit, at least three (3) days before pre-trial, pre-trial briefs
containing "[a] manifestation of the parties of their having availed or their
intention to avail themselves of discovery procedures or referral to
commissioners." 70
Republic v. Sandiganbayan 71 explained the purpose and policy behind
modes of discovery:
The truth is that "evidentiary matters" may be inquired into and
learned by the parties before the trial. Indeed, it is the purpose and
policy of the law that the parties — before the trial if not indeed
even before the pre-trial — should discover or inform themselves
of all the facts relevant to the action, not only those known to them
individually, but also those known to their adversaries; in other words,
the desideratum is that civil trials should not be carried on in the dark;
and the Rules of Court make this ideal possible through the deposition-
discovery mechanism set forth in Rules 24 to 29. The experience in
other jurisdictions has been that ample discovery before trial, under
proper regulation, accomplished one of the most necessary ends of
modern procedure: it not only eliminates unessential issues from
trials thereby shortening them considerably, but also requires
parties to play the game with the cards on the table so that the
possibility of fair settlement before trial is measurably increased. .
..
As just intimated, the deposition-discovery procedure was
designed to remedy the conceded inadequacy and cumbersomeness
of the pre-trial functions of notice-giving, issue-formulation and fact
revelation theretofore performed primarily by the pleadings.
The various modes or instruments of discovery are meant to
serve (1) as a device, along with the pre-trial hearing under Rule 20, to
narrow and clarify the basic issues between the parties, and (2) as a
device for ascertaining the facts relative to those issues. The evident
purpose is, to repeat, to enable the parties, consistent with recognized
privileges, to obtain the fullest possible knowledge of the issues
 and facts before civil trials and thus prevent that said trials are
carried on in the dark. 72 (Emphasis supplied, citations omitted)
Specifically, this Court discussed the importance of a motion for
production of documents under Rule 27 of the Rules of Court in expediting
time-consuming trials:
This remedial measure is intended to assist in the administration of
justice by facilitating and expediting the preparation of cases for
trial and guarding against undesirable surprise and delay; and it is
designed to simplify procedure and obtain admissions of facts and
evidence, thereby shortening costly and time-consuming trials.It is
based on ancient principles of equity. More specifically, the purpose of
the statute is to enable a party-litigant to discover material information
which, by reason of an opponent's control, would otherwise be
unavailable for judicial scrutiny, and to provide a convenient and
summary method of obtaining material and competent documentary
evidence in the custody or under the control of an adversary. It is a
further extension of the concept of pretrial. 73 (Emphasis supplied)
Consistent with litigation's quest for truth, parties should welcome every
opportunity in attaining this objective, such as acting in good faith to reveal
material documents. 74
The scope of discovery must be liberally construed, as a general rule,
to serve its purpose of providing the parties with essential information to reach
an amicable settlement or to expedite trial. 75 "Courts, as arbiters and
guardians of truth and justice, must not countenance any technical ploy to the
detriment of an expeditious settlement of the case or to a fair, full and
complete determination on its merits." 76
Rule 27, Section 1 of the Rules of Court does not provide when the
motion may be used. Hence, the allowance of a motion for production of
document rests on the sound discretion of the court where the case is
pending, with due regard to the rights of the parties and the demands of
equity and justice. 77cSEDTC

In Eagleridge Development Corporation v. Cameron Granville 3 Asset

Management, Inc., 78 we held that a motion for production of documents may
be availed of even beyond the pre-trial stage, upon showing of good cause as
required under Rule 27. 79 We allowed the production of documents because
the petitioner was able to show "good cause" and relevance of the documents
sought to be produced, and the trial court had not yet rendered its judgment.
In this case, petitioner filed its Motion for Production of Documents after
the Court of Tax Appeals Division had rendered its judgment. According to the
Court of Tax Appeals Division, the documents sought to be produced were
already discussed in the Commissioner's Memorandum dated October 21,
2010 and were already considered by the tax court when it rendered its
Decision. 80 If petitioner believed that the evidence in the custody and control
of respondent "would provide a better illumination of the outcome of the case,"
it should have sought their production at the earliest opportunity as it had
been already aware of their existence. 81 Petitioner's laxity is inexcusable and
is a fatal omission.
Under these circumstances, there was indeed no further need for the
production of documents and objects desired by petitioner. These pieces of
evidence could have served no useful purpose. On the contrary, the
production of those documents after judgment defeats the purpose of modes
of discovery in expediting case preparation and shortening trials.
We find no reversible error on the part of the Court of Tax Appeals En
Banc in affirming the Division's denial of petitioner's Motion for Production of
Documents.
II
These consolidated cases involve the Tax Code provision defining new
brand as opposed to variant of brand, as these two are treated differently for
excise tax on fermented liquor.
Effective January 1, 1998, Republic Act No. 8424, otherwise known as
the Tax Reform Act of 1997, reproduced as Section 143 the provisions of
Section 140 of the old Tax Code, as amended by Republic Act No. 8240,
governing excise taxes on fermented liquor. Section 143 distinguishes a new
brand from a variant of brand:
Sec. 143. Fermented Liquor. — There shall be levied, assessed and
collected an excise tax on beer, lager beer, ale, porter and other
fermented liquors except tuba, basi, tapuy and similar domestic
fermented liquors in accordance with the following schedule:
(a) If the net retail price (excluding the excise tax and value-added tax)
per liter of volume capacity is less than Fourteen pesos and fifty
centavos (P14.50), the tax shall be Six pesos and fifteen centavos
(P6.15) per liter;
(b) If the net retail price (excluding the excise tax and the value-added
tax) per liter of volume capacity is Fourteen pesos and fifty centavos
(P14.50) up to Twenty-two pesos (P22.00), the tax shall be Nine pesos
and fifteen centavos (P9.15) per liter;
(c) If the net retail price (excluding the excise tax and the value-added
tax) per liter of volume capacity is more than Twenty-two pesos
(P22.00), the tax shall be Twelve pesos and fifteen centavos (P12.15)
per liter.
Variants of existing brands which are introduced in the domestic
market after the effectivity of Republic Act No. 8240 shall be taxed
under the highest classification of any variant of that brand.
Fermented liquor which are brewed and sold at micro-breweries or
small establishments such as pubs and restaurants shall be subject to
the rate in paragraph (c) hereof.
The excise tax from any brand of fermented liquor within the next three
(3) years from the effectivity of Republic Act No. 8240 shall not be
lower than the tax which was due from each brand on October 1, 1996.
The rates of excise tax on fermented liquor under paragraphs (a), (b)
and (c) hereof shall be increased by twelve percent (12%) on January
1, 2000.
New brands shall be classified according to their current net retail
price.
For the above purpose, 'net retail price' shall mean the price at which
the fermented liquor is sold on retail in twenty (20) major supermarkets
in Metro Manila (for brands of fermented liquor marketed nationally),
excluding the amount intended to cover the applicable excise tax and
the value-added tax. For brands which are marketed only outside
Metro Manila, the 'net retail price' shall mean the price at which the
fermented liquor is sold in five (5) major supermarkets in the region
excluding the amount intended to cover the applicable excise tax and
the value-added tax.
The classification of each brand of fermented liquor based on its
average net retail price as of October 1, 1996, as set forth in Annex 'C,'
shall remain in force until revised by Congress.
A 'variant of brand' shall refer to a brand on which a modifier is
prefixed and/or suffixed to the root name of the brand and/or a
different brand which carries the same logo or design of the
existing brand.
Every brewer or importer of fermented liquor shall, within thirty (30)
days from the effectivity of R.A. No. 8240, and within the first five (5)
days of every month thereafter, submit to the Commissioner a sworn
statement of the volume of sales for each particular brand of fermented
liquor sold at his establishment for the three-month period immediately
preceding. SDAaTC

Any brewer or importer who, in violation of this Section, knowingly

misdeclares or misrepresents in his or its sworn statement herein
required any pertinent data or information shall be penalized by a
summary cancellation or withdrawal of his or its permit to engage in
business as brewer or importer of fermented liquor.
 Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount of
deficiency taxes, surcharges and interest which may be assessed
pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this
Section shall be criminally liable and penalized under Section 254 of
this Code. Any person who willfully aids or abets in the commission of
any such act or omission shall be criminally liable in the same manner
as the principal.
If the offender is not a citizen of the Philippines, he shall be deported
immediately after serving the sentence, without further proceedings for
deportation. (Emphasis supplied)
On January 1, 2005, Republic Act No. 9334 82 took effect, amending
Section 143 of the Tax Code to read:
Sec. 143. Fermented Liquors. — There shall be levied, assessed and
collected an excise tax on beer, lager beer, ale, porter and other
fermented liquors except tuba, basi, tapuy and similar fermented
liquors in accordance with the following schedule:
(a) If the net retail price (excluding the excise tax and the value-added
tax) per liter of volume capacity is less than Fourteen pesos and fifty
centavos (P14.50), the tax shall be Eight pesos and twenty-seven
centavos (P8.27) per liter;
(b) If the net retail price (excluding the excise tax and the value-added
tax) per liter of volume capacity is Fourteen pesos and fifty centavos
(P14.50) up to Twenty-two pesos (P22.00), the tax shall be Twelve
pesos and thirty centavos (P12.30) per liter;
(c) If the net retail price (excluding the excise tax and the value-added
tax) per liter of volume capacity is more than Twenty-two pesos
(P22.00), the tax shall be Sixteen pesos and thirty-three centavos
(P16.33) per liter.
Variants of existing brands and variants of new brands which are
introduced in the domestic market after the effectivity of this Act shall
be taxed under the proper classification thereof based on their
suggested net retail price: Provided, however, That such classification
shall not, in any case, be lower than the highest classification of any
variant of that brand.
A 'variant of a brand' shall refer to a brand on which a modifier is
prefixed and/or suffixed to the root name of the brand.
Fermented liquors which are brewed and sold at micro-breweries or
small establishments such as pubs and restaurants shall be subject to
the rate in paragraph (c) hereof.
New brands, as defined in the immediately following paragraph, shall
initially be classified according to their suggested net retail price.
'New brand' shall mean a brand registered after the date of
effectivity of R.A. No. 8240.
'Suggested net retail price' shall mean the net retail price at which new
brands, as defined above, of locally manufactured or imported
fermented liquor are intended by the manufacturer or importer to be
sold on retail in major supermarkets or retail outlets in Metro Manila for
those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product
launch, the Bureau of Internal Revenue shall validate the suggested
net retail price of the new brand against the net retail price as defined
herein and determine the correct tax bracket to which a particular new
brand of fermented liquor, as defined above, shall be classified. After
the end of eighteen (18) months from such validation, the Bureau of
Internal Revenue shall revalidate the initially validated net retail price
against the net retail price as of the time of revalidation in order to
finally determine the correct tax bracket which a particular new brand
of fermented liquors shall be classified: Provided, however, That
brands of fermented liquors introduced in the domestic market
between January 1, 1997 and December 31, 2003 shall remain in
the classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such
classification of new brands and brands introduced between
January 1, 1997 and December 31, 2003 shall not be revised
except by an act of Congress.
'Net retail price,' as determined by the Bureau of Internal Revenue
through a price survey to be conducted by the Bureau of Internal
Revenue itself, or the National Statistics Office when deputized for the
purpose by the Bureau of Internal Revenue, shall mean the price at
which the fermented liquor is sold on retail in at least twenty (20) major
supermarkets in Metro Manila (for brands of fermented liquor marketed
nationally), excluding the amount intended to cover the applicable
excise tax and the value-added tax. For brands which are marketed
outside Metro Manila, the 'net retail price' shall mean the price at which
the fermented liquor is sold in at least five (5) major supermarkets in
the region excluding the amount intended to cover the applicable
excise tax and the value-added tax.
The classification of each brand of fermented liquor based on its
average net retail price as of October 1, 1996, as set forth in
Annex 'C', including the classification of brands for the same
products which, although not set forth in said Annex 'C', were
registered and were being commercially produced and marketed
on or after October 1, 1996, and which continue to be
 commercially produced and marketed after the effectivity of this
Act, shall remain in force until revised by Congress.
The rates of tax imposed under this Section shall be increased by eight
percent (8%) every two years starting on January 1, 2007 until January
1, 2011. acEHCD

Any downward reclassification of present categories, for tax purposes,

of existing brands of fermented liquor duly registered at the time of the
effectivity of this Act which will reduce the tax imposed herein, or the
payment thereof, shall be prohibited.
Every brewer or importer of fermented liquor shall, within thirty (30)
days from the effectivity of this Act, and within the first five (5) days of
every month thereafter, submit to the Commissioner a sworn statement
of the volume of sales for each particular brand of fermented liquor
sold at his establishment for the three-month period immediately
preceding.
Any brewer or importer who, in violation of this Section, knowingly
misdeclares or misrepresents in his or its sworn statement herein
required any pertinent data or information shall be penalized by a
summary cancellation or withdrawal of his or its permit to engage in
business as brewer or importer of fermented liquor.
Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount of
deficiency taxes, surcharges and interest which may be assessed
pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this
Section shall be criminally liable and penalized under Section 254 of
this Code. Any person who willfully aids or abets in the commission of
any such act or omission shall be criminally liable in the same manner
as the principal.
If the offender is not a citizen of the Philippines, he shall be deported
immediately after serving the sentence, without further proceedings for
deportation. (Emphasis supplied)
On December 19, 2012, Rep. Act No. 10351, otherwise known as
the Sin Tax Law, 83 was promulgated to further amend certain provisions on
excise taxes on alcohol and tobacco products. Among the amendments to
Section 143 were:
(1) Increase in the excise tax rates and transition from three (3)-tiered
to two (2)-tiered tax rates starting January 1, 2014 until
December 31, 2016; and to a single tax rate beginning January 1,
2017, irrespective of the price levels at which the products were
sold in the market;
 (2) All fermented liquors existing in the market at the time of the
effectivity of the Act shall be classified according to the net retail
prices and the tax rates provided, based on the latest price
survey of the fermented liquors conducted by the Bureau of
Internal Revenue. However, any downward reclassification is
prohibited;
(3) Fermented liquors introduced in the domestic market after the
effectivity of the Act shall be initially tax-classified according to
their suggested net retail prices until such time that their correct
tax bracket is finally determined under a specified period; and
(4) The proper tax classification of fermented liquors, whether
registered before or after the effectivity of the Act, shall be
determined every two (2) years from the date of effectivity of the
Act.
Excise taxes are imposed on the production, sale, or consumption of
specific goods. Generally, excise taxes on domestic products are paid by the
manufacturer or producer before removal of those products from the place of
production. 84 The excise tax based on weight, volume capacity, or any other
physical unit of measurement is referred to as "specific tax." If based on
selling price or other specified value, it is referred to as "ad valorem" tax. 85
The excise tax on beer is a specific tax based on volume, or on a per
liter basis. Before its amendment, Section 143 provided for three (3) layers of
tax rates, depending on the net retail price per liter. How a new beer product
is taxed depends on its classification, i.e., whether it is a variant of an existing
brand or a new brand. Variants of a brand that were introduced in the market
after January 1, 1997 are taxed under the highest tax classification of any
variant of the brand. On the other hand, new brands are initially classified and
taxed according to their suggested net retail price, until a survey is conducted
by the Bureau of Internal Revenue to determine their current net retail price in
accordance with the specified procedure.
III
Petitioner argues that "San Mig Light," launched in November 1999, is
not a new brand but merely a low-calorie variant of "San Miguel Pale
Pilsen." 86 Thus, the application of the higher excise tax rate for variant
products is appropriate and respondent should not be entitled to a refund or
issuance of a tax credit certificate. 87
Respondent counters that "San Mig Light" is a new brand; the
classification of "San Mig Light" as a new and medium-priced brand may not
be revised except by an act of Congress; 88 and the Court of Tax Appeals did
not err in granting its claim for refund or issuance of tax credit certificate.
 The refund claim in CTA Case No. 7405, subject of the Petition
docketed as G.R. No. 205723, covers the period from February 2, 2004 to
November 30, 2005, while the refund claim in CTA Case No. 7708, subject of
the Petition docketed as G.R. No. 205045, covers the period from December
1, 2005 up to July 31, 2007.
We find for respondent.
Parenthetically, the Bureau of Internal Revenue's actions reflect its
admission and confirmation that "San Mig Light" is a new brand. SDHTEC

When respondent's October 19, 1999 letter requested the registration

and authority to manufacture "San Mig Light," to be taxed at P12.15 per
liter, 89 the Bureau of Internal Revenue granted the request. 90
The response dated February 7, 2002 of the LTAD II Acting Chief
confirmed that respondent was allowed to register, manufacture, and sell "San
Mig Light" as a new brand. 91
The Joint Stipulation of Facts, Documents and Issues in CTA Cases
Nos. 7052 and 7053 dated July 29, 2005, 92 signed by both parties, includes
paragraph 1.08, which reads:
1.08. From the time of its registration as a new brand in October
1999 and its production in November 1999, "San Mig Light" products
have been withdrawn and sold, and taxes have been paid on such
removals, on the basis of its registration and tax rate as a new
brand. (CTA No. 7052: Petition, par. 5.06; Answer, par. 2[e]; CTA No.
7053: Petition, par. 5.06; Answer, par. 2[e]). 93 (Emphasis supplied)
The May 28, 2002 Notice of Discrepancy was effectively nullified by the
subsequent issuance of Revenue Memorandum Order No. 6-2003, which
included "San Mig Light" as a new brand.
The Bureau of Internal Revenue issued Revenue Memorandum Order
No. 6-2003 dated March 11, 2003 with the subject, Prescribing the Guidelines
and Procedures in the Establishment of Current Net Retail Prices of New
Brands of Cigarettes and Alcohol Products Pursuant to Revenue Regulations
No. 9-2003. Annex "A-3" is the Master List of Registered Brands of Locally
Manufactured Alcohol Products as of February 28, 2003, and the list includes
"San Mig Light," 94 classified as "NB" or "new brand registered on or after
January 1, 1997": 95
CLAS SPECIFICATIO PACKAG INTENDE REMARK
BRAND NAME
S N E D S
MARKET
Expor Date of
Domestic Status
t Last
Sale Productio
 n

B.
FERMENTED
LIQUOR
1. SAN
MIGUEL
CORPORATIO
N
....
330ml flint
"San Mig Light" NB 24 bots x x Active 96
bottle
IV
Any reclassification of fermented liquor products should be by act of
Congress. Section 143 of the Tax Code, as amended by Rep. Act No. 9334,
provides for this classification freeze referred to by the parties:
Provided, however, That brands of fermented liquors introduced in the
domestic market between January 1, 1997 and December 31, 2003
shall remain in the classification under which the Bureau of Internal
Revenue has determined them to belong as of December 31,
2003. Such classification of new brands and brands introduced
between January 1, 1997 and December 31, 2003 shall not be
revised except by an act of Congress.
xxx xxx xxx
The classification of each brand of fermented liquor based on its
average net retail price as of October 1, 1996, as set forth in Annex 'C',
including the classification of brands for the same products which,
although not set forth in said Annex 'C', were registered and were
being commercially produced and marketed on or after October 1,
1996, and which continue to be commercially produced and marketed
after the effectivity of this Act, shall remain in force until revised by
Congress. 97 (Emphasis supplied)
In her Dissenting Opinion, Court of Tax Appeals Associate Justice
Cielito N. Mindaro-Grulla discussed that British American Tobacco v.
Camacho 98 explained the purpose and application of the classification
freeze. 99 Her Dissenting Opinion concludes that the classification freeze does
not apply when a brand is a variant erroneously determined as a new
brand. 100
British American Tobacco involves Section 145 of the Tax
Code governing excise taxes for cigars and cigarettes.
This Court in British American Tobacco discussed that Rep. Act No.
9334 includes, among other things, the legislative freeze on cigarette brands
introduced between January 2, 1997 and December 31, 2003, in that these
cigarette brands will remain in the classification determined by the Bureau of
Internal Revenue as of December 31, 2003 until revised by Congress. 101 In
other words, after a cigarette brand is classified under the low-priced,
medium-priced, high-priced, or premium-priced tax bracket based on its
current net retail price, its classification is frozen unless Congress reclassifies
it. 102
The petitioner in British American Tobacco questioned this legislative
freeze under Section 145 for creating a "grossly discriminatory classification
scheme between old and new brands." 103 This Court ruled that the
classification freeze provision does not violate the constitutional provisions on
equal protection. 104
This Court discussed the legislative intent behind the classification
freeze, that is, to deter the potential for abuse if the power to reclassify is
delegated and much discretion is given to the Department of Finance and
Bureau of Internal Revenue:
To our mind, the classification freeze provision was in the main
the result of Congress' earnest efforts to improve the efficiency and
effectivity of the tax administration over sin products while trying to
balance the same with other state interests. In particular, the
questioned provision addressed Congress' administrative concerns
regarding delegating too much authority to the DOF and BIR as this
will open the tax system to potential areas of abuse and corruption.
Congress may have reasonably conceived that a tax system which
would give the least amount of discretion to the tax implementers
would address the problems of tax avoidance and tax evasion. 105 AScHCD

British American Tobacco discussed the legislative history of the

classification freeze, but it did not explicitly rule that the classification freeze
only refers to retail price tax brackets.
In any event, petitioner's letters and Notices of Discrepancy, which
effectively changed San Mig Light's brand's classification from "new
brand to variant of existing brand," necessarily changes San Mig Light's tax
bracket. Based on the legislative intent behind the classification freeze
provision, petitioner has no power to do this.
A reclassification of a fermented liquor brand introduced between
January 1, 1997 and December 31, 2003, such as "San Mig Light," must be
by act of Congress. There was none in this case.
V
Before Rep. Act No. 9334 was passed, the Tax Code under Republic
Act No. 8240 defined a "variant of a brand" as follows:
 A variant of a brand shall refer to a brand on which a modifier is
prefixed and/or suffixed to the root name of the brand and/or a different
brand which carries the same logo or design of the existing brand. 106
This definition includes two (2) types of "variants." The first involves the
use of a modifier that is prefixed and/or suffixed to a brand root name, and the
second involves the use of the same logo or design of an existing brand.
Rep. Act No. 9334 took effect on January 1, 2005 and deleted the
second type of "variant" from the definition:
A 'variant of a brand' shall refer to a brand on which a modifier is
prefixed and/or suffixed to the root name of the brand. 107
Revenue Regulations No. 3-2006, with the subject: "Prescribing the
Implementing Guidelines of the Revised Tax Rates on Alcohol and Tobacco
Products Pursuant to the Provisions of Republic Act No. 9334, and Clarifying
Certain Provisions of Existing Revenue Regulations Relative
Thereto" reiterated the deletion of the second type of "variant":
SEC. 2. DEFINITION OF TERMS. — For purposes of these
Regulations, the following words and phrases shall have the meaning
indicated below:
xxx xxx xxx
(d) VARIANT OF A BRAND — shall refer to a brand of alcohol or
tobacco products on which a modifier is prefixed and/or suffixed
to the root name of the brand.(Emphasis supplied)
For this purpose, the term "root name" shall refer to a letter,
word, number, symbol, or character; or a combination of letters, words,
numbers, symbols, and/or characters that may or may not form a word;
or shall consist of a word or group of words, which may or may not
describe the other word or words: Provided, That the root name has
been originally registered as such with the Bureau of Internal Revenue
(BIR).
Examples of root name: "L & M", "bW", "10", "Pall Mall", "Blue
Ice", "Red Horse", etc.
The term "modifier" shall refer to a word, a number or a
combination of words and/or numbers that specifically describe the
root name to distinguish one variant from another whether or not the
use of such modifier is a common industry practice. The root name,
although accompanied by a modifier at the time of the original brand
registration, shall be the basis in determining the tax classification of
subsequent variants of such brands.
Examples of modifiers: . . .
 For beer: "Light," "Dry," "Ice," "Lager,"
"Hard," "Premium," etc.
Any variation in the color and/or design of the label (such as
logo, font, picturegram, and the like), manner and/or form of packaging
or size of container of the brand originally registered with the BIR shall
not, by itself, be deemed an introduction of a new brand or a variant of
a brand: Provided, That all instances of such variation shall require a
prior written permit from the BIR.
In case such BIR-registered brand has more than one (1) tax
classification as a result of the shift in the manner of taxation from ad
valorem tax to specific tax under R.A. No. 8240, the highest tax
classification shall be applied to such brand bearing a new label,
package, or volume content per package, subject to the provisions of
the immediately preceding paragraph.
ILLUSTRATION:
No. 1. —
xxx xxx xxx
In case a letter(s), number(s), symbols(s) or word(s) is/are
deleted from or replaced by another letter(s), number(s), symbol(s) or
word(s) in the root name of a previously BIR-registered brand, such
that the introduction of the said brand bearing such change(s) shall
ride on the popularity of the said previously registered brand, the same
shall be classified as a variant of such previously registered
brand: Provided, That where the introduction of such brand by another
manufacturer or importer will give rise to any legal action with respect
to infringement of patent or unfair competition, such brand shall be
considered a variant of such previously registered brand. AcICHD

ILLUSTRATION:
No. 2. —
ROOT MODIFIER IS MODIFIER IS MODIFIED ROOT
NAME PREFIXED SUFFIXED NAME

L&M Kings L & M L & M Lights M&L

10 Perfect 10 10 Menthols Ten
Blue Ice Wild Blue Ice Blue Ice Supreme Blue Iced
Red Horse Flying Red Horse Red Horse Premium Reddish Horse
Pall Mall Long Pall Mall Pall Mall Filter Pal Mall
Petitioner submits that the complete name of "San Mig Light" is "San
Mig Light Pale Pilsen," and Section 143 of the Tax Code, in relation to its
Annexes C-1 and C-2, show that the parent brands of San Mig Light are
RPT 108 in cans or San Miguel Beer Pale Pilsen in can 330 ml, Pale Pilsen,
and Super Dry. 109 It contends that the root name of the existing brand is
"Pale Pilsen," and RPT had the highest tax classification at the time "San Mig
Light" was introduced. 110 "San Miguel Beer Pale Pilsen" and "San Mig Light"
have almost identical labels, and only these two labels bear the same "Pale
Pilsen." 111
Respondent counters that petitioner changed its theory of the case on
appeal, and this should not be allowed. 112 It argues that petitioner
categorically invoked the second part of the definition of variant in Section
143, and this part of the definition has been deleted by Rep. Act No.
9334. 113 Moreover, petitioner made no categorical assertion on the first part
of the definition, but only a vague statement that "the root name of the existing
brand is 'Pale Pilsen.'" 114 Respondent adds that petitioner "has not specified
which type of 'San Mig Light,' in bottle or in can, is a variant of 'RPT' in can
(San Miguel Beer Pale Pilsen)." 115
Petitioner, on the other hand, maintains that even during the trial stage,
its theory has always been that "San Mig Light" falls under both first and
second parts of Section 143, before its amendment by Rep. Act No. 9334. 116
A change of theory on appeal is generally disallowed in this jurisdiction
for being unfair to the adverse party. 117
Even then, the Court of Tax Appeals En Banc, in both assailed
Decisions, quoted with approval the First Division's finding that "San Mig
Light" does not fall under both first and second parts of the definition
of variant:
The fact that "San Mig Light" is a "new brand" and not merely a
variant of an existing brand is bolstered by the fact that Annexes "C-1"
and "C-2" of RA No. 8240, which enumerated the fermented liquors
registered with the BIR do not include the brand name "San Mig Light."
Instead, what were listed, as existing brands of petitioner, as of the
effectivity of RA No. 8240, were as follows: "Pale Pilsen 320 ml.,"
"Super Dry 355 ml." and "Premium Can 330 ml." Even in Section 4 of
RR No. 2-97, which provides for the classification and manner of
taxation of existing brands, new brands and variants of existing brands,
the list of existing brands of fermented liquors of petitioner does not
include the brand "San Mig Light," but merely "RPT in cans 330 ml.,"
"Premium Bottles 355 ml.," "Premium Bottles 355 ml." and "Premium
Bottle Can 330 ml." for high priced brands; and "Super Dry 355 ml.,"
"Pale Pilsen 320 ml.," and "Grande" for medium-priced brands. 118
Thus, it is clear that when the product "San Mig Light" was
introduced in 1999, it was considered as an entirely new product and
a new brand of petitioner's fermented liquor, there being no root
name of "San Miguel" or "San Mig" in its existing brand names.
The existing registered and classified brand name of petitioner at
that time was "Pale Pilsen." Therefore, the word "Light" cannot be
considered as a mere suffix to the word "San Miguel," but it is
part and parcel of an entirely new brand name, "San Mig
Light." Evidently, as correctly pointed out by petitioner, "San Mig
Light" is not merely a variant of an existing brand, but an entirely new
brand:
Anent the second type of "variant of brand," i.e., when a
different brand carries the same logo or design of an existing
brand, records show that there are marked differences in the
designs of the existing brand "Pale Pilsen" and the new brand
"San Mig Light":
a) as to "Pale Pilsen" and "San Mig Light" in bottles:
1. the size, shape and color of the respective bottles are different.
Each brand has a distinct design in its packaging. "Pale Pilsen" is in a
steiny bottle, while "San Mig Light" is packed in a tall and slim
transparent bottle;
2. the design and color of the inscription on the bottles are different
from each other. "Pale Pilsen" has its label encrypted or embossed on
the bottle itself, while "San Mig Light" has a silver and blue label of
distinctive design that is printed on paper pasted on the bottle; and
3. the color of the letters in the "Pale Pilsen" brand is white against the
color of the bottle, while that of the words "San Mig" is white against a
blue background and the word "Light" is blue against a silver
background.
b) As to "Pale Pilsen" and "San Mig Light" in cans:
1. the words "Pale Pilsen" are in ordinary font printed horizontally in
black on the can against a diagonally striped light yellow gold
background, while the words "San Mig" are in Gothic font printed
diagonally on the can against a blue background and the word "Light"
in ordinary font printed diagonally against a diagonally striped silver
background; and
2. the general color scheme of "Pale Pilsen" is light yellow gold, while
that of "San Mig Light" is silver.
Though the "escudo" logo appears on both "Pale Pilsen" bottle
and "San Mig Light" bottle and can, the same cannot be considered as
an indication that "San Mig Light" is merely a variant of the brand "Pale
Pilsen," since the said "escudo" insignia is the corporate logo of
petitioner. It merely identifies the products, as having been
manufactured by petitioner, but does not form part of its brand. In fact,
it appears not only in petitioner's beer products, but even in its non-
beer products. 119 TAIaHE

VI
 A variant under the Tax Code has a technical meaning. It is determined
by the brand (name) or logo of the beer product.
To be sure, all beers are composed of four (4) raw materials: barley,
hops, yeast, and water. 120 Barley grain has always been used and associated
with brewing beer, while hops act as the bittering substance. 121 Yeast plays a
role in alcoholic fermentation, with bottom-fermenting yeasts resulting in light
lager and top-fermenting ones producing the heavy and rich ale. 122 With only
four (4) ingredients combined and processed in varying quantities, all beer are
essentially related variants of these mixtures.
A manufacturer of beer may produce different versions of its products,
distinguished by features such as flavor, quality, or calorie content, to suit the
tastes and needs of specific segments of the domestic market. It can also
leverage on the popularity of its existing brand and sell a lower priced version
to make it affordable for the low-income consumers. These strategies are
employed to gain a higher overall level of share or profit from the market.
In intellectual property law, a registered trademark owner has the right
to prevent others from the use of the same mark (brand) for identical goods or
services. The use of an identical or colorable imitation of a registered
trademark by a person for the same goods or services or closely related
goods or services of another party constitutes infringement. It is a form of
unfair competition 123 because there is an attempt to get a free ride on the
reputation and selling power of another manufacturer by passing of one's
goods as identical or produced by the same manufacturer as those carrying
the other mark (brand). 124
The variant contemplated under the Tax Code has a technical meaning.
A variant is determined by the brand (name) of the beer product, whether it
was formed by prefixing or suffixing a modifier to the root name of the alleged
parent brand, or whether it carries the same logo or design. The purpose
behind the definition was to properly tax brands that were presumed to be
riding on the popularity of previously registered brands by being marketed
under an almost identical name with a prefix, suffix, or a variant. 125 It seeks to
address price differentials employed by a manufacturer on similar products
differentiated only in brand or design. Specifically, the provision was meant to
obviate any tax avoidance by manufacturing firms from the sale of lower
priced variants of its existing beer brands, thus, falling in the lower tax bracket
with lower excise tax rates. To favor government, a variant of a brand is taxed
according to the highest rate of tax for that particular brand.
"San Mig Light" and "Pale Pilsen" do not share a root word. Neither is
there an existing brand in the list (Annexes C-1 and C-2 of the Tax Code)
called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light"
as its "variant." 126 As discussed in the Court of Tax Appeals Decision, "San
Mig Light" should be considered as one brand name. 127
Respondent's statements describing San Mig Light as a low-calorie
variant is not conclusive of its classification as a variant for excise tax
purposes. Burdens are not to be imposed nor presumed to be imposed
beyond the plain and express terms of the law. 128 "The general rule of
requiring adherence to the letter in construing statutes applies with peculiar
strictness to tax laws and the provisions of a taxing act are not to be extended
by implication." 129
Furthermore, respondent's payment of the higher taxes starting January
30, 2004 after deficiency assessments were made cannot be considered as
an admission that its San Mig Light is a variant. Section 130 (A) (2) of the Tax
Code requires payment of excise tax "before removal of domestic products
from place of production." 130 These payments were made in protest as
respondent subsequently filed refund claims.
VII
Petitioner argues that although the Bureau of Internal Revenue
erroneously allowed San Miguel Corporation to manufacture and sell "San
Mig Light" in 1999 as a "new brand" with the lower excise tax rate for "new
brands," government is not estopped from correcting previous errors by its
agents. 131
Petitioner submits that the Notice of Discrepancy was to remedy the
"misrepresentation" 132 of "San Mig Light" as new brand. It submits that
respondent's self-assessment of excise taxes as a new brand was without
approval:
San Mig Light was never registered with BIR as a new brand but
always as a variant. Thus, petitioner's payment of excise taxes on San
Mig Light as a new brand is based on its own classification of San Mig
Light as a new brand without approval of the BIR. Under existing
procedures in the payment of excise taxes, taxpayers are required to
pay their taxes based on self-assessment system with the government
relying heavily on the honesty of taxpayers. Such being the case, any
payments made, even those allegedly made as a condition for the
withdrawal of the product from the place of production, cannot be
considered as a confirmation by the BIR of the correctness of such
payment. 133
Section 143 of the Tax Code, as amended by Rep. Act No. 9334,
provides for the Bureau of Internal Revenue's role in validating and
revalidating the suggested net retail price of a new brand of fermented liquor
for purposes of determining its tax bracket: cDHAES
 'Suggested net retail price' shall mean the net retail price at which new
brands, as defined above, of locally manufactured or imported
fermented liquor are intended by the manufacturer or importer to be
sold on retail in major supermarkets or retail outlets in Metro Manila for
those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product
launch, the Bureau of Internal Revenue shall validate the
suggested net retail price of the new brand against the net retail
price as defined herein and determine the correct tax bracket to
which a particular new brand of fermented liquor, as defined
above, shall be classified. After the end of eighteen (18) months
from such validation, the Bureau of Internal Revenue shall
revalidate the initially validated net retail price against the net
retail price as of the time of revalidation in order to finally
determine the correct tax bracket which a particular new brand of
fermented liquors shall be classified: Provided, however, That
brands of fermented liquors introduced in the domestic market
between January 1, 1997 and December 31, 2003 shall remain in the
classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such
classification of new brands and brands introduced between January 1,
1997 and December 31, 2003 shall not be revised except by an act of
Congress.
When respondent launched "San Mig Light" in 1999, it wrote the Bureau
of Internal Revenue on October 19, 1999 requesting registration and authority
to manufacture "San Mig Light" to be taxed as P12.15.
The Bureau of Internal Revenue granted this request in its October 27,
1999 letter. Contrary to petitioner's contention, the registration granted was
not merely for intellectual property protection 134 but "for internal revenue
purposes only":
Your request dated October 19, 1999, for the registration of San
Miguel Corporation commercial label for beer bearing the trade mark
"San Mig Light" Pale Pilsen, for domestic sale or export, 24 bottles in a
case, each flint bottle with contents of 330 ml., is hereby granted.
xxx xxx xxx
Please follow strictly the requirements of internal revenue laws,
rules and regulations relative to the marks to be placed on each case,
cartons or box used as secondary containers. It is understood that
the said brand be brewed and bottled in the breweries at Polo,
Valenzuela (A-2-21).
You are hereby informed that the registration of
commercial labels in this Office is for internal revenue purposes
only and does not give you protection against any person or entity
 whose rights may be prejudiced by infringement or unfair competition
resulting from your use of the above indicated
trademark. 135 (Emphasis supplied)
Because the Bureau of Internal Revenue granted respondent's request
in its October 27, 1999 letter and confirmed this grant in its subsequent
letters, respondent cannot be faulted for relying on these actions by the
Bureau of Internal Revenue.
While estoppel generally does not apply against government, especially
when the case involves the collection of taxes, an exception can be made
when the application of the rule will cause injustice against an innocent
party. 136
Respondent had already acquired a vested right on the tax
classification of its San Mig Light as a new brand. To allow petitioner to
change its position will result in deficiency assessments in substantial
amounts against respondent to the latter's prejudice.
The authority of the Bureau of Internal Revenue to overrule, correct, or
reverse the mistakes or errors of its agents is conceded. However, this
authority must be exercised reasonably, 137 i.e., only when the action or ruling
is patently erroneous 138 or patently contrary to law. 139 For the presumption
lies in the regularity of performance of official duty, 140 and reasonable care
has been exercised by the revenue officer or agent in evaluating the facts
before him or her prior to rendering his or her decision or ruling — in this
case, prior to the approval of the registration of San Mig Light as a new
brand for excise tax purposes. A contrary view will create disorder and
confusion in the operations of the Bureau of Internal Revenue and open the
administrative agency to inconsistencies in the administration and
enforcement of tax laws.
In Commissioner v. Algue: 141
It is said that taxes are what we pay for civilized society. Without
taxes, the government would be paralyzed for lack of the motive power
to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard-earned income to the taxing authorities,
every person who is able to must contribute his share in the running of
the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.
But even as we concede the inevitability and indispensability of
taxation, it is a requirement in all democratic regimes that it be
 exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the
courts will then come to his succor. For all the awesome power of the
tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed. 142
VIII
The Tax Code includes remedies for erroneous collection and
overpayment of taxes. Under Sections 229 and 204 (C) of the Tax Code, a
taxpayer may seek recovery of erroneously paid taxes within two (2) years
from date of payment: ASEcHI

SEC. 229. Recovery of tax Erroneously or Illegally Collected. —

No suit or proceeding shall be maintained in any court for the recovery
of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, of any sum alleged to
have been excessively or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed with the Commissioner;
but such suit or proceeding may be maintained, whether or not such
tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the
expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening case that may arise after
payment: Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the
face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid.
xxx xxx xxx
SEC. 204. Authority of the Commissioner to Compromise, Abate and
Refund or Credit Taxes. — The Commissioner may —
xxx xxx xxx
(C) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps
when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered
unfit for use and refund their value upon proof of destruction. No credit
or refund of taxes or penalties shall be allowed unless the taxpayer
files in writing with the Commissioner a claim for credit or refund within
two (2) years after the payment of the tax or penalty: Provided,
however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code
may be applied against any internal revenue tax, excluding withholding
 taxes, for which the taxpayer is directly liable. Any request for
conversion into refund of unutilized tax credits may be allowed, subject
to the provisions of Section 230 of this Code: Provided, That the
original copy of the Tax Credit Certificate showing a creditable balance
is surrendered to the appropriate revenue officer for verification and
cancellation: Provided, further, That in no case shall a tax refund be
given resulting from availment of incentives granted pursuant to special
laws for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the Committee on
Ways and Means of both the Senate and House of Representatives,
every six (6) months, a report on the exercise of his powers under this
Section, stating therein the following facts and information, among
others: names and addresses of taxpayers whose cases have been
the subject of abatement or compromise; amount involved; amount
compromised or abated; and reasons for the exercise of
power: Provided, That the said report shall be presented to the
Oversight Committee in Congress that shall be constituted to
determine that said powers are reasonably exercised and that the
Government is not unduly deprived of revenues.
In G.R. No. 205045, the Court of Tax Appeals En Banc ruled that "San
Mig Light" is a new brand and not a variant of an existing brand. Accordingly,
it ordered the refund of erroneously collected excise taxes on "San Mig Light"
products in the amount of P926,169,056.74 for the period of December 1,
2005 to July 31, 2007. 143
In G.R. No. 205723, the Court of Tax Appeals En Banc found proper
the refund of erroneously collected excise taxes on "San Mig Light" products
in the amount of P781,514,772.56 for the period of February 2, 2004 to
November 30, 2005. 144 It referred to, and agreed with, the findings of the
Court-commissioned Independent Certified Public Accountant Normita L.
Villaruz on reaching this amount. 145 The Court of Tax Appeals also found,
from the records, that respondent timely filed its administrative claim for
refund on December 28, 2005, and its judicial claim on January 31, 2006. 146
This Court accords the highest respect to the factual findings of the
Court of Tax Appeals. We recognize its developed expertise on the subject as
it is the court dedicated solely to considering tax issues, unless there is a
showing of abuse in the exercise of authority. 147 We find no reason to
overturn the factual findings of the Court of Tax Appeals on the amounts
allowed for refund.
WHEREFORE, the Petitions are DENIED. The assailed Decisions and
Resolutions of the Court of Tax Appeals En Banc in CTA Case Nos. 7052,
7053, 7405, and 7708 are AFFIRMED.
SO ORDERED.
 Carpio, Velasco, Jr., * Peralta and Mendoza, JJ., concur.
(Commissioner of Internal Revenue v. San Miguel Corp., G.R. Nos. 205045 &
|||

205723, [January 25, 2017], 804 PHIL 293-340)

SECOND DIVISION

[G.R. No. 174379. August 31, 2016.]

E.I. DUPONT DE NEMOURS AND CO. (assignee of inventors

Carini, Duncia and Wong), petitioner, vs. DIRECTOR EMMA C.
FRANCISCO (in her capacity as DIRECTOR GENERAL OF THE
INTELLECTUAL PROPERTY OFFICE), DIRECTOR EPIFANIO
M. EVASCO (in his capacity as the DIRECTOR OF THE
BUREAU OF PATENTS), and THERAPHARMA,
INC., respondents.

DECISION

LEONEN, J : p

A patent is granted to provide rights and protection to the inventor after

an invention is disclosed to the public. It also seeks to restrain and prevent
unauthorized persons from unjustly profiting from a protected invention.
However, ideas not covered by a patent are free for the public to use and
exploit. Thus, there are procedural rules on the application and grant of
patents established to protect against any infringement. To balance the public
interests involved, failure to comply with strict procedural rules will result in the
failure to obtain a patent.
This resolves a Petition for Review on Certiorari 1 assailing the Court of
Appeals Amended Decision 2 dated August 30, 2006, which denied the revival
of Philippine Patent Application No. 35526, and the Court of Appeals
Resolution 3 dated January 31, 2006, which granted the intervention of
Therapharma, Inc. in the revival proceedings.
E.I. Dupont Nemours and Company (E.I. Dupont Nemours) is an
American corporation organized under the laws of the State of Delaware. 4 It
is the assignee of inventors David John Carini, John Jonas Vytautas Duncia,
and Pancras Chor Bun Wong, all citizens of the United States of America. 5
 On July 10, 1987, E.I. Dupont Nemours filed Philippine Patent
Application No. 35526 before the Bureau of Patents, Trademarks, and
Technology Transfer. 6 The application was for Angiotensin II Receptor
Blocking Imidazole (losartan), an invention related to the treatment of
hypertension and congestive heart failure. 7 The product was produced and
marketed by Merck, Sharpe, and Dohme Corporation (Merck), E.I. Dupont
Nemours' licensee, under the brand names Cozaar and Hyzaar. 8
The patent application was handled by Atty. Nicanor D. Mapili (Atty.
Mapili), a local resident agent who handled a majority of E.I. Dupont Nemours'
patent applications in the Philippines from 1972 to 1996. 9
On December 19, 2000, E.I. Dupont Nemours' new counsel, Ortega,
Del Castillo, Bacorro, Odulio, Calma, and Carbonell, 10 sent the Intellectual
Property Office 11 a letter requesting that an office action be issued on
Philippine Patent Application No. 35526. 12
In response, Patent Examiner Precila O. Bulihan of the Intellectual
Property Office sent an office action marked Paper No. 2 on January 30,
2002, 13 which stated: CAIHTE

The appointed attorney on record was the late Atty. Nicanor D.

Mapili. The reconstituted documents provided no documents that will
show that the authority to prosecute the instant application is now
transferred to the present counsel. No official revocation on record is
available.
Therefore, an official revocation of the Power of Attorney of the
former counsel and the appointment of the present by the applicant is
therefore required before further action can be undertaken.
xxx xxx xxx
1. Contrary to what was alleged, the Chemical Examining
Division's (CED) record will show that as far as the said
division is concern[ed], it did not fail to issue the proper and
timely action on the instant application. CED record shows
that the subject application was assigned to the examiner
on June 7, 1988. A month after that was July 19, 1988, the
first Office Action was mailed but was declared abandoned
as of September 20, 1988 for applicant's failure to respond
within the period as prescribed under Rule 112. Since then,
no other official transactions were recorded. This record is
complemented by the Examiner-in-charge's own record. . .
.
xxx xxx xxx
2. It was noted that it took thirteen (13) long years for the
applicant to request for such Office Action. This is not
 expected of the applicant since it is an acceptable fact that
almost all inventors/applicants wish for the early disposition
for their applications. 14
On May 29, 2002, E.I. Dupont Nemours replied to the office action by
submitting a Power of Attorney executed by Miriam Meconnahey, authorizing
Ortega, Castillo, Del Castillo, Bacorro, Odulio, Calma, and Carbonell to
prosecute and handle its patent applications. 15 On the same day, it also filed
a Petition for Revival with Cost of Philippine Patent Application No. 35526. 16
In its Petition for Revival, E.I. Dupont Nemours argued that its former
counsel, Atty. Mapili, did not inform it about the abandonment of the
application, and it was not aware that Atty. Mapili had already died. 17 It
argued that it discovered Atty. Mapili's death when its senior-level patent
attorney visited the Philippines in 1996. 18 It argued that it only had actual
notice of the abandonment on January 30, 2002, the date of Paper No.
2. 19 Thus, it argued that its Petition for Revival was properly filed under
Section 113 of the 1962 Revised Rules of Practice before the Philippines
Patent Office in Patent Cases (1962 Revised Rules of Practice). 20
On April 18, 2002, the Director of Patents denied the Petition for
Revival for having been filed out of time. 21 The Resolution 22 stated:
Propriety dictates that the well-settled rule on agency should be
applied to this case to maintain the objectivity and discipline of the
Office. Therefore, for cases such as the instant case, let the Office
maintain its position that mistakes of the counsel bind the client,'
regardless of the degree of negligence committed by the former
counsel. Although it appears that the former counsel, Atty. Nicanor
Mapili was remiss in his obligations as counsel for the applicants, the
Office cannot revive the abandoned application because of the
limitations provided in Rule 115. Clearly, the Petition for Revival was
filed beyond the reglementary period. Since the law and rules do not
give the Director of Patents the discretion to stretch the period for
revival, the Office is constrained to apply Rule 115 to the instant
case. DETACa

In view of the foregoing considerations, applicants' petition to

revive the subject application is hereby denied.
SO ORDERED. 23
E.I. Dupont Nemours appealed the denial to the Director-General of the
Intellectual Property Office on August 26, 2002. 24 In the Decision 25 dated
October 22, 2003, Director-General Emma C. Francisco denied the appeal
and affirmed the Resolution of the Director of Patents.
 On November 21, 2003, petitioner filed before the Court of Appeals a
Petition for Review seeking to set aside the Intellectual Property Office's
Decision dated October 22, 2003. 26
On August 31, 2004, the Court of Appeals granted the Petition for
Review. 27 In allowing the Petition for Revival, the Court of Appeals stated:
After an exhaustive examination of the records of this case, this
Court believes that there is sufficient justification to relax the
application of the above-cited doctrine in this case, and to afford
petitioner some relief from the gross negligence committed by its
former lawyer, Atty. Nicanor D. Mapili[.] 28
The Office of the Solicitor General, on behalf of the Intellectual Property
Office, moved for reconsideration of this Decision on September 22, 2004. 29
In the interim, Therapharma, Inc. moved for leave to intervene and
admit the Attached Motion for Reconsideration dated October 11, 2004 30 and
argued that the Court of Appeals' August 31, 2004 Decision directly affects its
"vested" rights to sell its own product. 31
Therapharma, Inc. alleged that on January 4, 2003, it filed before the
Bureau of Food and Drugs its own application for a losartan product "Lifezar,"
a medication for hypertension, which the Bureau granted. 32 It argued that it
made a search of existing patent applications for similar products before its
application, and that no existing patent registration was found since E.I.
Dupont Nemours' application for its losartan product was considered
abandoned by the Bureau of Patents, Trademarks, and Technology
Transfer. 33 It alleged that sometime in 2003 to 2004, there was an exchange
of correspondence between Therapharma, Inc. and Merck. In this exchange,
Merck informed Therapharma, Inc. that it was pursuing a patent on the
losartan products in the Philippines and that it would pursue any legal action
necessary to protect its product. 34
On January 31, 2006, the Court of Appeals issued the
Resolution 35 granting the Motion for Leave to Intervene. According to the
Court of Appeals, Therapharma, Inc. had an interest in the revival of E.I.
Dupont Nemours' patent application since it was the local competitor for the
losartan product. 36 It stated that even if the Petition for Review was premised
on the revival of the patent application, Therapharma, Inc.'s intervention was
not premature since E.I. Dupont Nemours, through Merck, already threatened
Therapharma, Inc. with legal action if it continued to market its losartan
product. 37
E.I. Dupont Nemours moved for reconsideration on February 22, 2006,
assailing the Court of Appeals' January 31, 2006 Resolution. 38
 On August 30, 2006, the Court of Appeals resolved both Motions for
Reconsideration and rendered the Amended Decision 39 reversing its August
31, 2004 Decision.
The Court of Appeals ruled that the public interest would be prejudiced
by the revival of E.I. Dupont Nemours' application. 40 It found that losartan
was used to treat hypertension, "a chronic ailment afflicting an estimated 12.6
million Filipinos," 41 and noted that the presence of competition lowered the
price for losartan products. 42 It also found that the revival of the application
prejudiced Therapharma, Inc.'s interest, in that it had already invested more
than P20,000,000.00 to develop its own losartan product and that it acted in
good faith when it marketed its product. 43 aDSIHc

The Court of Appeals likewise found that it erroneously based its

August 31, 2004 Decision on E.I. Dupont Nemours' allegation that it took
seven (7) to 13 years for the Intellectual Property Office to act on a patent
application. 44 It stated that while it might have taken that long to issue the
patent, it did not take that long for the Intellectual Property Office to act on
application. 45 Citing Schuartz v. Court of Appeals, 46 it found that both E.I.
Dupont Nemours and Atty. Mapili were inexcusably negligent in prosecuting
the patent application. 47
On October 19, 2006, petitioner E.I. Dupont Nemours filed before this
Court this Petition for Review on Certiorari. 48 Both respondents Intellectual
Property Office and Therapharma, Inc. were directed to comment on the
comment on the Petition. 49 Upon submission of their respective
Comments, 50 petitioner was directed to file its Consolidated
Reply. 51 Thereafter, the parties were directed to file their respective
memoranda. 52
The arguments of the parties present several issues for this Court's
resolution, as follows:
First, whether the Petition for Review on Certiorari complied with Rule
45, Section 4 of the Rules of Court when petitioner failed to attach certain
documents to support the allegations in the complaint;
Second, whether petitioner should have filed a petition
for certiorari under Rule 65 of the Rules of Court;
Third, whether the Petition for Review on Certiorari raises questions of
fact;
Fourth, whether the Court of Appeals erred in allowing the intervention
of respondent Therapharma, Inc. in petitioner's appeal;
Fifth, whether the Court of Appeals erred in denying petitioner's appeal
for the revival of its patent application on the grounds that (a) petitioner
committed inexcusable negligence in the prosecution of its patent application;
and (b) third-party rights and the public interest would be prejudiced by the
appeal;
Sixth, whether Schuartz applies to this case in that the negligence of a
patent applicant's counsel binds the applicant; and
Lastly, whether the invention has already become part of public domain.
I
The question of whether the Court of Appeals may resolve a motion for
intervention is a question that assails an interlocutory order and requests a
review of a lower court's exercise of discretion. Generally, a petition
for certiorari under Rule 65 of the Rules of Court will lie to raise this issue in a
limited manner. There must be a clear showing of grave abuse of discretion
for the writ of certiorari to be issued.
However, when the Court of Appeals has already resolved the question
of intervention and the merits of the case, an appeal through a petition for
review on certiorariunder Rule 45 of the Rules of Court is the proper remedy.
Respondent Therapharma, Inc. argues that the Petition should be
dismissed outright for being the wrong mode of appeal. 53 It argues that
petitioner should have filed a petition for certiorari under Rule 65 since
petitioner was assailing an act done by the Court of Appeals in the exercise of
its discretion. 54 It argues that petitions under Rule 45 are limited to questions
of law, and petitioner raised findings of fact that have already been affirmed
by the Court of Appeals. 55
Petitioner, on the other hand, argues that Rule 65 is only available
when there is no appeal or any plain, speedy remedy in the ordinary course of
law. Since a petition for review under Rule 45 was still available to it, it argues
that it correctly availed itself of this remedy. 56 Petitioner also argues that
there are exceptions to the general rule on the conclusiveness of the Court of
Appeals' findings of fact. 57 It argues that it was necessary for it to discuss
relevant facts in order for it to show that the Court of Appeals made a
misapprehension of facts. 58
The special civil action of certiorari under Rule 65 is intended to correct
errors of jurisdiction. 59 Courts lose competence in relation to an order if it acts
in grave abuse of discretion amounting to lack or excess of jurisdiction. 60 A
petition for review under Rule 45, on the other hand, is a mode of appeal
intended to correct errors of judgment. 61Errors of judgment are errors
committed by a court within its jurisdiction. 62 This includes a review of the
conclusions of law 63 of the lower court and, in appropriate cases, evaluation
of the admissibility, weight, and inference from the evidence presented. ETHIDa
 Intervention results in an interlocutory order ancillary to a principal
action. 64 Its grant or denial is subject to the sound discretion of the
court. 65 Interlocutory orders, or orders that do not make a final disposition of
the merits of the main controversy or cause of action, 66 are generally not
reviewable. 67 The only exception is a limited one, in that when there is no
plain, speedy, and adequate remedy, and where it can be shown that the
court acted without, in excess, or with such grave abuse of discretion that
such action ousts it of jurisdiction.
Judicial economy, or the goal to have cases prosecuted with the least
cost to the parties, 68 requires that unnecessary or frivolous reviews of orders
by the trial court, which facilitate the resolution of the main merits of the case,
be reviewed together with the main merits of the case. After all, it would be
more efficient for an appellate court to review a case in its entire context when
the case is finally disposed.
The question of whether intervention is proper is a question of law.
Settled is the distinction between a question of law and a question of fact. A
question of fact arises when there is doubt as to the truth or falsity of certain
facts. 69 A question of law, on the other hand, arises when "the appeal raises
doubt as to the applicable law on a certain set of facts." 70 The test often used
by this Court to determine whether there is a question of fact or a question of
law "is not the appellation given to such question by the party raising the
same; rather, it is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case, it is a question of
law; otherwise it is a question of fact." 71
Petitioner raises the question of whether Republic Act No. 165 allows
the Court of Appeals to grant a motion for intervention. This necessarily
requires a determination of whether Rule 19 of the Rules of Court 72 applies in
appeals of cases filed under Republic Act No. 165. The determination of this
question does not require a review of re-evaluation of the evidence. It requires
a determination of the applicable law.
II
If a petition fails to attach material portions of the record, it may still be
given due course if it falls under certain exceptions. Although Rule 45, Section
4 of the Rules of Court requires that the petition "be accompanied by . . . such
material portions of the record as would support the petition," the failure to do
so will not necessarily warrant the outright dismissal of the complaint. 73
Respondent Therapharma, Inc. argues that the Petition should have
been outright dismissed since it failed to attach certain documents to support
its factual allegations and legal arguments, particularly: the annexes of the
Petition for Review it had filed before the Court of Appeals and the annexes in
the Motion for Leave to Intervene it had filed. 74 It argues that petitioner's
failure to attach the documents violates Rule 45, Section 4, which requires the
submission of material portions of the record. 75 TIADCc

On the other hand, petitioner argues that it was able to attach the Court
of Appeals Decision dated August 31, 2004, the Resolution dated January 31,
2006, and the Amended Decision dated August 30, 2006, all of which were
sufficient for this Court to give due course to its Petition. 76
In Magsino v. De Ocampo, 77 this Court applied the procedural
guideposts in Galvez v. Court of Appeals 78 in determining whether the Court
of Appeals correctly dismissed a petition for review under Rule 42 for failure to
attach relevant portions of the record. Thus:
In Galvez v. Court of Appeals, a case that involved the dismissal
of a petition for certiorari to assail an unfavorable ruling brought about
by the failure to attach copies of all pleadings submitted and other
material portions of the record in the trial court (like the complaint,
answer and position paper) as would support the allegations of the
petition, the Court recognized three guideposts for the CA to consider
in determining whether or not the rules of procedures should be
relaxed, as follows:
First, not all pleadings and parts of case records
are required to be attached to the petition. Only those
which are relevant and pertinent must accompany it. The
test of relevancy is whether the document in question will
support the material allegations in the petition, whether
said document will make out a prima faciecase of grave
abuse of discretion as to convince the court to give due
course to the petition.
Second, even if a document is relevant and
pertinent to the petition, it need not be appended if it is
shown that the contents thereof can also [sic] found in
another document already attached to the petition. Thus,
if the material allegations in a position paper are
summarized in a questioned judgment, it will suffice that
only a certified true copy of the judgment is attached.
Third, a petition lacking an essential pleading or
part of the case record may still be given due course or
reinstated (if earlier dismissed) upon showing that
petitioner later submitted the documents required, or that
it will serve the higher interest of justice that the case be
decided on the merits. 79
Although Magsino referred to a petition for review under Rule 42 before
the Court of Appeals, the procedural guideposts cited in Magsino may apply
to this case since the contents of a pleading under Rule 42 80 are substantially
the same as the contents of a pleading under Rule 45, 81 in that both
procedural rules require the submission of "material portions of the record as
would support the allegations of the petition." 82
In support of its Petition for Review on Certiorari, petitioner attached the
Court of Appeals Decision dated August 31, 2004, 83 the Resolution dated
January 31, 2006, 84 and the Amended Decision dated August 30,
2006. 85 The Court of Appeals Resolution and Amended Decision quoted
extensive portions of its rollo in support of its rulings. 86 These conclusions
were sufficient to convince this Court not to outright dismiss the Petition but to
require respondents to first comment on the Petition, in satisfaction of the first
and second procedural guideposts in Magsino.
Upon filing of its Consolidated Reply, 87 petitioner was able to attach the
following additional documents:
(1) Petition for Review filed before the Court of Appeals; 88
(2) Letters dated July 18, 1995, December 12, 1995, and December 29,
1995; 89
(3) Declaration of Ms. Miriam Meconnahey dated June 25, 2002; 90
(4) Spreadsheet of petitioner's patent applications handled by Atty.
Mapili; 91
(5) Power of Attorney and Appointment of Resident Agent dated
September 26, 1996; 92 AIDSTE

(6) Letter dated December 19, 2000 requesting an Office Action on

Patent Application No. 35526; 93
(7) Paper No. 2 dated January 30, 2002; 94
(8) Petition for Revival dated January 30, 2002 with attached Power of
Attorney and Appointment of Resident Agent; 95
(9) Resolution dated July 24, 2002 by Director of the Bureau of
Patents; 96 and
(10) Notice of and Memorandum on Appeal before the Director-General
of the Intellectual Property Office. 97
The third procedural guidepost in Magsino was complied with upon the
submission of these documents. Petitioner, therefore, has substantially
complied with Rule 45, Section 4 of the Rules of Court.
III
Appeal is not a right but a mere privilege granted by statute. 98 It may
only be exercised in accordance with the law that grants it.
 Accordingly, the Court of Appeals is not bound by the rules of
procedure in administrative agencies. The procedural rules of an
administrative agency only govern proceedings within the agency. Once the
Court of Appeals has given due course to an appeal from a ruling of an
administrative agency, the proceedings before it are governed by the Rules of
Court.
However, petitioner argues that intervention should not have been
allowed on appeal 99 since the revival of a patent application is ex parte and is
"strictly a contest between the examiner and the applicant" 100 under Sections
78 101 and 79 102 of the 1962 Revised Rules of Practice. 103 It argues that the
disallowance of any intervention is to ensure the confidentiality of the
proceedings under Sections 13 and 14 of the 1962 Revised Rules of
Practice. 104
Respondents argue that the 1962 Revised Rules of Practice is only
applicable before the Intellectual Property Office. 105 In particular, respondent
Therapharma, Inc. argues that the issue before the Court of Appeals was
beyond the realm of patent examination proceedings since it did not involve
the patentability of petitioner's invention. 106 It further argues that its
intervention did not violate the confidentiality of the patent application
proceedings since petitioner was not required to divulge confidential
information regarding its patent application. 107
In the 1962 Revised Rules of Practice, final decisions of the Director of
Patents are appealed to this Court and governed by Republic Act No. 165. In
particular:
PART X
PETITION AND APPEALS
xxx xxx xxx
CHAPTER IV
APPEALS TO THE SUPREME COURT FROM FINAL ORDERS OR
DECISIONS OF THE DIRECTOR OF PATENTS IN EX PARTE AND
INTER PARTES PROCEEDINGS
265. Appeals to the Supreme Court in ex parte and inter partes
proceedings. — Any person who is dissatisfied with the final decision
of the Director of Patents, (affirming that of a Principal Examiner)
denying him a patent for an invention, industrial design or utility model;
any person who is dissatisfied with any final decision of the Director of
Patents (affirming that of the Executive Examiner) in any proceeding;
and any party who is dissatisfied with any final decision of the Director
of Patents in an inter partes proceeding, may appeal such final
decision to the Supreme Court within thirty days from the date he
 receives a copy of such decision. (Republic Act No. 165, section 16, as
amended by section 3, Republic Act No. 864.)
266. Procedure on appeal to the Supreme Court. — For the
procedure on appeal to the Supreme Court, from the final decisions of
the Director of Patents, see sections 63 to 73, inclusive, of Republic
Act No. 165 (patent law).
Particularly instructive is Section 73 of Republic Act No. 165, which
provides:
Section 73. Rules of Court applicable. — In all other matters not herein
provided, the applicable provisions of the Rules of Court shall govern.
Republic Act No. 165 has since been amended by Republic Act No.
8293, otherwise known as the Intellectual Property Code of the
Philippines (Intellectual Property Code), in 1997. This is the applicable law
with regard to the revival of petitioner's patent application. Section 7 (7.1) (a)
of the Intellectual Property Code states: AaCTcI

SECTION 7. The Director General and Deputies Director General. —

7.1. Functions. — The Director General shall exercise the following
powers and functions:
xxx xxx xxx
b. Exercise exclusive appellate jurisdiction over all decisions rendered
by the Director of Legal Affairs, the Director of Patents, the Director of
Trademarks, and the Director of the Documentation, Information and
Technology Transfer Bureau. The decisions of the Director General in
the exercise of his appellate jurisdiction in respect of the decisions of
the Director of Patents, and the Director of Trademarks shall be
appealable to the Court of Appeals in accordance with the Rules of
Court; and those in respect of the decisions of the Director of
Documentation, Information and Technology Transfer Bureau shall be
appealable to the Secretary of Trade and Industry[.] (Emphasis
supplied)
Thus, it is the Rules of Court, not the 1962 Revised Rules of Practice,
which governs the Court of Appeals' proceedings in appeals from the
decisions of the Director-General of the Intellectual Property Office regarding
the revival of patent applications.
Rule 19 of the Rules of Court provides that a court has the discretion to
determine whether to give due course to an intervention. Rule 19, Section 1
states:
RULE 19
INTERVENTION
 SECTION 1. Who may intervene. — A person who has a legal interest
in the matter in litigation, or in the success of either of the parties, or an
interest against both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court
or of an officer thereof may, with leave of court, be allowed to intervene
in the action. The court shall consider whether or not the intervention
will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may be fully
protected in a separate proceeding. acEHCD

The only questions the court need to consider in a motion to intervene

are whether the intervenor has standing to intervene, whether the motion will
unduly delay the proceedings or prejudice rights already established, and
whether the intervenor's rights may be protected in a separate action. 108
If an administrative agency's procedural rules expressly prohibit an
intervention by third parties, the prohibition is limited only to the proceedings
before the administrative agency. Once the matter is brought before the Court
of Appeals in a petition for review, any prior prohibition on intervention does
not apply since the only question to be determined is whether the intervenor
has established a right to intervene under the Rules of Court.
In this case, respondent Therapharma, Inc. filed its Motion for Leave to
Intervene 109 before the Court of Appeals, not before the Intellectual Property
Office. In assessing whether to grant the intervention, the Court of Appeals
considered respondent Therapharma, Inc.'s legal interest in the case and its
other options for the protection of its interests. 110 This was within the
discretion of the Court of Appeals under the Rules of Court.
Respondent Therapharma, Inc. was able to show that it had legal
interest to intervene in the appeal of petitioner's revival of its patent
application. While its intervention may have been premature as no patent has
been granted yet, petitioner's own actions gave rise to respondent
Therapharma, Inc.'s right to protect its losartan product.
Respondent Therapharma, Inc. filed an application for product
registration before the Bureau of Food and Drugs on June 4, 2003 and was
granted a Certificate of Product Registration on January 27, 2004. 111 It
conducted patent searches from October 15, 1995 and found that no patent
application for losartan had been filed either before the Bureau of Patents,
Trademarks, and Technology Transfer or before the Intellectual Property
Office. 112
As early as December 11, 2003, petitioner through Merck was already
sending communications threatening legal action if respondent Therapharma,
Inc. continued to develop and market losartan in the Philippines. The letter
stated:
 Merck is strongly committed to the protection of its valuable
intellectual property rights, including the subject losartan patents. While
fair competition by sale of pharmaceutical products which are
domestically produced legally is always welcomed by Merck and MSD
Philippines, Merck will vigorously pursue all available legal remedies
against any unauthorized manufacturer, distributor or supplier of
losartan in countries where its patents are in force and where such
activity is prohibited by law. Thus, Merck is committed to preventing
the distribution of losartan in the Philippines if it originates from, or
travels through, a country in which Merck holds patent
rights. 113 (Emphasis supplied)
This letter was presented before the Court of Appeals, which eventually
granted the revival of the patent application in its August 31, 2004 Decision.
Petitioner had no pending patent application for its losartan product when it
threatened respondent Therapharma, Inc. with legal action. 114
Respondent Therapharma, Inc. expressed its willingness to enter into a
Non-Use and Confidentiality Contract if there was a pending patent
application. 115 After several negotiations on the clauses of the
contract, 116 the parties were unable to come to an agreement. In its letter
dated May 24, 2004, 117 respondent Therapharma, Inc. expressed its
frustration on petitioner's refusal to give a clear answer on whether it had a
pending patent application: SDHTEC

For easy reference, we have reproduced below paragraph 5 of

the Confidentiality and Non-Use Agreement ("Confidentiality
Agreement"), underscoring your proposed amendment:
"THERAPHARMA agrees that upon receipt of
Specifications and Claims of Application No. 35526 or at
any time thereafter, before it becomes part of the public
domain, through no fault of THERAPHARMA, it will not,
either directly or indirectly, alone, or through, on behalf
of, or in conjunction with any other person or entity, make
use of any information contained therein, particularly the
product covered by its claims and the equivalents
thereof, in any manner whatsoever."
We find your proposed insertion odd. What may be confidential,
and which we agree you have every right to protect by way of the
Confidentiality Agreement, are the Specifications and Claims in the
patent application, not the product per se. The product has been in the
market for years. Hence, how can it be confidential? Or is the
ambiguity intended to create a legal handle because you have no
cause of action against us should we launch our own version of the
losartan product?
xxx xxx xxx
 Finally, the questions we posed in our previous letters are plain
and simple — Is the Philippine Patent Application No. 35526 still
pending before the IPO, i.e., it has neither been withdrawn by your
licensor nor denied registration by the IPO for any reason
whatsoever? When did your licensor file said application with the
IPO?These questions are easy to answer, unless there is an intention
to mislead. You are also aware that the IPO is the only government
agency that can grant letters patent. This is why we find disturbing your
statement that the pendency of the patent application before the IPO is
"not relevant". Hence, unless we receive unequivocal answers to the
questions above, we regret that we cannot agree to execute the
Confidentiality Agreement; otherwise, we may be acknowledging by
contract a right that you do not have, and never will have, by
law. 118 (Emphasis and underscoring in the original)
The threat of legal action against respondent Therapharma, Inc. was
real and imminent. If respondent Therapharma, Inc. waited until petitioner was
granted a patent application so it could file a petition for compulsory licensing
and petition for cancellation of patent under Section 240 119 and Section
247 120 of the 1962 Revised Rules of Practice, 121 its continued marketing of
Lifezar would be considered as an infringement of petitioner's patent.
Even assuming that the Intellectual Property Office granted the revival
of Philippine Patent Application No. 35526 back in 2000, petitioner's claim of
absolute confidentiality in patent proceedings is inaccurate.
In the 1962 Revised Rules of Practice, the Bureau of Patents,
Trademarks, and Technology Transfer previously required secrecy in pending
patent applications. Section 13 states:
13. Pending applications are preserved in secrecy. — No
information will be given to anyone respecting the filing by any
particular person of any application for a patent, the pendency of any
particular case before the Office, or the subject matter of any particular
application, unless the same is authorized by the applicant in writing,
and unless it shall be necessary, in the opinion of the Director of
Patents for the proper conduct of business before the Office.
The Intellectual Property Code, however, changed numerous aspects of
the old patent law. The Intellectual Property Code was enacted not only to
amend certain provisions of existing laws on trademark, patent, and copyright,
but also to honor the country's commitments under the World Trade
Organization — Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS Agreement), a treaty that entered force in the Philippines on
January 1, 1995. 122
The mandatory disclosure requirement in the TRIPS
Agreement 123 precipitated the shift from a first-to-invent system to a first-to-
file system. The first-to-file system required citizens of foreign countries to
register their patents in the Philippines before they can sue for
infringement. 124
Lawmakers, however, expressed their concern over the extension of
the period of protection for registered patents. 125 Under Section
21 126 of Republic Act No. 165, a patent had a term of 17 years.
The Intellectual Property Code extended the period to 20 years. 127
During the interpellations before the House of Representatives, then
Representative Neptali Gonzales II (Gonzales) explained that under
the Intellectual Property Code, the period of protection would have been
shortened because of the publication requirement: AScHCD

MR. TAÑADA:
Under the proposed measure, Your Honor, what is the period of
protection that is given to the holder of the patent registered?
MR. GONZALES:
Seventeen years from grant of patent, Mr. Speaker. Unlike before . . .
MR. TAÑADA:
Under the present law, Mr. Speaker.
MR. GONZALES:
I mean 17 years from filing, Mr. Speaker, unlike before which is 20
years from grant. Okay.
I am sorry, Mr. Speaker. Seventeen years from filing under the existing
law, 20 years from grant under the proposed measure. It would
appear, Mr. Speaker, that the proposed measure seeks to extend
the grant of the patent.
MR. TAÑADA:
But you have made the period of protection longer, Mr. Speaker.
MR. GONZALES:
On the contrary, Mr. Speaker, when a similar question was previously
propounded before, actually Mr. Speaker, it may decrease in fact
the period of protection, Mr. Speaker. Because unlike before 17
years from grant, Mr. Speaker, now 20 years from application or
from filing but actually, Mr. Speaker, it normally takes three to four
years before a patent is actually granted even under the proposed
measure. Because as you can see[,] publication in the BPTTT
Gazette would even taken place after 18 months from filing. In
other words, the procedure itself is such a manner that normally
takes a period of about three years to finally grant the patent. So
even if 20 years is given from the time of filing actually in essence
 it will be the same, Mr. Speaker, because under the existing law
17 years from grant. But even under our existing law from the
time that a patent application is filed it also takes about three to
four years, Mr. Speaker, to grant the same.
Now, why from filing, Mr. Speaker? Because the patent holder applicant
is now required to publish in a manner easily understood by a
person trained or with the same skill as that of a patent holder.
And from that time this is published, this process covered by the
patent is already made available. In fact, from the time that it is
published, any interested person may even examine and go over
the records as filed with the BPTTT and, therefore, this new
technology or new invention is now made available to persons
equipped or possessed with the same skills as that of the patent
holder. And that is the reason why the patent is — the time of the
patent is now tacked from the time it is filed because as a
compromise it is now mandatory to publish the said patent
together with its description — the description of the process and
even would, at times demand the deposit of sample of the
industrial design, Mr. Speaker. 128
Gonzales further clarified that the publication requirements of
the Intellectual Property Code would necessarily shorten the period for
confidentiality of patent applications:
MR. MONFORT:
Now, another question is, (another is) you know, the time from the filing
of the date up to publication which is the period of pendency or
confidentiality, may I know how many years will it take, that
confidentiality period, variability.
MR. GONZALES:
Eighteen months, Mr. Speaker.
MR. MONFORT:
How many?
MR. GONZALES:
Eighteen months.
MR. MONFORT:
I do not think it is 18 months.
MR. GONZALES:
It is provided for in the law, Mr. Speaker, because prior to the
publication, naturally, the records become confidential because
the essence of a patent, trademark, or copyright is to give the
author or the inventor exclusive right to work on his own invention.
 And that is his invention, and naturally, it is but right that he
should have the exclusive right over his invention. AcICHD

On the other hand, the law requires that after 18 months, it should now
be published. When it is now published, naturally, it ceases to be
confidential in character because it is now ready for examination.
It is now ready for possible copying of any interested person
because the application, as we have repeatedly said on the floor,
would require the filing of a description of the invention that can
be carried out by a person similarly trained in the arts and
sciences as that of the patent holder. 129
Thus, the absolute secrecy required by the 1962 Revised Rules of
Practice would not be applicable to a patent application before the Intellectual
Property Office. Section 13 of the 1962 Revised Rules of Practice does not
appear in the Intellectual Property Code, 130 in the Rules and Regulations on
Inventions, 131 or in the Revised Implementing Rules and Regulations for
Patents, Utility Models and Industrial Design. 132 The Intellectual Property
Code now states that all patent applications must be published in the
Intellectual Property Office Gazette and that any interested party may inspect
all documents submitted to the Intellectual Property Office. The patent
application is only confidential before its publication. Sections 44 and 45 of
the Intellectual Property Code provide:
SECTION 44. Publication of Patent Application. —
44.1. The patent application shall be published in the IPO Gazette
together with a search document established by or on behalf of the
Office citing any documents that reflect prior art, after the expiration of
eighteen (18) months from the filing date or priority date.
44.2. After publication of a patent application, any interested party may
inspect the application documents filed with the Office.
44.3. The Director General, subject to the approval of the Secretary of
Trade and Industry, may prohibit or restrict the publication of an
application, if in his opinion, to do so would be prejudicial to the
national security and interests of the Republic of the Philippines. (n)
SECTION 45. Confidentiality Before Publication. — A patent
application, which has not yet been published, and all related
documents, shall not be made available for inspection without the
consent of the applicant. caITAC

It was inaccurate, therefore, for petitioner to argue that secrecy in

patent applications prevents any intervention from interested parties. The
confidentiality in patent applications under the Intellectual Property Code is
not absolute since a party may already intervene after the publication of the
application.
 IV
An abandoned patent application may only be revived within four (4)
months from the date of abandonment. No extension of this period is provided
by the 1962 Revised Rules of Practice. Section 113 states:
113. Revival of abandoned application. — An application
abandoned for failure to prosecute may be revived as a pending
application if it is shown to the satisfaction of the Director that the delay
was unavoidable. An abandoned application may be revived as a
pending application within four months from the date of abandonment
upon good cause shown and upon the payment of the required fee of
P25. An application not revived within the specified period shall be
deemed forfeited.
Petitioner argues that it was not negligent in the prosecution of its
patent application 133 since it was Atty. Mapili or his heirs who failed to inform
it of crucial developments with regard to its patent application. 134 It argues
that as a client in a foreign country, it does not have immediate supervision
over its local counsel so it should not be bound by its counsel's
negligence. 135 In any case, it complied with all the requirements for the
revival of an abandoned application under Rule 113 of the 1962 Revised
Rules of Practice. 136
Respondents, on the other hand, argue that petitioner was inexcusably
and grossly negligent in the prosecution of its patent application since it
allowed eight (8) years to pass before asking for a status update on its
application. 137 Respondent Intellectual Property Office argues that petitioner's
inaction for eight (8) years constitutes actual abandonment. 138 It also points
out that from the time petitioner submitted its new Special Power of Attorney
on September 29, 1996, it took them another four (4) years to request a status
update on its application. 139
Under Chapter VII, Section 111 (a) of the 1962 Revised Rules of
Practice, a patent application is deemed abandoned if the applicant fails to
prosecute the application within four months from the date of the mailing of
the notice of the last action by the Bureau of Patents, Trademarks, and
Technology Transfer, and not from applicant's actual notice. Section 111 (a)
states:
Chapter VII
TIME FOR RESPONSE BY APPLICANT; ABANDONMENT OF
APPLICATION
111. Abandonment for failure to respond within the time limit. —
(a) If an applicant fails to prosecute his application within four months
after the date when the last official notice of action by the Office was
 mailed to him, or within such time as may be fixed (rule 112), the
application will become abandoned.
According to the records of the Bureau of Patents, Trademarks, and
Technology Transfer Chemical Examining Division, petitioner filed Philippine
Patent Application No. 35526 on July 10, 1987. It was assigned to an
examiner on June 7, 1988. An Office Action was mailed to petitioner's agent,
Atty. Mapili, on July 19, 1988. Because petitioner failed to respond within the
allowable period, the application was deemed abandoned on September 20,
1988. 140 Under Section 113, petitioner had until January 20, 1989 to file for a
revival of the patent application. Its Petition for Revival, however, was filed on
May 30, 2002, 141 13 years after the date of abandonment. ICHDca

Section 113 has since been superseded by Section 133.4 of

the Intellectual Property Code, Rule 930 of the Rules and Regulations on
Inventions, and Rule 929 of the Revised Implementing Rules and Regulations
for Patents, Utility Models and Industrial Design. The period of four (4) months
from the date of abandonment, however, remains unchanged. The Intellectual
Property Code even provides for a shorter period of three (3) months within
which to file for revival:
SECTION 133. Examination and Publication. —
xxx xxx xxx
133.4. An abandoned application may be revived as a pending
application within three (3) months from the date of abandonment,
upon good cause shown and the payment of the required fee.
Rule 930 of the Rules and Regulations on Inventions provides:
Rule 930. Revival of application. — An application deemed withdrawn
for failure to prosecute may be revived as a pending application within
a period of four (4) months from the mailing date of the notice of
withdrawal if it is shown to the satisfaction of the Director that the
failure was due to fraud, accident, mistake or excusable negligence.
A petition to revive an application deemed withdrawn must be
accompanied by (1) a showing of the cause of the failure to prosecute,
(2) a complete proposed response, and (3) the required fee.
An application not revived in accordance with this rule shall be deemed
forfeited.
Rule 929 of the Revised Implementing Rules and Regulations for
Patents, Utility Models and Industrial Design provides:
Rule 929. Revival of Application. — An application deemed withdrawn
for failure to prosecute may be revived as a pending application within
a period of four (4) months from the mailing date of the notice of
 withdrawal if it is shown to the satisfaction of the Director that the
failure was due to fraud, accident, mistake, or excusable negligence.
A petition to revive an application deemed withdrawn shall be
accompanied by:
(a) A showing of a justifiable reason for the failure to prosecute;
(b) A complete proposed response; and
(c) Full payment of the required fee.
No revival shall be granted to an application that has been previously
revived with cost.
An application not revived in accordance with this Rule shall be
deemed forfeited.
Even if the delay was unavoidable, or the failure to prosecute was due
to fraud, accident, mistake, or excusable negligence, or the Petition was
accompanied by a complete proposed response, or all fees were paid, the
Petition would still be denied since these regulations only provide a four (4)-
month period within which to file for the revival of the application. The rules do
not provide any exception that could extend this four (4)-month period to 13
years.
Petitioner's patent application, therefore, should not be revived since it
was filed beyond the allowable period.
V
Even assuming that the four (4)-month period could be extended,
petitioner was inexcusably negligent in the prosecution of its patent
application.
Negligence is inexcusable if its commission could have been avoided
through ordinary diligence and prudence. 142 It is also settled that negligence
of counsel binds the client as this "ensures against the resulting uncertainty
and tentativeness of proceedings if clients were allowed to merely disown
their counsels' conduct." 143
Petitioner's resident agent, Atty. Mapili, was undoubtedly negligent in
failing to respond to the Office Action sent by the Bureau of Patents,
Trademarks, and Technology Transfer on June 19, 1988. Because of his
negligence, petitioner's patent application was declared abandoned. He was
again negligent when he failed to revive the abandoned application within four
(4) months from the date of abandonment. TCAScE

Petitioner tries to disown Atty. Mapili's conduct by arguing that it was

not informed of the abandonment of its patent application or of Atty. Mapili's
death. By its own evidence, however, petitioner requested a status update
from Atty. Mapili only on July 18, 1995, eight (8) years after the filing of its
application. 144 It alleged that it only found out about Atty. Mapili's death
sometime in March 1996, as a result of its senior patent attorney's visit to the
Philippines. 145 Although it was in petitioner's discretion as a foreign client to
put its complete trust and confidence on its local resident agent, there was a
correlative duty on its part to be diligent in keeping itself updated on the
progress of its patent applications. Its failure to be informed of the
abandonment of its patent application was caused by its own lack of
prudence.
In Bernardo v. Court of Appeals, 146 "[n]o prudent party will leave the
fate of his case entirely to his lawyer. . . . It is the duty of a party-litigant to be
in contact with his counsel from time to time in order to be informed of the
progress of his case." 147
Even if Atty. Mapili's death prevented petitioner from submitting a
petition for revival on time, it was clearly negligent when it subsequently failed
to immediately apprise itself of the status of its patent application.
Upon learning of Atty. Mapili's death, petitioner issued a Power of
Attorney and Appointment of Resident Agent in favor of Bito, Lozada, Ortega
& Castillo on March 25, 1996. 148 Despite the immediate action in the
substitution of its resident agent, it only requested a status update of
Philippine Patent Application No. 35526 from the Intellectual Property Office
on December 14, 2000, 149 or four (4) years after it learned of Atty. Mapili's
death.
Petitioner attempts to explain that it took them four (4) years to request
a status update because the Bureau of Patents, Trademarks, and Technology
Transfer failed to take any action when it submitted its Power of Attorney and
Appointment of Resident Agent in favor of Bito, Lozada, Ortega &
Castillo. 150 The Power of Attorney, however, shows that it was only to inform
the Bureau that all notices relating to its pending patent applications should be
sent to it. Philippine Patent Application No. 35526 was declared abandoned
on September 20, 1988. As far as the Bureau was concerned, it was a
forfeited application that had already been archived. It was not the Bureau's
duty to resurrect previous notices of forfeited and abandoned applications to
be sent to new resident agents unless a specific status update was requested.
Considering that petitioner only requested a status update on December 14,
2000, it was only then that the Intellectual Property Office would start sending
notices to it.
Contrary to the posturing of petitioner, Schuartz is applicable.
In Schuartz, several foreign inventors seeking to file patent applications
in the Philippines hired the law firm Siguion Reyna, Montecillo and Ongsiako
to process their applications. 151 The Bureau of Patents, Trademarks, and
Technology Transfer mailed the law firm several notices of abandonment on
its patent applications from June 1987 to September 1987. The law firm only
found out about this in December 1987, after it dismissed two (2) of its
employees in charge of handling correspondences from the Bureau. 152The
law firm filed petitions for revival of its patent applications from March 1988, all
of which were denied by the Director of the Bureau of Patents for being filed
out of time. 153An appeal was subsequently filed before the Court of Appeals
but was dismissed for being filed beyond the reglementary period. 154
This Court found that although the Court of Appeals may have erred in
counting the period for appeal, it could not grant the Petition. This Court
stated:
[P]etitioners 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.
cTDaEH

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.
"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." 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. 155 (Emphasis supplied)
Petitioner attempts to distinguish itself from Schuartz by arguing that
the petitioners in Schuartz had actual notice of abandonment while petitioner
here was only able to have actual notice when it received Paper No. 2.
The four (4)-month period in Section 111 156 of the 1962 Revised Rules
of Practice, however, is not counted from actual notice of abandonment but
from mailing of the notice. Since it appears from the Intellectual Property
Office's records that a notice of abandonment was mailed to petitioner's
resident agent on July 19, 1988, 157 the time for taking action is counted from
this period. Petitioner's patent application cannot be revived simply because
the period for revival has already lapsed and no extension of this period is
provided for by the 1962 Revised Rules of Practice.
VI
The right of priority given to a patent applicant is only relevant when
there are two or more conflicting patent applications on the same invention.
Because a right of priority does not automatically grant letters patent to an
applicant, possession of a right of priority does not confer any property rights
on the applicant in the absence of an actual patent.
Petitioner argues that its patent application was filed on July 10, 1987,
within 12 months from the prior filing of a U.S. patent application on July 11,
1986. 158 It argues that it is protected from becoming part of the public domain
because of convention priority under the Paris Convention for the Protection
of Industrial Property and Section 9 of Republic Act No. 165. 159
Respondent Therapharma, Inc., on the other hand, argues that a mere
patent application does not vest any right in the applicant before the issuance
of the patent. 160 It argues that the "priority date" argued by petitioner is only
relevant in determining who has a better right to the patent among the other
applicants who subsequently apply for the same invention. 161
Under Section 31 of the Intellectual Property Code, a right of priority is
given to any patent applicant who has previously applied for a patent in a
country that grants the same privilege to Filipinos. Section 31 states: cSaATC

SECTION 31. Right of Priority. — An application for patent filed by any

person who has previously applied for the same invention in another
country which by treaty, convention, or law affords similar privileges to
Filipino citizens, shall be considered as filed as of the date of filing the
foreign application: Provided, That:
a. the local application expressly claims priority;
b. it is filed within twelve (12) months from the date the earliest foreign
application was filed; and
c. a certified copy of the foreign application together with an English
translation is filed within six (6) months from the date of filing in the
Philippines.
A patent applicant with the right of priority is given preference in the
grant of a patent when there are two or more applicants for the same
invention. Section 29 of the Intellectual Property Code provides:
SECTION 29. First to File Rule. — If two (2) or more persons have
made the invention separately and independently of each other, the
right to the patent shall belong to the person who filed an application
for such invention, or where two or more applications are filed for the
 same invention, to the applicant who has the earliest filing date or, the
earliest priority date.
Since both the United States 162 and the Philippines 163 are signatories
to the Paris Convention for the Protection of Industrial Property, an applicant
who has filed a patent application in the United States may have a right of
priority over the same invention in a patent application in the
Philippines. 164 However, this right of priority does not immediately entitle a
patent applicant the grant of a patent. A right of priority is not equivalent to a
patent. Otherwise, a patent holder of any member-state of the Paris
Convention need not apply for patents in other countries where it wishes to
exercise its patent.
It was, therefore, inaccurate for petitioner to argue that its prior patent
application in the United States removed the invention from the public domain
in the Philippines. This argument is only relevant if respondent Therapharma,
Inc. had a conflicting patent application with the Intellectual Property Office. A
right of priority has no bearing in a case for revival of an abandoned patent
application.
VII
The grant of a patent is to provide protection to any inventor from any
patent infringement. 165 Once an invention is disclosed to the public, only the
patent holder has the exclusive right to manufacture, utilize, and market the
invention. 166 In Creser Precision Systems v. Court of Appeals: 167
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. 168
Under the Intellectual Property Code, a patent holder has the right to "to
restrain, prohibit and prevent" 169 any unauthorized person or entity from
manufacturing, selling, or importing any product derived from the patent.
However, after a patent is granted and published in the Intellectual Property
Office Gazette, 170 any interested third party "may inspect the complete
description, claims, and drawings of the patent." 171 cHDAIS

The grant of a patent provides protection to the patent holder from the
indiscriminate use of the invention. However, its mandatory publication also
has the correlative effect of bringing new ideas into the public consciousness.
After the publication of the patent, any person may examine the invention and
develop it into something further than what the original patent holder may
have envisioned. After the lapse of 20 years, 172 the invention becomes part of
the public domain and is free for the public to use. In Pearl and Dean v.
Shoemart, Inc.: 173
To be able to effectively and legally preclude others from
copying and profiting from the invention, a patent is a primordial
requirement. No patent, no protection. The ultimate goal of a patent
system is to bring new designs and technologies into the public domain
through disclosure. Ideas, once disclosed to the public without the
protection of a valid patent, are subject to appropriation without
significant restraint.
On one side of the coin is the public which will benefit from new
ideas; on the other are the inventors who must be protected. As held
in Bauer & Cie vs. O'Donnell, "The act secured to the inventor the
exclusive right to make use, and vend the thing patented, and
consequently to prevent others from exercising like privileges without
the consent of the patentee. It was passed for the purpose of
encouraging useful invention and promoting new and useful inventions
by the protection and stimulation new and useful inventions by the
protection and stimulation given to inventive genius, and was intended
to secure to the public, after the lapse of the exclusive privileges
granted the benefit of such inventions and improvements."
The law attempts to strike an ideal balance between the two
interests:
"(The p)atent system thus embodies a carefully
crafted bargain for encouraging the creation and
disclosure of new useful and non-obvious advances in
technology and design, in return for the exclusive right to
practice the invention for a number of years. The inventor
may keep his invention secret and reap its fruits
indefinitely. In consideration of its disclosure and the
consequent benefit to the community, the patent is
granted. An exclusive enjoyment is guaranteed him for
17 years, but upon the expiration of that period, the
knowledge of the invention inures to the people, who are
thus enabled to practice it and profit by its use."
The patent law has a three-fold purpose: "first, patent law seeks
to foster and reward invention; second, it promotes disclosures of
inventions to stimulate further innovation and to permit the public to
practice the invention once the patent expires; third, the stringent
requirements for patent protection seek to ensure that ideas in the
public domain remain there for the free use of the public."
It is only after an exhaustive examination by the patent office
that a patent is issued. Such an in-depth investigation is required
because "in rewarding a useful invention, the rights and welfare of the
community must be fairly dealt with and effectively guarded. To that
 end, the prerequisites to obtaining a patent are strictly observed and
when a patent is issued, the limitations on its exercise are equally
strictly enforced. To begin with, a genuine invention or discovery must
be demonstrated lest in the constant demand for new appliances, the
heavy hand of tribute be laid on each slight technological advance in
art." 174 (Emphasis supplied)
In addition, a patent holder of inventions relating to food or medicine
does not enjoy absolute monopoly over the patent. Both Republic Act No.
165 and the Intellectual Property Code provide for compulsory licensing.
Compulsory licensing is defined in the Intellectual Property Code as the "grant
a license to exploit a patented invention, even without the agreement of the
patent owner." 175 ISHCcT

Under Republic Act No. 165, a compulsory license may be granted to

any applicant three (3) years after the grant of a patent if the invention relates
to food or medicine necessary for public health or safety. 176 In Smith Kline &
French Laboratories, Ltd. vs. Court of Appeals: 177
Section 34 of R.A. No. 165, even if the Act was enacted prior to
the Philippines' adhesion to the [Paris] 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. 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. 178
The patent holder's proprietary right over the patent only lasts for three
(3) years from the grant of the patent, after which any person may be allowed
to manufacture, use, or sell the invention subject to the payment of royalties:
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 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 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 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
a bilateral and workable licensing agreement and a reasonable royalty
 to be agreed upon by the parties and in default of such agreement, the
Director of Patent may fix the terms and conditions of the license. 179
A patent is a monopoly granted only for specific purposes and
objectives. Thus, its procedures must be complied with to attain its social
objective. Any request for leniency in its procedures should be taken in this
context. Petitioner, however, has failed to convince this court that the revival
of its patent application would have a significant impact on the pharmaceutical
industry.
Hypertension, or high blood pressure, is considered a "major risk factor
for cardiovascular disease" 180 such as "heart disease, stroke, kidney failure
and blindness." 181 In a study conducted by the World Health Organization,
25% of adults aged 21 years and older in the Philippines suffer from high
blood pressure. 182 According to the Department of Health, heart disease
remains the leading cause of mortality in the Philippines. 183 Angiotensin II
Receptor Blocking Imidazole or "losartan" is one of the medications used for
the treatment of hypertension. 184 CAacTH

In a study conducted by the Philippine Institute for Development

Studies, "affordability of drugs remains a serious problem" 185 in the
Philippines. It found that because of the cost of drugs, accessibility to drugs
become prohibitive for the lowest-earning households and are "even more
prohibitive for the unemployed and indigent." 186 Several measures have been
enacted by the government to address the high costs of medicine, among
them, parallel drug importation 187 and the passage of Republic Act No. 9502,
otherwise known as the Universally Accessible Cheaper and Quality
Medicines Act of 2008. 188 Figures submitted by respondent Therapharma,
Inc., however, also show that the presence of competition in the local
pharmaceutical market may ensure the public access to cheaper medicines.
According to respondent Therapharma, Inc., the retail price of
petitioner's losartan product, Cozaar, decreased within one (1) month of
respondent Therapharma, Inc.'s entry into the market: 189
BRAND TRADER RETAIL PRICE RETAIL PRICE
As of Lifezar's first Within one month
entry into the from Lifezar's entry
market on June 4, or by July 4, 2004
2004

LIFEZAR Therapharma 50 mg — P20.20 50 mg — P20.20

COZAAR Merck 50 mg — P39.50 50 mg — P39.50
 100 mg — P55.00 100 — P44.00

Respondent Therapharma, Inc. also presented figures showing that

there was a 44% increase in the number of losartan units sold within five (5)
months of its entry into the market. 190 More Filipinos are able to purchase
losartan products when there are two (2) different players providing
competitive prices in the market.
Lifezar, and another of respondent Therapharma, Inc.'s products,
Combizar, have also been recommended as cheaper alternative losartan
medication, since they were priced "50 percent less than foreign brands." 191
Public interest will be prejudiced if, despite petitioner's inexcusable
negligence, its Petition for Revival is granted. Even without a pending patent
application and the absence of any exception to extend the period for revival,
petitioner was already threatening to pursue legal action against respondent
Therapharma, Inc. if it continued to develop and market its losartan product,
Lifezar. 192 Once petitioner is granted a patent for its losartan products,
Cozaar and Hyzaar, the loss of competition in the market for losartan products
may result in higher prices. For the protection of public interest, Philippine
Patent Application No. 35526 should be considered a forfeited patent
application.
WHEREFORE, the Petition is DENIED. The Resolution dated January
31, 2006 and the Amended Decision dated August 30, 2006 of the Court of
Appeals are AFFIRMED.
SO ORDERED.
Velasco, Jr., * Del Castillo and Mendoza, JJ., concur.
Brion, ** J., is on leave.
(E.I. Dupont De Nemours and Co. v. Francisco, G.R. No. 174379, [August 31,
|||

2016], 794 PHIL 97-148)

THIRD DIVISION
[G.R. No. 205409. June 13, 2018.]
CITIGROUP, INC., petitioner, vs. CITYSTATE SAVINGS BANK, INC.,
respondent.

DECISION
LEONEN, J : p
 This resolves a Petition for Review on Certiorari 1 assailing the
August 29, 2012 Decision 2 and the January 15, 2013 Resolution 3 of the
Court of Appeals in CA-G.R. SP No. 109679. DETACa

The facts which led to the controversy before this Court, as

summarized by the Court of Appeals, are as follows:
Petitioner Citigroup, Inc. is a corporation duly organized
under the laws of the State of Delaware engaged in banking and
financial services. In the late 1970s, Citibank N.A., a wholly-
owned subsidiary of petitioner, installed its first automated teller
machines in over a hundred New York City branches. In 1984,
Citibank N.A., Philippine Branch, began the development of its
domestic Automated Teller Machine (ATM) network, and started
operating ATMs and issuing ATM cards in the Philippines.
Citibank N.A., Philippine Branch then joined Bancnet, Inc.
("Bancnet") in 1990, the first year Bancnet commenced
operations. To date, Citibank N.A., Philippine Branch has six
branches and 22 ATMs in the Philippines.

In 2005, Citibank Savings, Inc. became an indirect

wholly-owned subsidiary of Citibank, N.A. As a pre-existing thrift
bank, it offered ATM services in the Philippines in 1995 and
joined Bancnet in 2005. Citibank Savings, Inc. now has 36
branches and 27 ATMs in the Philippines.

Combining the branches and ATMs of Citibank N.A.,

Philippine Branch and Citibank Savings, Inc., there are a total of
42 branches and 29 ATMs in the Philippines marketed and
identified to the public under the CITI family of marks.

The ATM cards issued by Citibank N.A., Philippine

Branch and Citibank Savings, Inc. are labelled "CITICARD." The
trademark CITICARD is owned by Citibank N.A. and is registered
in the [Intellectual Property Office] of the Philippines on 27
September 1995 under Registration Number 34731.
 In addition, petitioner or Citibank N.A., a wholly-owned
subsidiary of petitioner, owns the following other trademarks
currently registered with the Philippine [Intellectual Property
Office], to wit: "CITI and arc design," "CITIBANK," "CITIBANK
PAYLINK," "CITIBANK SPEEDCOLLECT," "CITIBANKING,"
"CITICARD," "CITICORP," "CITIFINANCIAL," "CITIGOLD,"
"CITIGROUP," "CITIPHONE BANKING," and "CITISERVICE."

On the other hand, sometime in the mid-nineties, a

group of Filipinos and Singaporean companies formed a
consortium to establish respondent Citystate Savings Bank, Inc.
The consortium included established Singaporean companies,
specifically Citystate Insurance Group and Citystate Management
Group Holdings Pte. Ltd.

Respondent's registered mark has in its name affixed a

lion's head, which is likened to the national symbol of Singapore,
the Merlion. On 08 August 1997, respondent opened its initial
branch in Makati City. From then on, it endeavored to expand its
branch network. At present it has 19 branches in key cities and
municipalities including 3 branches in the province of Bulacan
and 1 in Cebu City. Respondent had also established off site
ATMs in key locations in the Philippines as one of its banking
products and services.

In line with this, respondent filed an application for

registration with the [Intellectual Property Office] on 21 June 2005
of the trademark "CITY CASH WITH GOLDEN LION'S HEAD" for
its ATM service, under Application Serial No. 42005005673. 4

After respondent Citystate Savings Bank, Inc. (Citystate) applied for

registration of its trademark "CITY CASH WITH GOLDEN LION'S HEAD"
with the Intellectual Property Office, Citigroup, Inc. (Citigroup) filed an
opposition to Citystate's application. Citigroup claimed that the "CITY CASH
WITH GOLDEN LION'S HEAD" mark is confusingly similar to its own "CITI"
marks. 5 After an exchange of pleadings, the Director of the Bureau of Legal
Affairs of the Intellectual Property Office rendered a Decision 6 dated
November 20, 2008. The Intellectual Property Office concluded that the
dominant features of the marks were the words "CITI" and "CITY," which
were almost the same in all aspects. It further ratiocinated that Citigroup had
the better right over the mark, considering that its "CITI" and "CITI"-related
marks have been registered with the Intellectual Property Office, as well as
with the United States Patent and Trademark Office, covering "financial
services" under Class 36 of the International Classification of Goods. 7 Thus,
applying the dominancy test and considering that Citystate's dominant
feature of the applicant's mark was identical or confusingly similar to a
registered trademark, the Intellectual Property Office ruled that approving it
would be contrary to Section 138 of the Intellectual Property Code and
Citigroup's exclusive right to use its marks.
aDSIHc

This was appealed to the Office of the Director General of the

Intellectual Property Office. In a Decision 8 dated July 3, 2009, Director
General Adrian S. Cristobal, Jr. (Director General Cristobal) reversed the
November 20, 2008 Decision of the Director of the Bureau of Legal Affairs
and gave due course to Citystate's trademark application. He made a visual
comparison of the parties' respective marks and considered the golden lion
head device to be the prominent or dominant feature of Citystate's mark, and
not the word "CITY." Thus, Citystate's mark did not resemble Citigroup's
mark such that deception or confusion was likely. Director General Cristobal
found plausible Citystate's explanation for choosing "CITYSTATE," i.e., that
its name was based on the country of Singapore, which was referred to as
"city-state," and that the golden lion head device was similar to the national
symbol of Singapore, the merlion. 9 He appreciated that availing of the
products and services related to the parties' marks would entail very detailed
procedures, like sales representatives explaining the products and clients
filling up and submitting application forms, such that customers would
necessarily be well informed and not confused. 10

Thus, Citigroup filed a Petition for Review 11 before the Court of

Appeals, which dismissed the petition. The Court of Appeals found that
Director General Cristobal did not act with grave abuse of discretion in ruling
that the parties' trademarks were not confusingly similar, and in giving due
course to Citystate's trademark application. 12 It found that Citystate's mark
was not confusingly or deceptively similar to Citigroup's marks:
[Citystate's] trademark is the entire "CITY CASH WITH
GOLDEN LION'S HEAD." Although the words "CITY CASH" are
prominent, the entirety of the trademark must be considered, and
focus should not be made solely on the phonetic similarity of the
words "CITY" and "CITI."

The dissimilarities between the two marks are

noticeable and substantial. [Citystate's] mark, "CITY CASH WITH
GOLDEN LION'S HEAD," has an insignia of a golden lion's head
at the left side of the words "CITY CASH," while [Citigroup's]
"CITI" mark usually has an arc between the two I's. A further
scrutiny of the other "CITI" marks of [Citigroup] would show that
their font type, font size, and color schemes of the said "CITI"
marks vary for each product or service. Most of the time,
[Citigroup's] "CITI" mark is joined with another term to form a
single word, with each product or service having different font
types and color schemes. On the contrary, the trademark of
[Citystate] consists of the words "CITY CASH," with a golden
lion's head emblem on the left side. It is, therefore, improbable
that the public would immediately and naturally conclude that
[Citystate's] "CITY CASH WITH GOLDEN LION'S HEAD" is but
another variation under [Citigroup's] "CITI" marks.

Verily, the variations in the appearance of the "CITI"

marks by [Citigroup], when conjoined with other words, would
dissolve the alleged similarity between them and the trademark
of [Citystate]. These dissimilarities, and the insignia of a golden
lion's head before the words "CITY CASH" in the mark of
[Citystate] would sufficiently acquaint and apprise the public that
[Citystate's] trademark "CITY CASH WITH GOLDEN LION'S
HEAD" is not connected with the "CITI" marks of [Citigroup].

Moreover, more credit should be given to the "ordinary

purchaser." Cast in this particular controversy, the ordinary
purchaser is not the "completely unwary consumer" but is the
"ordinarily intelligent buyer" considering the type of product
involved. It bears to emphasize that the mark "CITY CASH WITH
GOLDEN LION'S HEAD" is a mark of [Citystate] for its ATM
services which it offers to the public. It cannot be gainsaid that an
ATM service is not an ordinary product which could be obtained
at any store without the public noticing its association with the
banking institution that provides said service. Naturally, the
customer must first open an account with a bank before it could
avail of its ATM service. Moreover, the name of the banking
institution is written and posted either inside or outside the ATM
booth, not to mention the fact that the name of the bank that
operates the ATM is constantly flashed at the screen of the ATM
itself. With this, the public would accordingly be apprised that
[Citystate's] "CITY CASH" is an ATM service of [Citystate], and
not that of [Citigroup's]. 13 (Citation omitted)

Thus, the Court of Appeals quoted Director General Cristobal:

In evaluating the relevance of the prefix "CITI," due
attention should be given not only to the other features of the
competing marks but also to the attendant circumstances of the
case. Otherwise, a blind adherence to [Citigroup's] claim over the
prefix CITI is tantamount to handing it a monopoly of all marks
with such prefix or with a prefix that sounds alike but with a
different spelling like the word "city." Accordingly, the kind of
products and services involved should likewise be scrutinized. ETHIDa

xxx xxx xxx

Thus, this Court finds no cogent reason to believe

[Citigroup's] contention that consumers may confuse the products
and services covered by the competing trademarks as coming
from the same source of origin. The fear that the consumer may
mistake the products as to the source or origin, or that the
consumers seeking its products and services will be redirected or
diverted to [Citystate], is unfounded. The products or services
involved are not the ordinary everyday products that one can just
pick up in a supermarket or grocery stores (sic). These products
generally require sales representatives explaining to their
prospective customers the features of and entitlements thereto.
Availing the products and services involved follows certain
procedures that ordinarily and routinely gives the prospective
customers or clients opportunity to know exactly with whom they
are dealing with (sic). The procedures usually include the clients
filling-up and submitting a pro-forma application form and other
documentary requirements, which means that the person is
wel[l]-informed and thus, cannot be misled into believing that the
product or service is that of [Citystate] when in fact it is different
from [Citigroup's].

The likelihood of confusion between two marks should

be taken from the viewpoint of the prospective buyer. In Emerald
Garment Manufacturing Corp. vs. Court of Appeals, et al., the
Supreme Court ruled that:

"Finally, in line with the foregoing

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

The definition laid down in Dy Buncio

v. Tan Tiao Bok is better suited to the present
case. There, the 'ordinary purchaser' was
defined as one 'accustomed to buy, and
therefore to some extent familiar with, the
goods in question. The test of fraudulent
simulation is to be found in the likelihood of the
deception of some persons in some measure
acquainted with an established design and
desirous of purchasing the commodity with
which that design has been associated. The
test is not found in the deception, or the
possibility of deception, of the person who
 knows nothing about the design which has
been counterfeited, and who must be
indifferent between that and the other. The
simulation, in order to be objectionable, must
be such as appears likely to mislead the
ordinary intelligent buyer who has a need to
supply and is familiar with the article that he
seeks to purchase." 14

Citigroup filed a Motion for Reconsideration, 15 which the Court of

Appeals denied in its January 15, 2013 Resolution. 16

Thus, Citigroup filed a Petition for Review 17 against Citystate before

this Court. After respondent filed its Comment/Opposition 18 and petitioner
filed its Reply, 19 respondent filed its Memorandum. 20

Petitioner claims that the Court of Appeals erred in finding that there
was no confusing similarity between the trademark that respondent applied
for and petitioner's own trademarks. 21 It avers that Emerald Manufacturing
Company v. Court of Appeals 22 is not applicable to this case. 23 Contrary to
the Court of Appeals' finding, the arc design is not an integral part of
petitioner's "CITI" family of marks. 24

Petitioner asserts that when the dominancy test is applied to the

Court of Appeals' findings of fact, the necessary result is a finding of
confusing similarity. 25 It points out that the Court of Appeals found that "CITY
CASH" is the dominant feature of respondent's applied trademark. However,
because the word "CASH" was disclaimed in respondent's trademark
application, only "CITY" may be considered the dominant part of the mark.
"'CITY' . . . appears nearly identical to 'CITI.'" 26

Further, petitioner argues that the Court of Appeals did not

understand the services offered in relation to respondent's mark when it said
that the mark is to be applied only in relation to respondent's ATMs and
within the bank premises. It insists that in actuality, the mark could be used
outside the bank premises, such as in radio, newspapers, and the internet,
where there would not necessarily be a "GOLDEN LION'S HEAD" symbol to
disambiguate the mark from any of petitioner's marks. It argues that the
Court of Appeals should have appreciated the difference between basic
financial services on one hand, which include ATM services, and
sophisticated financial services on the other hand. It avers that customers do
not select ATM services after cautious evaluation, and that ATM services are
marketed to ordinary consumers. Thus, petitioner claims that the Court of
Appeals erred when it concluded that customers are intelligent purchasers,
and failed to consider ordinary purchasers who have not yet used the
financial services of petitioner and respondent. 27 cSEDTC

It further holds that it is not claiming a monopoly of all marks prefixed

by words sounding like "city." It stresses that it opposes only marks which
are registered under class 36 used in products directly related and in
competition with its "CITI" family of marks, sold under the same business
channels, and sold to the same group of consumers. 28

Respondent argues that its mark is not confusingly similar to

petitioner's 29 and that petitioner's fears are purely speculative. 30 It claims
that the phonetic similarity between "CITY" and "CITI" is not sufficient to
deny its registration, asserting that this Court has ruled that idem sonans
alone is insufficient basis for a determination of the existence of confusing
similarity. As for petitioner's arguments on possible confusion due to
advertising, respondent states that advertisement aims to inform the public of
a certain entity's product and that not mentioning a supplier's trade name in
its advertisement defeats the purpose of advertisement. It disputes
petitioner's claims on ATM services and the kind of caution exercised prior to
obtaining an ATM card, asserting that before customers may avail of ATM
services, they have to open an account with the bank offering them. 31

This Court denies the Petition.

The sole issue for this Court's resolution is whether or not the Court
of Appeals committed an error of law in finding that there exists no confusing
similarity between petitioner Citigroup, Inc.'s and respondent Citystate
Savings Bank, Inc.'s marks.

In La Chemise Lacoste, S.A. v. Fernandez, 32 this Court explained

why trademarks are protected in the market:
The purpose of the law protecting a trademark cannot
be overemphasized. They are to point out distinctly the origin or
ownership of the article to which it is affixed, to secure to him,
who has been instrumental in bringing into market a superior
article of merchandise, the fruit of his industry and skill, and to
prevent fraud and imposition (Etepha v. Director of Patents, 16
SCRA 495).
 The legislature has enacted laws to regulate the use of
trademarks and provide for the protection thereof. Modern trade
and commerce demands that depredations on legitimate trade
marks of non-nationals including those who have not shown prior
registration thereof should not be countenanced. The law against
such depredations is not only for the protection of the owner of
the trademark but also, and more importantly, for the protection
of purchasers from confusion, mistake, or deception as to the
goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA
1; General Garments Corporation v. Director of Patents, 41
SCRA 50).

The law on trademarks and tradenames is based on the

principle of business integrity and common justice. This law, both
in letter and spirit, is laid upon the premise that, while it
encourages fair trade in every way and aims to foster, and not to
hamper, competition, no one, especially a trader, is justified in
damaging or jeopardizing another's business by fraud, deceit,
trickery or unfair methods of any sort. This necessarily precludes
the trading by one dealer upon the good name and reputation
built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d)
338). 33

In Mirpuri v. Court of Appeals, 34 this Court traced the historical

development of trademark law:
A "trademark" is defined under R.A. 166, the Trademark
Law, as including "any word, name, symbol, emblem, sign or
device or any combination thereof adopted and used by a
manufacturer or merchant to identify his goods and distinguish
them from those manufactured, sold or dealt in by others." This
definition has been simplified in R.A. No. 8293, the Intellectual
Property Code of the Philippines, which defines a "trademark" as
"any visible sign capable of distinguishing goods." In Philippine
jurisprudence, the function of a trademark is to point out distinctly
the origin or ownership of the goods to which it is affixed; to
secure to him, who has been instrumental in bringing into the
market a superior article of merchandise, the fruit of his industry
and skill; to assure the public that they are procuring the genuine
article; to prevent fraud and imposition; and to protect the
manufacturer against substitution and sale of an inferior and
different article as his product.

Modern authorities on trademark law view trademarks

as performing three distinct functions: (1) they indicate origin or
ownership of the articles to which they are attached; (2) they
guarantee that those articles come up to a certain standard of
quality; and (3) they advertise the articles they symbolize.

Symbols have been used to identify the ownership or

origin of articles for several centuries. As early as 5,000 B.C.,
markings on pottery have been found by archaeologists. Cave
drawings in southwestern Europe show bison with symbols on
their flanks. Archaeological discoveries of ancient Greek and
Roman inscriptions on sculptural works, paintings, vases,
precious stones, glassworks, bricks, etc. reveal some features
which are thought to be marks or symbols. These marks were
affixed by the creator or maker of the article, or by public
authorities as indicators for the payment of tax, for disclosing
state monopoly, or devices for the settlement of accounts
between an entrepreneur and his workmen. SDAaTC

In the Middle Ages, the use of many kinds of marks on a

variety of goods was commonplace. Fifteenth century England
saw the compulsory use of identifying marks in certain trades.
There were the baker's mark on bread, bottlemaker's marks,
smith's marks, tanner's marks, watermarks on paper, etc. Every
guild had its own mark and every master belonging to it had a
special mark of his own. The marks were not trademarks but
police marks compulsorily imposed by the sovereign to let the
public know that the goods were not "foreign" goods smuggled
into an area where the guild had a monopoly, as well as to aid in
tracing defective work or poor craftsmanship to the artisan. For a
similar reason, merchants also used merchants' marks.
Merchants dealt in goods acquired from many sources and the
marks enabled them to identify and reclaim their goods upon
recovery after shipwreck or piracy.

With constant use, the mark acquired popularity and

became voluntarily adopted. It was not intended to create or
continue monopoly but to give the customer an index or
guarantee of quality. It was in the late 18th century when the
industrial revolution gave rise to mass production and distribution
of consumer goods that the mark became an important
instrumentality of trade and commerce. By this time, trademarks
did not merely identify the goods; they also indicated the goods
to be of satisfactory quality, and thereby stimulated further
purchases by the consuming public. Eventually, they came to
symbolize the goodwill and business reputation of the owner of
the product and became a property right protected by law. The
common law developed the doctrine of trademarks and
tradenames "to prevent a person from palming off his goods as
another's, from getting another's business or injuring his
reputation by unfair means, and, from defrauding the public."
Subsequently, England and the United States enacted national
legislation on trademarks as part of the law regulating unfair
trade. It became the right of the trademark owner to exclude
others from the use of his mark, or of a confusingly similar mark
where confusion resulted in diversion of trade or financial injury.
At the same time, the trademark served as a warning against the
imitation or faking of products to prevent the imposition of fraud
upon the public.

Today, the trademark is not merely a symbol of origin

and goodwill; it is often the most effective agent for the actual
creation and protection of goodwill. It imprints upon the public
mind an anonymous and impersonal guaranty of satisfaction,
creating a desire for further satisfaction. In other words, the mark
actually sells the goods. The mark has become the "silent
salesman," the conduit through which direct contact between the
trademark owner and the consumer is assured. It has invaded
popular culture in ways never anticipated that it has become a
more convincing selling point than even the quality of the article
to which it refers. In the last half century, the unparalleled growth
of industry and the rapid development of communications
technology have enabled trademarks, tradenames and other
 distinctive signs of a product to penetrate regions where the
owner does not actually manufacture or sell the product itself.
Goodwill is no longer confined to the territory of actual market
penetration; it extends to zones where the marked article has
been fixed in the public mind through advertising. Whether in the
print, broadcast or electronic communications medium,
particularly on the Internet, advertising has paved the way for
growth and expansion of the product by creating and earning a
reputation that crosses over borders, virtually turning the whole
world into one vast marketplace. 35 (Citations omitted)

There is also an underlying economic justification for the protection

of trademarks: an effective trademark system helps bridge the information
gap between producers and consumers, and thus, lowers the costs incurred
by consumers in searching for and deciding what products to purchase. As
summarized in a report of the World Intellectual Property Organization:
Economic research has shown that brands play an
important role in bridging so-called asymmetries of information
between producers and consumers. In many modern markets,
product offerings differ across a wide range of quality
characteristics. Consumers, in turn, cannot always discern these
characteristics at the moment of purchase; they spend time and
money researching different offerings before deciding which
product to buy. Brand reputation helps consumers to reduce
these search costs. It enables them to draw on their past
experience and other information about products — such as
advertisements and third party consumer reviews. However, the
reputation mechanism only works if consumers are confident that
they will purchase what they intend to purchase. The trademark
system provides the legal framework underpinning this
confidence. It does so by granting exclusive rights to names,
signs and other identifiers in commerce. In addition, by
employing trademarks, producers and sellers create concise
identifiers for specific goods and services, thereby improving
communication about those goods and services. 36

Recognizing the significance, and to further the effectivity of our

trademark system, 37 our legislators proscribed the registration of marks
 under certain circumstances:
Section 123. Registrability. — 123.1. A mark cannot be registered if it:

(a) Consists of immoral, deceptive or scandalous

matter, or matter which may disparage or falsely suggest a
connection with persons, living or dead, institutions, beliefs, or
national symbols, or bring them into contempt or disrepute;

(b) Consists of the flag or coat of arms or other insignia

of the Philippines or any of its political subdivisions, or of any
foreign nation, or any simulation thereof; acEHCD

(c) Consists of a name, portrait or signature identifying a

particular living individual except by his written consent, or the
name, signature, or portrait of a deceased President of the
Philippines, during the life of his widow, if any, except by written
consent of the widow;

(d) Is identical with a registered mark belonging to a

different proprietor or a mark with an earlier filing or priority date,
in respect of:

(i) The same goods or services, or

 (ii) Closely related goods or services,
or

(iii) If it nearly resembles such a mark

as to be likely to deceive or cause confusion;

(e) Is identical with, or confusingly similar to, or

constitutes a translation of a mark which is considered by the
competent authority of the Philippines to be well-known
internationally and in the Philippines, whether or not it is
registered here, as being already the mark of a person other than
the applicant for registration, and used for identical or similar
goods or services: Provided, That in determining whether a mark
is well-known, account shall be taken of the knowledge of the
relevant sector of the public, rather than of the public at large,
including knowledge in the Philippines which has been obtained
as a result of the promotion of the mark;

(f) Is identical with, or confusingly similar to, or

constitutes a translation of a mark considered well-known in
accordance with the preceding paragraph, which is registered in
the Philippines with respect to goods or services which are not
similar to those with respect to which registration is applied for:
Provided, That use of the mark in relation to those goods or
services would indicate a connection between those goods or
services, and the owner of the registered mark: Provided, further,
That the interests of the owner of the registered mark are likely to
be damaged by such use;
 (g) Is likely to mislead the public, particularly as to the
nature, quality, characteristics or geographical origin of the goods
or services;

(h) Consists exclusively of signs that are generic for the

goods or services that they seek to identify;

(i) Consists exclusively of signs or of indications that

have become customary or usual to designate the goods or
services in everyday language or in bona fide and established
trade practice;

(j) Consists exclusively of signs or of indications that

may serve in trade to designate the kind, quality, quantity,
intended purpose, value, geographical origin, time or production
of the goods or rendering of the services, or other characteristics
of the goods or services;

(k) Consists of shapes that may be necessitated by

technical factors or by the nature of the goods themselves or
factors that affect their intrinsic value;

(l) Consists of color alone, unless defined by a given

form; or

(m) Is contrary to public order or morality.

 Based on this proscription, petitioner insists that respondent's mark
cannot be registered because it is confusingly similar to its own set of marks.
Thus, granting the petition rests solely on the question of likelihood of
confusion between petitioner's and respondent's respective marks.

There is no objective test for determining whether the confusion is

likely. Likelihood of confusion must be determined according to the particular
circumstances of each case. 38 To aid in determining the similarity and
likelihood of confusion between marks, our jurisprudence has developed two
(2) tests: the dominancy test and the holistic test. This Court explained these
tests in Coffee Partners, Inc. v. San Francisco Coffee & Roastery, Inc.: 39

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

In contrast, the holistic test entails a consideration of the

entirety of the marks as applied to the products, including the
labels and packaging, in determining confusing similarity. The
discerning eye of the observer must focus not only on the
predominant words but also on the other features appearing on
both marks in order that the observer may draw his conclusion
whether one is confusingly similar to the other. 40 (Citations
omitted) SDHTEC

With these guidelines in mind, this Court considered "the main,

essential, and dominant features" of the marks in this case, as well as the
contexts in which the marks are to be used. This Court finds that the use of
the "CITY CASH WITH GOLDEN LION'S HEAD" mark will not result in the
likelihood of confusion in the minds of customers.

A visual comparison of the marks reveals no likelihood of confusion.

Respondent's mark is:

 This Court agrees with the observation of Director General Cristobal
that the most noticeable part of this mark is the golden lion's head device, 41
and finds that after noticing the image of the lion's head, the words "CITY"
and "CASH" are equally prominent.

On the other hand, petitioner's marks, as noted by the Court of

Appeals, often include the red arc device:

Petitioner's other registered marks which do not contain the red arc
device include the following:

Examining these marks, this Court finds that petitioner's marks can
best be described as consisting of the prefix "CITI" added to other words.

Applying the dominancy test, this Court sees that the prevalent
feature of respondent's mark, the golden lion's head device, is not present at
all in any of petitioner's marks. The only similar feature between respondent's
mark and petitioner's collection of marks is the word "CITY" in the former,
and the "CITI" prefix found in the latter. This Court agrees with the findings of
the Court of Appeals that this similarity alone is not enough to create a
likelihood of confusion.

The dis[s]imilarities between the two marks are

noticeable and substantial. Respondent's mark, "CITY CASH
WITH GOLDEN LION'S HEAD," has an insignia of a golden lion's
head at the left side of the words "CITY CASH," while petitioner's
"CITI" mark usually has an arc between the two I's. A further
scrutiny of the other "CITI" marks of petitioner would show that
their font type, font size, and color schemes of the said "CITI"
marks vary for each product or service. Most of the time,
petitioner's "CITI" mark is joined with another term to form a
single word, with each product or service having different font
types and color schemes. On the contrary, the trademark of
respondent consists of the words "CITY CASH," with a golden
lion's head emblem on the left side. It is, therefore, improbable
that the public would immediately and naturally conclude that
respondent's "CITY CASH WITH GOLDEN LION'S HEAD" is but
another variation under petitioner's "CITI" marks.
 Verily, the variations in the appearance of the "CITI"
marks by petitioner, when conjoined with other words, would
dissolve the alleged similarity between them and the trademark
of respondent. These dissimilarities, and the insignia of a golden
lion's head before the words "CITY CASH" in the mark of the
respondent would sufficiently acquaint and apprise the public that
respondent's trademark "CITY CASH WITH GOLDEN LION'S
HEAD" is not connected with the "CITI" marks of petitioner. 42

This Court also agrees with the Court of Appeals that the context
where respondent's mark is to be used, namely, for its ATM services, which
could only be secured at respondent's premises and not in an open market
of ATM services, further diminishes the possibility of confusion on the part of
prospective customers. Thus, this Court quotes with approval the Court of
Appeals, which made reference to Emerald Manufacturing:
Moreover, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary
purchaser is not the "completely unwary consumer" but is the
"ordinarily intelligent buyer" considering the type of product
involved. It bears to emphasize that the mark "CITY CASH WITH
GOLDEN LION'S HEAD" is a mark of respondent for its ATM
services which it offers to the public. It cannot be gainsaid that an
ATM service is not an ordinary product which could be obtained
at any store without the public noticing its association with the
banking institution that provides said service. Naturally, the
customer must first open an account with a bank before it could
avail of its ATM service. Moreover, the name of the banking
institution is written and posted either inside or outside the ATM
booth, not to mention the fact that the name of the bank that
operates the ATM is constantly flashed at the screen of the ATM
itself. With this, the public would accordingly be apprised that
respondent's "CITY CASH" is an ATM service of the respondent
bank, and not of the petitioner's. 43

Petitioner argues that Emerald Manufacturing is distinguishable from

this case, insisting that ATM services are more akin to ordinary household
items than they are akin to brand name jeans, in terms of how their
customers choose their providers: AScHCD
 73. The Emerald Manufacturing case involved the
marks "Lee" and "Stylistic Mr. Lee," and the Supreme Court
focused on the nature of the products as "not the ordinary
household items," pointing to the fact that, "the average Filipino
consumer generally buys his jeans by brand. He does not ask the
sales clerk for his generic jeans but for, say a Levis, Guess,
Wrangler or even an Armani."

74. In contrast, when an ordinary consumer of ATM

services wishes to withdraw cash, more often than not he will
simply locate the nearest ATM, without reference to brand as
long as the ATM accepts his card. When dealing with banks that
belong to an ATM network such as Bancnet, which both parties
do, the cards are almost universally and interchangeably
accepted. 44

This scenario is unclear, and thus, unconvincing and insufficient to

support a finding of error on the part of the Court of Appeals. Petitioner
hypothesizes that there could be some confusion because ATM users
"simply locate the nearest ATM, without reference to brand as long as the
ATM accepts [their] card." 45 This Court is at a loss to see how this supports
petitioner's claims that ATM users locate the nearest ATMs and use them
without reference to brand as long as the ATM accepts their cards. If
petitioner's speculation is true, then bank branding is wholly irrelevant after
the ATM service has been secured. This Court is hard pressed to accept this
assumption. In any case, this Court simply cannot agree that a bank or ATM
service is more akin to ordinary household items than it is to brand name
jeans.

More relevant than the scenario discussed by petitioner is the stage

when a bank is trying to attract customers to avail of its services. Petitioner
points out that in advertisements, such as in radio, newspapers, and the
internet, which are shown beyond the bank premises, there may be no
golden lion's head device to disambiguate "CITY CASH" from any of
petitioner's own marks and services. 46 This Court finds this unconvincing.
ATM services, like other bank services, are generally not marketed as
independent products. Indeed, as pointed out by petitioner itself, ATM cards
accompany the basic deposit product in most banks. 47 They are generally
adjunct to the main deposit service provided by a bank. Since ATM services
must be secured and contracted for at the offering bank's premises, any
marketing campaign for an ATM service must focus first and foremost on the
offering bank. Hence, any effective internet and newspaper advertisement for
respondent would include and emphasize the golden lion's head device.
Indeed, a radio advertisement would not have it. It should not be forgotten,
however, that a mark is a question of visuals, by statutory definition. 48 Thus,
the similarity between the sounds of "CITI" and "CITY" in a radio
advertisement alone neither is sufficient for this Court to conclude that there
is a likelihood that a customer would be confused nor can operate to bar
respondent from registering its mark. This Court notes that any confusion
that may arise from using "CITY CASH" in a radio advertisement would be
the same confusion that might arise from using respondent's own trade
name. Aurally, respondent's very trade name, which is not questioned, could
be mistaken as "CITISTATE SAVINGS BANK," and all of petitioner's fears of
possible confusion would be just as likely.

This Court agrees with Director General Cristobal's recognition of

respondent's history and of "Citystate" as part of its name. 49 Upon
consideration, it notes that it may have been more aligned with the purpose
of trademark protection for respondent to have chosen the trademark
"CITYSTATE CASH" instead of "CITY CASH" to create a stronger
association between its trade name and the service provided. Nonetheless,
there is no law requiring that trademarks match the offeror's trade name
precisely to be registrable. The only relevant issue is the likelihood of
confusion.

This Court also recognizes that there could be other situations

involving a combination of the word "city" and another word that could result
in confusion among customers. However, it is not convinced that this is one
of those situations.

Thus, having examined the particularities of this case, this Court

affirms the Court of Appeals' finding that Director General Cristobal of the
Intellectual Property Office did not commit any grave abuse of discretion in
allowing the registration of respondent's trademark.

WHEREFORE, the petition is DENIED. The Court of Appeals August

29, 2012 Decision and January 15, 2013 Resolution in CA-G.R. SP No.
109679 are AFFIRMED.

SO ORDERED.

Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.

 (Citigroup, Inc. v. Citystate Savings Bank, Inc., G.R. No. 205409, [June 13,
|||

2018])

SECOND DIVISION

[G.R. No. 195956. March 11, 2015.]

ABS-CBN CORPORATION, petitioner, vs. FELIPE GOZON,

GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A.
SOHO, GRACE DELA PEÑA-REYES, JOHN OLIVER T.
MANALASTAS, JOHN DOES AND JANE DOES, respondents.

DECISION

LEONEN, J : p

The main issue in this case is whether there is probable cause to

charge respondents with infringement under Republic Act No. 8293, otherwise
known as the Intellectual Property Code. The resolution of this issue requires
clarification of the concept of "copyrightable material" in relation to material
that is rebroadcast live as a news story. We are also asked to rule on whether
criminal prosecution for infringement of copyrightable material, such as live
rebroadcast, can be negated by good faith.
ABS-CBN Corporation (ABS-CBN) filed the Petition for Review
on Certiorari 1 to assail the November 9, 2010 Decision 2 and the March 3,
2011 Resolution 3 of the Court of Appeals. The Court of Appeals reinstated
the Department of Justice Resolution dated August 1, 2005 that ordered the
withdrawal of the Information finding probable cause for respondents' violation
of Sections 177 4 and 211 5 of the Intellectual Property Code. 6 Respondents
are officers and employees of GMA Network, Inc. (GMA-7). They are: Felipe
Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.),
Executive Vice-President; Marissa L. Flores (Flores), Vice-President for News
and Public Affairs; Jessica A. Soho (Soho), Director for News; Grace Dela
Peña-Reyes (Dela Peña-Reyes), Head of News and Public Affairs; John
Oliver Manalastas (Manalastas), Program Manager; and others.
The controversy arose from GMA-7's news coverage on the
homecoming of Filipino overseas worker and hostage victim Angelo dela Cruz
on July 22, 2004. As summarized by the Court of Appeals:
 Overseas Filipino worker Angelo dela Cruz was kidnapped by
Iraqi militants and as a condition for his release, a demand was made
for the withdrawal of Filipino troops in Iraq. After negotiations, he was
released by his captors and was scheduled to return to the country in
the afternoon of 22 July 2004. Occasioned by said homecoming and
the public interest it generated, both . . . GMA Network, Inc. . . . and
[petitioner] made their respective broadcasts and coverage of the live
event. 7
ABS-CBN "conducted live audio-video coverage of and broadcasted the
arrival of Angelo dela Cruz at the Ninoy Aquino International Airport (NAIA)
and the subsequent press conference." 8 ABS-CBN allowed Reuters
Television Service (Reuters) to air the footages it had taken earlier under a
special embargo agreement. 9
ABS-CBN alleged that under the special embargo agreement, any of
the footages it took would be for the "use of Reuter's international subscribers
only, and shall be considered and treated by Reuters under 'embargo' against
use by other subscribers in the Philippines. . . . [N]o other Philippine
subscriber of Reuters would be allowed to use ABS-CBN footage without the
latter's consent." 10
GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes,
and Manalastas are connected, "assigned and stationed news reporters and
technical men at the NAIA for its live broadcast and non-live news coverage of
the arrival of dela Cruz." 11 GMA-7 subscribes to both Reuters and Cable
News Network (CNN). It received a live video feed of the coverage of Angelo
dela Cruz's arrival from Reuters. 12
GMA-7 immediately carried the live newsfeed in its program "Flash
Report," together with its live broadcast. 13 Allegedly, GMA-7 did not receive
any notice or was not aware that Reuters was airing footages of ABS-
CBN. 14 GMA-7's news control room staff saw neither the "No Access
Philippines" notice nor a notice that the video feed was under embargo in
favor of ABS-CBN. 15
On August 13, 2004, ABS-CBN filed the Complaint for copyright
infringement under Sections 177 16 and 211 17 of the Intellectual Property
Code. 18
On December 3, 2004, Assistant City Prosecutor Dindo Venturanza
issued the Resolution 19 finding probable cause to indict Dela Peña-Reyes
and Manalastas. 20Consequently, the Information 21 for violation of
the Intellectual Property Code was filed on December 17, 2004. It reads:
That on or about the 22nd of July 2004, in Quezon City,
Philippines, the above-named accused, conspiring together,
confederating with and mutually helping each other, being the Head of
 News Operations and the Program Manager, respectively, for the
News and Public Affairs Department of GMA Network, Inc., did then
and there, willfully, unlawfully and feloniously use and broadcast the
footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino
International Airport of which ABS-CBN holds the exclusive ownership
and copyright by then and there using, airing, and broadcasting the
said footage in its news program "FLASH REPORT" without first
obtaining the consent or authority of said copyright owner, to their
damage and prejudice.
Contrary to law. 22
On January 4, 2005, respondents filed the Petition for Review before
the Department of Justice. 23 In the Resolution (Gonzalez Resolution) dated
August 1, 2005, Department of Justice Secretary Raul M. Gonzalez
(Secretary Gonzalez) ruled in favor of respondents and held that good faith
may be raised as a defense in the case. 24 The dispositive portion of the
Resolution reads: aDSIHc

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-

7 in I.S. No. 04-10458 is considered meritorious and is
hereby GRANTED. This case is hereby Dismissed, the resolution of
the City Prosecutor of Quezon City is hereby reversed and the same is
ordered to withdraw the information if any and report action taken to
this office within ten (10) days. 25 (Emphasis in the original)
Both parties moved for reconsideration of the Gonzalez Resolution. 26
Meanwhile, on January 19, 2005, the trial court granted the Motion to
Suspend Proceedings filed earlier by Dela Peña-Reyes and
Manalastas. 27 The trial court Order reads:
Perusing the motion, the court finds that a petition for review
was filed with the Department of Justice on January 5, 2005 as
confirmed by the public prosecutor. Under Section 11 (c), Rule 116 of
the Rules of Criminal Procedure, once a petition for review is filed with
the Department of Justice, a suspension of the criminal proceedings
may be allowed by the court.
Accordingly, to allow the Department of Justice the opportunity
to act on said petition for review, let the proceedings on this case be
suspended for a period of sixty (60) days counted from January 5,
2005, the date the petition was filed with the Department of Justice.
The arraignment of the accused on February 1, 2005 is accordingly
cancelled. Let the arraignment be rescheduled to March 8, 2005 at
8:30 a.m. The accused through counsel are notified in open court.
SO ORDERED. 28
On June 29, 2010, Department of Justice Acting Secretary Alberto C.
Agra (Secretary Agra) issued the Resolution (Agra Resolution) that reversed
the Gonzalez Resolution and found probable cause to charge Dela Peña-
Reyes and Manalastas for violation of the Intellectual Property
Code. 29 Secretary Agra also found probable cause to indict Gozon, Duavit,
Jr., Flores, and Soho for the same violation. 30 He ruled that:
[w]hile good faith may be a defense in copyright infringement,
the same is a disputable presumption that must be proven in a full-
blown trial. Disputable presumptions may be contradicted and
overcome by other evidence. Thus, a full-blown trial is the proper
venue where facts, issues and laws are evaluated and considered. The
very purpose of trial is to allow a party to present evidence to
overcome the disputable presumptions involved. 31
The dispositive portion of the Agra Resolution provides:
WHEREFORE, premises considered:
(a) The Motion for Reconsideration filed by appellees ABS-
CBN Broadcasting Corporation (ABS-CBN) of our Resolution
promulgated on August 1, 2005 (Resolution No. 364, Series of 2005)
and the Petition for Review filed by complainant-appellant ABS-CBN
in I.S. No. 04-10458 on April 10, 2006, are GRANTED and the City
Prosecutor of Quezon City is hereby ordered to file the necessary
Information for violation of Sections 177 and 211 of Republic Act No.
8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marisa
L. Flores, Jessica A. Soho, Grace Dela Peña-Reyes, John Oliver T.
Manalastas[.]
xxx xxx xxx
SO ORDERED. 32 (Emphasis in the original)
Respondents assailed the Agra Resolution through the Petition
for Certiorari with prayer for issuance of a temporary restraining order and/or
Writ of Preliminary Injunction on September 2, 2010 before the Court of
Appeals. In the Resolution dated September 13, 2010, the Court of Appeals
granted the temporary restraining order preventing the Department of Justice
from enforcing the Agra Resolution. 33
On November 9, 2010, the Court of Appeals rendered the Decision
granting the Petition and reversing and setting aside the Agra
Resolution. 34 The Court of Appeals held that Secretary Agra committed
errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of
copyright infringement, the Court of Appeals said:
Surely, private respondent has a copyright of its news coverage.
Seemingly, for airing said video feed, petitioner GMA is liable under the
provisions of the Intellectual PropertyCode, which was enacted
purposely to protect copyright owners from infringement. However, it is
an admitted fact that petitioner GMA had only aired a five (5) second
 footage of the disputed live video feed that it had received from
Reuters and CNN as a subscriber. Indeed, petitioners had no notice of
the right of ownership of private respondent over the same. Without
notice of the "No Access Philippines" restriction of the live video feed,
petitioner cannot be faulted for airing a live video feed from Reuters
and CNN.
Verily, as aptly opined by Secretary Gonzalez in his earlier
Resolution, the act of petitioners in airing the five (5) second footage
was undeniably attended by good faith and it thus serves to exculpate
them from criminal liability under the Code. While the
Intellectual Property Code is a special law, and thus generally
categorized as malum prohibitum, it bears to stress that the
provisions of the Code itself do not ipso facto penalize a person or
entity for copyright infringement by the mere fact that one had used a
copyrighted work or material.
Certainly so, in the exercise of one's moral and economic or
copyrights, the very provisions of Part IV of the
Intellectual Property Code provide for the scope and limitations on
copyright protection under Section 184 and in fact permit fair use of
copyrighted work under Section 185. With the aforesaid statutory
limitations on one's economic and copyrights and the allowable
instances where the other persons can legally use a copyrighted work,
criminal culpability clearly attaches only when the infringement had
been knowingly and intentionally committed. 35 (Emphasis supplied)
The dispositive portion of the Decision reads:
WHEREFORE, the foregoing considered, the instant petition is
hereby GRANTED and the assailed Resolution dated 29 June
2010 REVERSED and SET ASIDE. Accordingly, the earlier Resolution
dated 1 August 2005, which ordered the withdrawal of the Information
filed, if any, against the petitioners for violation of Sections 177 and
211 of the Intellectual Property Code, is hereby REINSTATED. No
costs.
SO ORDERED. 36 (Emphasis in the original) ETHIDa

ABS-CBN's Motion for Reconsideration was denied. 37 It then filed its

Petition for Review before this court assailing the Decision and Resolution of
the Court of Appeals. 38
The issues for this court's consideration are:
First, whether Secretary Agra committed errors of jurisdiction in the
Resolution dated June 29, 2010 and, therefore, whether a petition
for certiorari was the proper remedy in assailing that Resolution;
Second, whether news footage is copyrightable under the law;
 Third, whether there was fair use of the broadcast material;
Fourth, whether lack of knowledge that a material is copyrighted is a
defense against copyright infringement;
Fifth, whether good faith is a defense in a criminal prosecution for
violation of the Intellectual Property Code; and
Lastly, whether the Court of Appeals was correct in overturning
Secretary Agra's finding of probable cause.
I
The trial court granted respondents' Motion to Suspend Proceedings
and deferred respondents Dela Peña-Reyes and Manalastas' arraignment for
60 days in view of the Petition for Review filed before the Department of
Justice.
Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows the
suspension of the accused's arraignment in certain circumstances only:
SEC. 11. Suspension of arraignment. — Upon motion by the proper
party, the arraignment shall be suspended in the following cases: (a)
The accused appears to be suffering from an unsound mental
condition which effectively renders him unable to fully understand the
charge against him and to plead intelligently thereto. In such case, the
court shall order his mental examination and, if necessary, his
confinement for such purpose;
(b) There exists a prejudicial question; and
(c) A petition for review of the resolution of the prosecutor is pending at
either the Department of Justice, or the Office of the President;
provided, that the period of suspension shall not exceed sixty (60) days
counted from the filing of the petition with the reviewing
office. (12a) (Emphasis supplied)
In Samson v. Daway, 39 this court acknowledged the applicability of
Rule 116, Section (c) in a criminal prosecution for infringement under
the Intellectual Property Code. However, this court emphasized the limits of
the order of deferment under the Rule:
While the pendency of a petition for review is a ground for
suspension of the arraignment, the . . . provision limits the deferment of
the arraignment to a period of 60 days reckoned from the filing of the
petition with the reviewing office. It follows, therefore, that after the
expiration of said period, the trial court is bound to arraign the accused
or to deny the motion to defer arraignment. 40
We clarify that the suspension of the arraignment should always be
within the limits allowed by law. In Crespo v. Judge Mogul, 41 this court
outlined the effects of filing an information before the trial court, which
includes initiating a criminal action and giving this court "authority to hear and
determine the case": 42
The preliminary investigation conducted by the fiscal for the
purpose of determining whether a prima facie case exists warranting
the prosecution of the accused is terminated upon the filing of the
information in the proper court. In turn, as above stated, the filing of
said information sets in motion the criminal action against the accused
in Court. Should the fiscal find it proper to conduct a reinvestigation of
the case, at such stage, the permission of the Court must be secured.
After such reinvestigation the finding and recommendations of the
fiscal should be submitted to the Court for appropriate action. While it
is true that the fiscal has the quasi judicial discretion to determine
whether or not a criminal case should be filed in court or not, once the
case had already been brought to Court whatever disposition the fiscal
may feel should be proper in the case thereafter should be addressed
for the consideration of the Court, the only qualification is that the
action of the Court must not impair the substantial rights of the
accused or the right of the People to due process of law.
Whether the accused had been arraigned or not and whether it
was due to a reinvestigation by the fiscal or a review by the Secretary
of Justice whereby a motion to dismiss was submitted to the Court, the
Court in the exercise of its discretion may grant the motion or deny it
and require that the trial on the merits proceed for the proper
determination of the case.
However, one may ask, if the trial court refuses to grant the
motion to dismiss filed by the fiscal upon the directive of the Secretary
of Justice will there not be a vacuum in the prosecution? A state
prosecutor to handle the case cannot possibly be designated by the
Secretary of Justice who does not believe that there is a basis for
prosecution nor can the fiscal be expected to handle the prosecution of
the case thereby defying the superior order of the Secretary of Justice.
The answer is simple. The role of the fiscal or prosecutor as We
all know is to see that justice is done and not necessarily to secure the
conviction of the person accused before the Courts. Thus, in spite of
his opinion to the contrary, it is the duty of the fiscal to proceed with the
presentation of evidence of the prosecution to the Court to enable the
Court to arrive at its own independent judgment as to whether the
accused should be convicted or acquitted. The fiscal should not shirk
from the responsibility of appearing for the People of the Philippines
even under such circumstances much less should he abandon the
prosecution of the case leaving it to the hands of a private prosecutor
for then the entire proceedings will be null and void. The least that the
fiscal should do is to continue to appear for the prosecution although
 he may turn over the presentation of the evidence to the private
prosecutor but still under his direction and control.
The rule therefore in this jurisdiction is that once a complaint or
information is filed in Court any disposition of the case as to its
dismissal or the conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal retains the direction
and control of the prosecution of criminal cases even while the case is
already in Court he cannot impose his opinion on the trial court. The
Court is the best and sole judge on what to do with the case before it.
The determination of the case is within its exclusive jurisdiction and
competence. A motion to dismiss the case filed by the fiscal should be
addressed to the Court who has the option to grant or deny the same.
It does not matter if this is done before or after the arraignment of the
accused or that the motion was filed after a reinvestigation or upon
instructions of the Secretary of Justice who reviewed the records of the
investigation. 43 (Emphasis supplied, citations omitted)
The doctrine in Crespo was reiterated in Mayor Balindong v. Court of
Appeals, 44 where this court reminded the Department of Justice Secretary to
refrain from entertaining petitions for review when the case is already pending
with this court:
[I]n order to avoid a situation where the opinion of the Secretary of
Justice who reviewed the action of the fiscal may be disregarded by
the trial court, the Secretary of Justice should, as far as practicable,
refrain from entertaining a petition for review or appeal from the action
of the fiscal, when the complaint or information has already been filed
in the Court. The matter should be left entirely for the determination of
the Court. 45
The trial court should have proceeded with respondents Dela Peña-
Reyes and Manalastas' arraignment after the 60-day period from the filing of
the Petition for Review before the Department of Justice on March 8, 2005. It
was only on September 13, 2010 that the temporary restraining order was
issued by the Court of Appeals. The trial court erred when it did not act on the
criminal case during the interim period. It had full control and direction of the
case. As Judge Mogul reasoned in denying the motion to dismiss inCrespo,
failure to proceed with the arraignment "disregards the requirements of due
process [and] erodes the Court's independence and integrity." 46
II
According to ABS-CBN, the Court of Appeals erred in finding that: a
motion for reconsideration was not necessary before a petition
for certiorari could be filed; the Department of Justice Secretary committed
errors of jurisdiction since the Agra Resolution was issued within its authority
and in accordance with settled laws and jurisprudence; and respondents were
not liable for copyright infringement.
In its assailed Decision, the Court of Appeals found that respondents
committed a procedural error when they failed to file a motion for
reconsideration before filing the Petition for Certiorari. However, the Court of
Appeals held that a motion for reconsideration was unnecessary since the
Agra Resolution was a patent nullity and it would have been useless under
the circumstances:
Given that a reading of the assailed Resolution and the instant
records readily reveals errors of jurisdiction on the part of respondent
Secretary, direct judicial recourse is warranted under the
circumstances. Aside from the fact that said Resolution is a patent
nullity having been issued in grave abuse of discretion amounting to
lack or excess of jurisdiction, the filing of a motion for reconsideration
is evidently useless on account of the fact that the issues and
arguments before this Court have already been duly raised and
accordingly delved into by respondent Secretary in his disposition of
the petition a quo. 47 (Emphasis in the original)
In Elma v. Jacobi, 48 this court ruled that a petition for certiorari under
Rule 65 of the Rules of Court is proper when assailing adverse resolutions of
the Department of Justice stemming from the determination of probable
cause. 49 However, grave abuse of discretion must be alleged. 50
In Sanrio Company Limited v. Lim, 51 this court stressed the
prosecutor's role in determining probable cause. Judicial review will only lie
when it is shown that the prosecutor acted with grave abuse of discretion
amounting to lack or excess of jurisdiction:
A prosecutor alone determines the sufficiency of evidence that will
establish probable cause justifying the filing of a criminal information
against the respondent. By way of exception, however, judicial review
is allowed where respondent has clearly established that the
prosecutor committed grave abuse of discretion. Otherwise stated,
such review is appropriate only when the prosecutor has exercised his
discretion in an arbitrary, capricious, whimsical or despotic manner by
reason of passion or personal hostility, patent and gross enough to
amount to an evasion of a positive duty or virtual refusal to perform a
duty enjoined by law. 52 (Citations omitted)AIDSTE

Grave abuse of discretion refers to:

such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction. The abuse of discretion must be grave as where the
power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross as to
 amount to an evasion of positive duty or to a virtual refusal to perform
the duty enjoined by or to act at all in contemplation of law. 53
Resorting to certiorari requires that there be there be "no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of law[,]" 54 such
as a motion for reconsideration. Generally, "a motion for reconsideration is a
condition sine qua non before a petition for certiorari may lie, its purpose
being to grant an opportunity for the [tribunal or officer] to correct any error
attributed to it by a re-examination of the legal and factual circumstances of
the case." 55
However, exceptions to the rule exist:
(a) where the order is a patent nullity, as where the Court a quo had no
jurisdiction; (b) where the questions raised in
the certiorari proceeding have been duly raised and passed upon
by the lower court, or are the same as those raised and passed
upon in the lower court; (c) where there is an urgent necessity for
the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or
the subject matter of the action is perishable; (d) where, under the
circumstances, a motion for reconsideration would be useless; (e)
where petitioner was deprived of due process and there is
extreme urgency for relief; (f) where, in a criminal case, relief from
an order of arrest is urgent and the granting of such relief by the
trial Court is improbable; (g) where the proceedings in the lower
court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no
opportunity to object; and (i) where the issue raised is one purely
of law or where public interest is involved. 56 (Emphasis in the
original, citations omitted)
As argued by respondents, "[a] second motion for reconsideration
would have been useless and futile since the D[epartment] [of] J[ustice] had
already passed upon the same issues twice." 57 Equally pressing under the
circumstances was the need to resolve the matter, as the Information's filing
would lead to respondents' imminent arrest. 58
Moreover, Department of Justice Department Circular No. 70 dated July
3, 2000, or the 2000 NPS Rules on Appeal, provides that no second motion
for reconsideration of the Department of Justice Secretary's resolution shall
be entertained:
SECTION 13. Motion for reconsideration. — The aggrieved
party may file a motion for reconsideration within a non-extendible
period of ten (10) days from receipt of the resolution on appeal,
furnishing the adverse party and the Prosecution Office concerned with
 copies thereof and submitting proof of such service. No second or
further motion for reconsideration shall be entertained.
The Agra Resolution was the result of respondents' Motion for
Reconsideration assailing the Gonzalez Resolution. To file a motion for
reconsideration of the Agra Resolution would be superfluous. Respondents
were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.
III
The Court of Appeals ruled that Secretary Agra committed errors of
jurisdiction, which then required the grant of the writ of certiorari:
So viewed, by ordering the filing of information without proof that
probable cause exists to charge petitioners with a crime, respondent
Secretary clearly committed an error of jurisdiction thus warranting the
issuance of the writ of certiorari. Surely, probable cause cannot be had
when the very provisions of the statute exculpates criminal liability in
cases classified as fair use of copyrighted materials. The fact that they
admittedly used the Reuters live video feed is not, as a matter of
course, tantamount to copyright infringement that would justify the filing
of an information against the petitioners. 59
Error of jurisdiction must be distinguished from error of judgment:
A line must be drawn between errors of judgment and errors of
jurisdiction. An error of judgment is one which the court may commit in
the exercise of its jurisdiction. An error of jurisdiction renders an order
or judgment void or voidable. Errors of jurisdiction are reviewable
on certiorari; errors of judgment, only by appeal. 60
In People v. Hon. Sandiganbayan: 61
An error of judgment is one which the court may commit in the exercise
of its jurisdiction. An error of jurisdiction is one where the act
complained of was issued by the court without or in excess of
jurisdiction, or with grave abuse of discretion, which is tantamount to
lack or in excess of jurisdiction and which error is correctible only by
the extraordinary writ of certiorari. Certiorari will not be issued to cure
errors of the trial court in its appreciation of the evidence of the parties,
or its conclusions anchored on the said findings and its conclusions of
law. 62 (Emphasis supplied)
This court has adopted a deferential attitude towards review of the
executive's finding of probable cause. 63 This is based "not only upon the
respect for the investigatory and [prosecutorial] powers granted by
the Constitution to the executive department but upon practicality as
well." 64 Review of the Department of Justice Secretary's decision or
resolution will be allowed only when grave abuse of discretion is alleged:
 The full discretionary authority to determine probable cause in a
preliminary investigation to ascertain sufficient ground for the filing of
information rests with the executive branch. Hence, judicial review of
the resolution of the Secretary of Justice is limited to a determination
whether there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction. Courts cannot substitute the executive
branch's judgment.
xxx xxx xxx
It is only where the decision of the Justice Secretary is tainted
with grave abuse of discretion amounting to lack or excess of
jurisdiction that the Court of Appeals may take cognizance of the case
in a petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure. The Court of Appeals decision may then be appealed to
this Court by way of a petition for review on certiorari. 65 (Emphasis
supplied, citations omitted)AaCTcI

In this case, it must be shown that Secretary Agra exceeded his

authority when he reversed the findings of Secretary Gonzalez. This court
must determine whether there is probable cause to file an information for
copyright infringement under the Intellectual Property Code.
IV
Probable cause pertains to "such facts as are sufficient to engender a
well-founded belief that a crime has been committed and that respondent is
probably guilty thereof." 66 Preliminary investigation is the inquiry or
proceeding to determine whether there is probable cause. 67
In Webb v. De Leon, 68 this court ruled that determination of probable
cause during preliminary investigation does not require trial-like evaluation of
evidence since existence of probable cause does not equate to guilt:
It ought to be emphasized that in determining probable cause,
the average man weighs facts and circumstances without resorting to
the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of
which all reasonable men have an abundance.
xxx xxx xxx
. . . A finding of probable cause merely binds over the suspect to
stand trial. It is not a pronouncement of guilt. 69
In Reyes v. Pearlbank Securities, Inc., 70 finding probable cause is not
equivalent to finding with moral certainty that the accused committed the
crime:
A finding of probable cause needs only to rest on evidence showing
that more likely than not a crime has been committed by the suspects.
 It need not be based on clear and convincing evidence of guilt, not on
evidence establishing guilt beyond reasonable doubt, and definitely not
on evidence establishing absolute certainty of guilt. In determining
probable cause, the average man weighs facts and circumstances
without resorting to the calibrations of the rules of evidence of which he
has no technical knowledge. He relies on common sense. 71
During preliminary investigation, a public prosecutor does not
adjudicate on the parties' rights, obligations, or liabilities. 72
In the recent case of Estrada v. Office of the Ombudsman, et al., 73 we
reiterated Webb on the determination of probable cause during preliminary
investigation and traced the history of probable cause as borrowed from
American jurisprudence:
The purpose in determining probable cause is to make sure that
the courts are not clogged with weak cases that will only be dismissed,
as well as to spare a person from the travails of a needless
prosecution.
xxx xxx xxx
. . . In the United States, from where we borrowed the concept
of probable cause, the prevailing definition of probable cause is this:
In dealing with probable cause, however, as the
very name implies, we deal with probabilities. These are
not technical; they are the factual and practical
considerations of everyday life on which reasonable and
prudent men, not legal technicians, act. The standard of
proof is accordingly correlative to what must be proved.
"The substance of all the definitions" of probable
cause "is a reasonable ground for belief of
guilt." McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted
with approval in the Carroll opinion. 267 U. S. at 161. And
this "means less than evidence which would justify
condemnation" or conviction, as Marshall, C. J., said for
the Court more than a century ago in Locke v. United
States, 7 Cranch 339, 348. Since Marshall's time, at any
rate, it has come to mean more than bare suspicion:
Probable cause exists where "the facts and
circumstances within their [the officers'] knowledge and of
which they had reasonably trustworthy information [are]
sufficient in themselves to warrant a man of reasonable
caution in the belief that" an offense has been or is being
committed. Carroll v. United States, 267 U. S. 132, 162.
These long-prevailing standards seek to safeguard
citizens from rash and unreasonable interferences with
 privacy and from unfounded charges of crime. They also
seek to give fair leeway for enforcing the law in the
community's protection. Because many situations which
confront officers in the course of executing their duties
are more or less ambiguous, room must be allowed for
some mistakes on their part. But the mistakes must be
those of reasonable men, acting on facts leading sensibly
to their conclusions of probability. The rule of probable
cause is a practical, nontechnical conception affording
the best compromise that has been found for
accommodating these often opposing interests.
Requiring more would unduly hamper law enforcement.
To allow less would be to leave law-abiding citizens at
the mercy of the officers' whim or caprice.
In the Philippines, there are four instances in the Revised
Rules of Criminal Procedure where probable cause is needed to be
established:
(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to
determine whether there is sufficient ground to engender a
well-founded belief that a crime has been committed and
the respondent is probably guilty thereof, and should be
held for trial. A preliminary investigation is required before
the filing of a complaint or information for an offense where
the penalty prescribed by law is at least four years, two
months and one day without regard to the fine;
(2) In Sections 6 and 9 of Rule 112: By the judge, to determine
whether a warrant of arrest or a commitment order, if the
accused has already been arrested, shall be issued and
that there is a necessity of placing the respondent under
immediate custody in order not to frustrate the ends of
justice;EcTCAD

(3) In Section 5(b) of Rule 113: By a peace officer or a private

person making a warrantless arrest when an offense has
just been committed, and he has probable cause to believe
based on personal knowledge of facts or circumstances
that the person to be arrested has committed it; and
(4) In Section 4 of Rule 126: By the judge, to determine whether a
search warrant shall be issued, and only upon probable
cause in connection with one specific offense to be
determined personally by the judge after examination
under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the
place to be searched and the things to be seized which
may be anywhere in the Philippines.
 In all these instances, the evidence necessary to establish
probable cause is based only on the likelihood, or probability, of
guilt. 74
Estrada also highlighted that a "[p]reliminary investigation is not part of
the criminal action. It is merely preparatory and may even be disposed of in
certain situations." 75
To determine whether there is probable cause that respondents
committed copyright infringement, a review of the elements of the crime,
including the existing facts, is required.
V
ABS-CBN claims that news footage is subject to copyright and
prohibited use of copyrighted material is punishable under the Intellectual
Property Code. It argues that the new footage is not a "newsworthy event" but
"merely an account of the arrival of Angelo dela Cruz in the Philippines — the
latter being the newsworthy event": 76
To be clear, it is the event itself or the arrival of Angelo dela
Cruz which is not copyrightable because that is the newsworthy event.
However, any footage created from the event itself, in this case the
arrival of Angelo dela Cruz, are intellectual creations which are
copyrightable. Thus, the footage created by ABS-CBN during the
arrival of Angelo dela Cruz, which includes the statements of Dindo
Amparo, are copyrightable and protected by the laws on copyright. 77
On the other hand, respondents argue that ABS-CBN's news footage of
Angelo dela Cruz's arrival is not copyrightable or subject to protection:
Certainly, the arrival of Angelo [d]ela Cruz, which aroused public
attention and the consciousness of the Filipino people with regard to
their countrymen, OFWs working in foreign countries and how the
Philippine government responds to the issues concerning them, is
"news". There is no ingenuity or inventiveness added in the said news
footage. The video footage of this "news" is not copyrightable by any
legal standard as facts of everyday life depicted in the news and items
of press information is part of the public domain. 78 (Emphasis in the
original)
The news footage is copyrightable.
The Intellectual Property Code is clear about the rights afforded to
authors of various kinds of work. Under the Code, "works are protected by the
sole fact of their creation,irrespective of their mode or form of expression, as
well as of their content, quality and purpose." 79 These include "[a]udiovisual
works and cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual
recordings." 80
 Contrary to the old copyright law, 81 the Intellectual Property Code does
not require registration of the work to fully recover in an infringement suit.
Nevertheless, both copyright laws provide that copyright for a work is acquired
by an intellectual creator from the moment of creation. 82
It is true that under Section 175 of the Intellectual Property Code, "news
of the day and other miscellaneous facts having the character of mere items
of press information" are considered unprotected subject matter. 83 However,
the Code does not state that expression of the news of the day, particularly
when it underwent a creative process, is not entitled to protection.
An idea or event must be distinguished from the expression of that idea
or event. An idea has been likened to a ghost in that it "must be spoken to a
little before it will explain itself." 84 It is a concept that has eluded exact legal
definition. 85 To get a better grasp of the idea/expression dichotomy, the
etymology of the term "idea" is traced:
The word "idea" is derived from a Greek term, meaning "a form,
the look or appearance of a thing as opposed to its reality, from idein,
to see." In the Timaeus, Plato saw ideas as eternal paradigms,
independent objects to which the divine demiurge looks as patterns in
forming the world. This was later modified to the religious conception of
ideas as the thoughts of God. "It is not a very long step to extend the
term 'idea' to cover patterns, blueprints, or plans in anyone's mind, not
only in God's." The word entered the French and English vernacular in
the 1600s and possessed two meanings. The first was the Platonic
meaning of a perfect exemplar or paradigm. The second, which
probably has its origin with Descartes, is of a mental concept or image
or, more broadly, any object of the mind when it is active. Objects of
thought may exist independently. The sun exists (probably) before and
after you think of it. But it is also possible to think of things that have
never existed, such as a unicorn or Pegasus. John Locke defined
ideas very comprehensively, to include: all objects of the mind.
Language was a way of translating the invisible, hidden ideas that
make up a person's thoughts into the external, perceptible world of
articulate sounds and visible written symbols that others can
understand. 86 (Citations omitted)
There is no one legal definition of "idea" in this jurisdiction. The term
"idea" is mentioned only once in the Intellectual Property Code. 87 In Joaquin,
Jr. v. Drilon, 88 a television format (i.e., a dating show format) is not
copyrightable under Section 2 of Presidential Decree No. 49; 89 it is a mere
concept: HSAcaE

P.D. No. 49, §2, in enumerating what are subject to

copyright, refers to finished works and not to concepts. The copyright
does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in
 which it is described, explained, illustrated, or embodied in such work.
Thus, the new INTELLECTUAL PROPERTY CODE OF THE
PHILIPPINES provides:
SEC. 175. Unprotected Subject Matter. —
Notwithstanding the provisions of Sections 172 and 173,
no protection shall extend, under this law, to any idea,
procedure, system, method or operation, concept,
principle, discovery or mere data as such, even if they
are expressed, explained, illustrated or embodied in a
work; news of the day and other miscellaneous facts
having the character of mere items of press information;
or any official text of a legislative, administrative or legal
nature, as well as any official translation thereof.
What then is the subject matter of petitioners' copyright? This
Court is of the opinion that petitioner BJPI's copyright covers audio-
visual recordings of each episode of Rhoda and Me, as falling within
the class of works mentioned in P.D. 49, §2(M), to wit:
Cinematographic works and works produced by a
process analogous to cinematography or any process for
making audio-visual recordings;
The copyright does not extend to the general concept or format
of its dating game show. Accordingly, by the very nature of the subject
of petitioner BJPI's copyright, the investigating prosecutor should have
the opportunity to compare the videotapes of the two shows.
Mere description by words of the general format of the two
dating game shows is insufficient; the presentation of the master
videotape in evidence was indispensable to the determination of the
existence of probable cause. As aptly observed by respondent
Secretary of Justice:
A television show includes more than mere words
can describe because it involves a whole spectrum of
visuals and effects, video and audio, such that no
similarity or dissimilarity may be found by merely
describing the general copyright/format of both dating
game shows. 90 (Emphasis supplied, citations omitted)
Ideas can be either abstract or concrete. 91 It is the concrete ideas that
are generally referred to as expression:
The words "abstract" and "concrete" arise in many cases dealing with
the idea/expression distinction. The Nichols court, for example, found
that the defendant's film did not infringe the plaintiff's play because it
was "too generalized an abstraction from what plaintiff wrote . . . only a
part of her ideas." In Eichel v. Marcin, the court said that authors may
exploit facts, experiences, field of thought, and general ideas found in
 another's work, "provided they do not substantially copy a concrete
form, in which the circumstances and ideas have been developed,
arranged, and put into shape." Judge Hand, in National Comics
Publications, Inc. v. Fawcett Publications, Inc. said that "no one
infringes, unless he descends so far into what is concrete as to invade.
. . 'expression.'"
These cases seem to be distinguishing "abstract" ideas from
"concrete" tangible embodiments of these abstractions that may be
termed expression. However, if the concrete form of a work means
more than the literal expression contained within it, it is difficult to
determine what is meant by "concrete." Webster's New Twentieth
Century Dictionary of the English Language provides several meanings
for the word concrete. These include: "having a material, perceptible
existence; of, belonging to, or characterized by things or events that
can be perceived by the senses; real; actual;" and "referring to a
particular; specific, not general or abstract." 92
In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated, 93 this
court, citing the American case of Baker v. Selden, distinguished copyright
from patents and illustrated how an idea or concept is different from the
expression of that idea:
In the oft-cited case of Baker vs. Selden, the United States
Supreme Court held that only the expression of an idea is protected by
copyright, not the idea itself. In that case, the plaintiff held the copyright
of a book which expounded on a new accounting system he had
developed. The publication illustrated blank forms of ledgers utilized in
such a system. The defendant reproduced forms similar to those
illustrated in the plaintiff's copyrighted book. The US Supreme Court
ruled that:
"There is no doubt that a work on the subject of
book-keeping, though only explanatory of well known
systems, may be the subject of a copyright; but, then, it is
claimed only as a book. . . . But there is a clear distinction
between the books, as such, and the art, which it is,
intended to illustrate. The mere statement of the
proposition is so evident that it requires hardly any
argument to support it. The same distinction may be
predicated of every other art as well as that of
bookkeeping.
A treatise on the composition and use of medicines, be
they old or new; on the construction and use of ploughs
or watches or churns; or on the mixture and application of
colors for painting or dyeing; or on the mode of drawing
lines to produce the effect of perspective, would be the
subject of copyright; but no one would contend that the
copyright of the treatise would give the exclusive right to
the art or manufacture described therein. The copyright
of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its
subject matter. The novelty of the art or thing described
or explained has nothing to do with the validity of the
copyright. To give to the author of the book an exclusive
property in the art described therein, when no
examination of its novelty has ever been officially made,
would be a surprise and a fraud upon the public. That is
the province of letters patent, not of copyright. The claim
to an invention of discovery of an art or manufacture
must be subjected to the examination of the Patent Office
before an exclusive right therein can be obtained; and a
patent from the government can only secure it. HESIcT

The difference between the two things, letters

patent and copyright, may be illustrated by reference to
the subjects just enumerated. Take the case of
medicines. Certain mixtures are found to be of great
value in the healing art. If the discoverer writes and
publishes a book on the subject (as regular physicians
generally do), he gains no exclusive right to the
manufacture and sale of the medicine; he gives that to
the public. If he desires to acquire such exclusive right,
he must obtain a patent for the mixture as a new art,
manufacture or composition of matter. He may copyright
his book, if he pleases; but that only secures to him the
exclusive right of printing and publishing his book. So of
all other inventions or discoveries.
The copyright of a book on perspective, no matter
how many drawings and illustrations it may contain, gives
no exclusive right to the modes of drawing described,
though they may never have been known or used before.
By publishing the book without getting a patent for the
art, the latter is given to the public.
xxx xxx xxx
Now, whilst no one has a right to print or publish
his book, or any material part thereof, as a book intended
to convey instruction in the art, any person may practice
and use the art itself which he has described and
illustrated therein. The use of the art is a totally different
thing from a publication of the book explaining it. The
copyright of a book on bookkeeping cannot secure the
exclusive right to make, sell and use account books
prepared upon the plan set forth in such book. Whether
 the art might or might not have been patented, is a
question, which is not before us. It was not patented, and
is open and free to the use of the public. And, of course,
in using the art, the ruled lines and headings of accounts
must necessarily be used as incident to it.
The plausibility of the claim put forward by the
complainant in this case arises from a confusion of ideas
produced by the peculiar nature of the art described in
the books, which have been made the subject of
copyright. In describing the art, the illustrations and
diagrams employed happened to correspond more
closely than usual with the actual work performed by the
operator who uses the art. . . . The description of the art
in a book, though entitled to the benefit of copyright, lays
no foundation for an exclusive claim to the art itself. The
object of the one is explanation; the object of the other is
use. The former may be secured by copyright. The latter
can only be secured, if it can be secured at all, by letters
patent." 94 (Emphasis supplied)
News or the event itself is not copyrightable. However, an event can be
captured and presented in a specific medium. As recognized by this court
in Joaquin, television "involves a whole spectrum of visuals and effects, video
and audio." 95 News coverage in television involves framing shots, using
images, graphics, and sound effects. 96 It involves creative process and
originality. Television news footage is an expression of the news.
In the United States, a line of cases dwelt on the possibility of television
newscasts to be copyrighted. 97 Most of these cases focused on private
individuals' sale or resale of tapes of news broadcasts. Conflicting decisions
were rendered by its courts. Noteworthy, however, is the District Court's
pronouncement in Pacific & Southern Co. v. Duncan, 98which involves a News
Monitoring Service's videotaping and sale of WXIA-TV's news broadcasts:
It is axiomatic that copyright protection does not extend to
news "events" or the facts or ideas which are the subject of news
reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th
Cir. 1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp.,
558 F.2d 91, 95 (2d Cir. 1977), cert. denied, 434 U.S. 1014, 98 S.Ct.
730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that
copyright protection does extend to the reports themselves, as
distinguished from the substance of the information contained in
the reports. Wainwright, 558 F.2d at 95; International News Service v.
Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see
Chicago Record-Herald Co. v. Tribune Assn., 275 F. 797 (7th Cir.
1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright protects
the manner of expression of news reports, "the particular form or
 collocation of words in which the writer has communicated
it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70. Such
protection extends to electronic news reports as well as written
reports. See 17 U.S.C. § 102(a) (5), (6), and (7); see also Iowa State
University Research Foundations, Inc. v. American Broadcasting Cos.,
621 F.2d 57, 61 (2d Cir. 1980). 99 (Emphasis supplied)
The idea/expression dichotomy has long been subject to debate in the
field of copyright law. Abolishing the dichotomy has been proposed, in that
non-protectibility of ideas should be re-examined, if not stricken, from
decisions and the law:
If the underlying purpose of the copyright law is the dual one
expressed by Lord Mansfield, the only excuse for the continuance of
the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of
determining the proper balance between the creator's right to profit
from his work and the public's right that the "progress of the arts not be
retarded."
. . . [A]s used in the present-day context[,] the dichotomy has
little or no relationship to the policy which it should effectuate. Indeed,
all too often the sweeping language of the courts regarding the
nonprotectibility of ideas gives the impression that this is of itself a
policy of the law, instead of merely a clumsy and outdated tool to
achieve a much more basic end. 100
The idea/expression dichotomy is a complex matter if one is trying to
determine whether a certain material is a copy of another. 101 This dichotomy
would be more relevant in determining, for instance, whether a stage play was
an infringement of an author's book involving the same characters and setting.
In this case, however, respondents admitted that the material under review —
which is the subject of the controversy — is an exact copy of the original.
Respondents did not subject ABS-CBN's footage to any editing of their own.
The news footage did not undergo any transformation where there is a need
to track elements of the original.
Having established the protectible nature of news footage, we now
discuss the concomitant rights accorded to authors. The authors of a work are
granted several rights in relation to it, including copyright or economic
rights:
caITAC

SECTION 177. Copyright or Economic Rights. — Subject to the

provisions of Chapter VIII, copyright or economic rights shall consist of
the exclusive right to carry out, authorize or prevent the following acts:
177.1. Reproduction of the work or substantial portion of the work;
177.2. Dramatization, translation, adaptation, abridgment,
arrangement or other transformation of the work;
 177.3. The first public distribution of the original and each copy of
the work by sale or other forms of transfer of ownership;
177.4. Rental of the original or a copy of an audiovisual or
cinematographic work, a work embodied in a sound
recording, a computer program, a compilation of data and
other materials or a musical work in graphic form,
irrespective of the ownership of the original or the copy
which is the subject of the rental; (n)
177.5. Public display of the original or a copy of the work;
177.6. Public performance of the work; and
177.7. Other communication to the public of the work. (Sec. 5, P.
D. No. 49a) (Emphasis supplied)
Under Section 211 of the Intellectual Property Code, broadcasting
organizations are granted a more specific set of rights called related or
neighboring rights:
SECTION 211. Scope of Right. — Subject to the provisions of Section
212, broadcasting organizations shall enjoy the exclusive right to carry
out, authorize or prevent any of the following acts:
211.1. The rebroadcasting of their broadcasts;
211.2. The recording in any manner, including the making of films
or the use of video tape, of their broadcasts for the purpose
of communication to the public of television broadcasts of
the same; and
211.3. The use of such records for fresh transmissions or for fresh
recording. (Sec. 52, P.D. No. 49) (Emphasis supplied)
Section 212 of the Code provides:
CHAPTER XV
LIMITATIONS ON PROTECTION
Section 212. Limitations on Rights. — Sections 203, 208 and 209 shall
not apply where the acts referred to in those Sections are related to:
212.1. The use by a natural person exclusively for his own
personal purposes;
212.2. Using short excerpts for reporting current events;
212.3. Use solely for the purpose of teaching or for scientific
research; and
212.4. Fair use of the broadcast subject to the conditions under
Section 185. (Sec. 44, P.D. No. 49a)
The Code defines what broadcasting is and who broadcasting
organizations include:
 202.7. "Broadcasting" means the transmission by wireless means for
the public reception of sounds or of images or of representations
thereof; such transmission by satellite is also "broadcasting" where the
means for decrypting are provided to the public by the broadcasting
organization or with its consent;
202.8. "Broadcasting organization" shall include a natural person or a
juridical entity duly authorized to engage in broadcasting[.]
Developments in technology, including the process of preserving once
ephemeral works and disseminating them, resulted in the need to provide a
new kind of protection as distinguished from copyright. 102 The designation
"neighboring rights" was abbreviated from the phrase "rights neighboring to
copyright." 103 Neighboring or related rights are of equal importance with
copyright as established in the different conventions covering both kinds of
rights. 104
Several treaties deal with neighboring or related rights of
copyright. 105 The most prominent of these is the "International Convention for
the Protection of Performers, Producers of Phonograms and Broadcasting
Organizations" (Rome Convention). 106
The Rome Convention protects the rights of broadcasting organizations
in relation to their broadcasts. Article XIII of the Rome Convention enumerates
the minimum rights accorded to broadcasting organizations:
Article 13
Minimum Rights for Broadcasting Organizations
Broadcasting organizations shall enjoy the right to authorize or prohibit:
(a) the rebroadcasting of their broadcasts;
(b) the fixation of their broadcasts;
(c) the reproduction:
(i) of fixations, made without their consent, of their
broadcasts;
(ii) of fixations, made in accordance with the provisions of
Article 15, of their broadcasts, if the reproduction is
made for purposes different from those referred to in
those provisions;
(d) the communication to the public of their television broadcasts
if such communication is made in places accessible to the
public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of
this right is claimed to determine the conditions under
which it may be exercised.
 With regard to the neighboring rights of a broadcasting organization in
this jurisdiction, this court has discussed the difference between broadcasting
and rebroadcasting:
Section 202.7 of the IP Code defines broadcasting as "the
transmission by wireless means for the public reception of sounds or of
images or of representations thereof; such transmission by satellite is
also 'broadcasting' where the means for decrypting are provided to the
public by the broadcasting organization or with its consent."ICHDca

On the other hand, rebroadcasting as defined in Article 3(g) of

the International Convention for the Protection of Performers,
Producers of Phonograms and Broadcasting Organizations, otherwise
known as the 1961 Rome Convention, of which the Republic of the
Philippines is a signatory, is "the simultaneous broadcasting by one
broadcasting organization of the broadcast of another broadcasting
organization."
xxx xxx xxx
Under the Rome Convention, rebroadcasting is "the
simultaneous broadcasting by one broadcasting organization of the
broadcast of another broadcasting organization." The Working Paper
prepared by the Secretariat of the Standing Committee on Copyright
and Related Rights defines broadcasting organizations as "entities that
take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted
content." 107 (Emphasis in the original, citations omitted)
Broadcasting organizations are entitled to several rights and to the
protection of these rights under the Intellectual Property Code. Respondents'
argument that the subject news footage is not copyrightable is erroneous. The
Court of Appeals, in its assailed Decision, correctly recognized the existence
of ABS-CBN's copyright over the news footage:
Surely, private respondent has a copyright of its news coverage.
Seemingly, for airing said video feed, petitioner GMA is liable under the
provisions of the Intellectual PropertyCode, which was enacted
purposely to protect copyright owners from infringement. 108
News as expressed in a video footage is entitled to copyright protection.
Broadcasting organizations have not only copyright on but also neighboring
rights over their broadcasts. Copyrightability of a work is different from fair use
of a work for purposes of news reporting.
VI
ABS-CBN assails the Court of Appeals' ruling that the footage shown by
GMA-7 falls under the scope of Section 212.2 and 212.4 of the Intellectual
Property Code:
 The evidence on record, as well as the discussions above, show
that the footage used by [respondents] could hardly be characterized
as a short excerpt, as it was aired over one and a half minutes.
Furthermore, the footage used does not fall under the
contemplation of Section 212.2 of the Intellectual Property Code. A
plain reading of the provision would reveal that copyrighted material
referred to in Section 212 are short portions of an artist's performance
under Section 203, or a producer's sound recordings under Sections
208 and 209. Section 212 does not refer to actual use of video footage
of another as its own.
The Angelo dela Cruz footage does not fall under the rule on
Section 212.4 of the Intellectual Property Code on fair use of the
broadcast.
xxx xxx xxx
In determining fair use, several factors are considered, including
the nature of the copyrighted work, and the amount and substantiality
of the person used in relation to the copyrighted work as a whole.
In the business of television news reporting, the nature of the
copyrighted work or the video footages, are such that, footage created,
must be a novelty to be a good report. Thus, when the . . . Angelo dela
Cruz footage was used by [respondents], the novelty of the footage
was clearly affected.
Moreover, given that a substantial portion of the Angelo dela
Cruz footage was utilized by GMA-7 for its own, its use can hardly be
classified as fair use.
Hence, [respondents] could not be considered as having used
the Angelo dela Cruz [footage] following the provisions on fair use.
It is also worthy to note that the Honorable Court of Appeals
seem to contradict itself when it relied on the provisions of fair use in
its assailed rulings considering that it found that the Angelo dela Cruz
footage is not copyrightable, given that the fair use presupposes an
existing copyright. Thus, it is apparent that the findings of the
Honorable Court of Appeals are erroneous and based on wrong
assumptions. 109 (Underscoring in the original)
On the other hand, respondents counter that GMA-7's use of ABS-
CBN's news footage falls under fair use as defined in the Intellectual Property
Code. Respondents, citing the Court of Appeals Decision, argue that a strong
statutory defense negates any finding of probable cause under the same
statute. 110 The Intellectual Property Code provides that fair use negates
infringement.
 Respondents point out that upon seeing ABS-CBN's reporter Dindo
Amparo on the footage, GMA-7 immediately shut off the broadcast. Only five
(5) seconds passed before the footage was cut. They argue that this shows
that GMA-7 had no prior knowledge of ABS-CBN's ownership of the footage
or was notified of it. They claim that the Angelo dela Cruz footage is
considered a short excerpt of an event's "news" footage and is covered by fair
use. 111
Copyright protection is not absolute. 112 The Intellectual Property
Code provides the limitations on copyright:
CHAPTER VIII
LIMITATIONS ON COPYRIGHT
Section 184. Limitations on Copyright. — 184.1. Notwithstanding the
provisions of Chapter V, the following acts shall not constitute
infringement of copyright:
xxx xxx xxx
184.2. The provisions of this section shall be interpreted in such a way
as to allow the work to be used in a manner which does not conflict
with the normal exploitation of the work and does not unreasonably
prejudice the right holder's legitimate interests.
xxx xxx xxx
CHAPTER XVLIMITATIONS ON PROTECTION
Section 212. Limitations on Rights. — Sections 203, 208 and 209 shall
not apply where the acts referred to in those Sections are related to:
xxx xxx xxx
212.2. Using short excerpts for reporting current events;
xxx xxx xxx
212.4. Fair use of the broadcast subject to the conditions under Section
185. (Sec. 44, P.D. No. 49a) (Emphasis supplied)
The determination of what constitutes fair use depends on several
factors. Section 185 of the Intellectual Property Code states: TCAScE

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news
reporting, teaching including multiple copies for classroom use,
scholarship, research, and similar purposes is not an infringement of
copyright. . . . In determining whether the use made of a work in any
particular case is fair use, the factors to be considered shall include:
a. The purpose and character of the use, including whether such
use is of a commercial nature or is for non-profit
educational purposes;
 b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to
the copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of
the copyrighted work.
Respondents allege that the news footage was only five (5) seconds
long, thus falling under fair use. ABS-CBN belies this contention and argues
that the footage aired for two (2) minutes and 40 seconds. 113 According to the
Court of Appeals, the parties admitted that only five (5) seconds of the news
footage was broadcasted by GMA-7. 114
This court defined fair use as "a privilege to use the copyrighted
material in a reasonable manner without the consent of the copyright owner or
as copying the theme or ideas rather than their expression." 115 Fair use is an
exception to the copyright owner's monopoly of the use of the work to avoid
stifling "the very creativity which that law is designed to foster." 116
Determining fair use requires application of the four-factor test. Section
185 of the Intellectual Property Code lists four (4) factors to determine if there
was fair use of a copyrighted work:
a. The purpose and character of the use, including whether such use is
of a commercial nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the
copyrighted work.
First, the purpose and character of the use of the copyrighted material
must fall under those listed in Section 185, thus: "criticism, comment, news
reporting, teaching including multiple copies for classroom use, scholarship,
research, and similar purposes." 117 The purpose and character requirement
is important in view of copyright's goal to promote creativity and encourage
creation of works. Hence, commercial use of the copyrighted work can be
weighed against fair use.
The "transformative test" is generally used in reviewing the purpose and
character of the usage of the copyrighted work. 118 This court must look into
whether the copy of the work adds "new expression, meaning or message" to
transform it into something else. 119 "Meta-use" can also occur without
necessarily transforming the copyrighted work used. 120
 Second, the nature of the copyrighted work is significant in deciding
whether its use was fair. If the nature of the work is more factual than creative,
then fair use will be weighed in favor of the user.
Third, the amount and substantiality of the portion used is important to
determine whether usage falls under fair use. An exact reproduction of a
copyrighted work, compared to a small portion of it, can result in the
conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose
determines that the usage is still fair. 121 For example, a parody using a
substantial amount of copyrighted work may be permissible as fair use as
opposed to a copy of a work produced purely for economic gain.
Lastly, the effect of the use on the copyrighted work's market is also
weighed for or against the user. If this court finds that the use had or will have
a negative impact on the copyrighted work's market, then the use is deemed
unfair.
The structure and nature of broadcasting as a business requires
assigned values for each second of broadcast or airtime. In most cases,
broadcasting organizations generate revenue through sale of time or timeslots
to advertisers, which, in turn, is based on market share: 122
Once a news broadcast has been transmitted, the broadcast
becomes relatively worthless to the station. In the case of the aerial
broadcasters, advertising sales generate most of the profits derived
from news reports. Advertising rates are, in turn, governed by market
share. Market share is determined by the number of people watching a
show at any particular time, relative to total viewers at that time. News
is by nature time-limited, and so re-broadcasts are generally of little
worth because they draw few viewers. Newscasts compete for market
share by presenting their news in an appealing format that will capture
a loyal audience. Hence, the primary reason for copyrighting
newscasts by broadcasters would seem to be to prevent competing
stations from rebroadcasting current news from the station with the
best coverage of a particular news item, thus misappropriating a
portion of the market share.
Of course, in the real world there are exceptions to this perfect
economic view. However, there are also many caveats with these
exceptions. A common exception is that some stations rebroadcast the
news of others. The caveat is that generally, the two stations are not
competing for market share. CNN, for example, often makes news
stories available to local broadcasters. First, the local broadcaster is
often not affiliated with a network (hence its need for more
comprehensive programming), confining any possible competition to a
small geographical area. Second, the local broadcaster is not in
competition with CNN. Individuals who do not have cable TV (or a
 satellite dish with decoder) cannot receive CNN; therefore there is no
competition. . . . Third, CNN sells the right of rebroadcast to the local
stations. Ted Turner, owner of CNN, does not have First Amendment
freedom of access argument foremost on his mind. (Else he would give
everyone free cable TV so everyone could get CNN.) He is in the
business for a profit. Giving away resources does not a profit
make. 123 (Emphasis supplied)
The high value afforded to limited time periods is also seen in other
media. In social media site Instagram, users are allowed to post up to only 15
seconds of video. 124 In short-video sharing website Vine, 125 users are
allowed a shorter period of six (6) seconds per post. The mobile application 1
Second Everyday takes it further by capturing and stitching one (1) second of
video footage taken daily over a span of a certain period. 126
Whether the alleged five-second footage may be considered fair use is
a matter of defense. We emphasize that the case involves determination of
probable cause at the preliminary investigation stage. Raising the defense of
fair use does not automatically mean that no infringement was committed.
The investigating prosecutor has full discretion to evaluate the facts,
allegations, and evidence during preliminary investigation. Defenses raised
during preliminary investigation are subject to further proof and evaluation
before the trial court. Given the insufficiency of available evidence,
determination of whether the Angelo dela Cruz footage is subject to fair use is
better left to the trial court where the proceedings are currently pending.
GMA-7's rebroadcast of ABS-CBN's news footage without the latter's
consent is not an issue. The mere act of rebroadcasting without authority from
the owner of the broadcast gives rise to the probability that a crime was
committed under the Intellectual Property Code. cTDaEH

VII
Respondents cannot invoke the defense of good faith to argue that no
probable cause exists.
Respondents argue that copyright infringement is malum in se, in that
"[c]opying alone is not what is being prohibited, but its injurious effect which
consists in the lifting from the copyright owners' film or materials, that were the
result of the latter's creativity, work and productions and without authority,
reproduced, sold and circulated for commercial use to the detriment of the
latter." 127
Infringement under the Intellectual Property Code is malum prohibitum.
The Intellectual Property Code is a special law. Copyright is a statutory
creation:
 Copyright, in the strict sense of the term, is purely a statutory
right. It is a new or independent right granted by the statute, and not
simply a pre-existing right regulated by the statute. Being a statutory
grant, the rights are only such as the statute confers, and may be
obtained and enjoyed only with respect to the subjects and by the
persons, and on terms and conditions specified in the statute. 128
The general rule is that acts punished under a special law are malum
prohibitum. 129 "An act which is declared malum prohibitum, malice or criminal
intent is completely immaterial." 130
In contrast, crimes mala in se concern inherently immoral acts:
Not every criminal act, however, involves moral turpitude. It is
for this reason that "as to what crime involves moral turpitude, is for the
Supreme Court to determine". In resolving the foregoing question, the
Court is guided by one of the general rules that crimes mala in
se involve moral turpitude, while crimes mala prohibita do not, the
rationale of which was set forth in "Zari v. Flores," to wit:
It (moral turpitude) implies something immoral in
itself, regardless of the fact that it is punishable by law or
not. It must not be merely mala prohibita, but the act itself
must be inherently immoral. The doing of the act itself,
and not its prohibition by statute fixes the moral turpitude.
Moral turpitude does not, however, include such acts as
are not of themselves immoral but whose illegality lies in
their being positively prohibited. (Emphasis supplied)
[These] guidelines nonetheless proved short of providing a
clear-cut solution, for in International Rice Research Institute v. NLRC,
the Court admitted that it cannot always be ascertained whether moral
turpitude does or does not exist by merely classifying a crime
as malum in se or as malum prohibitum. There are crimes which
are mala in se and yet but rarely involve moral turpitude and there are
crimes which involve moral turpitude and are mala prohibita only. In
the final analysis, whether or not a crime involves moral turpitude is
ultimately a question of fact and frequently depends on all the
circumstances surrounding the violation of the statue. 131 (Emphasis in
the original)
"Implicit in the concept of mala in se is that of mens rea." 132 Mens
rea is defined as "the nonphysical element which, combined with the act of the
accused, makes up the crime charged. Most frequently it is the criminal intent,
or the guilty mind[.]" 133
Crimes mala in se presuppose that the person who did the felonious act
had criminal intent to do so, while crimes mala prohibita do not require
knowledge or criminal intent:
 In the case of mala in se it is necessary, to constitute a
punishable offense, for the person doing the act to have knowledge of
the nature of his act and to have a criminal intent; in the case of mala
prohibita, unless such words as "knowingly" and "willfully" are
contained in the statute, neither knowledge nor criminal intent is
necessary. In other words, a person morally quite innocent and with
every intention of being a law-abiding citizen becomes a criminal, and
liable to criminal penalties, if he does an act prohibited by these
statutes. 134 (Emphasis supplied)
Hence, "[i]ntent to commit the crime and intent to perpetrate the act
must be distinguished. A person may not have consciously intended to
commit a crime; but he did intend to commit an act, and that act is, by the very
nature of things, the crime itself[.]" 135 When an act is prohibited by a special
law, it is considered injurious to public welfare, and the performance of the
prohibited act is the crime itself. 136
Volition, or intent to commit the act, is different from criminal intent.
Volition or voluntariness refers to knowledge of the act being done. On the
other hand, criminal intent — which is different from motive, or the moving
power for the commission of the crime 137 — refers to the state of mind
beyond voluntariness. It is this intent that is being punished by crimes mala in
se.
Unlike other jurisdictions that require intent for a criminal prosecution of
copyright infringement, the Philippines does not statutorily support good faith
as a defense. Other jurisdictions provide in their intellectual property codes or
relevant laws that mens rea, whether express or implied, is an element of
criminal copyright infringement. 138
In Canada, criminal offenses are categorized under three (3) kinds: "the
full mens rea offence, meaning the accused's actual or subjective state of
mind has to be proved;strict liability offences where no mens rea has to be
proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and]absolute liability
offences where Parliament has made it clear that guilt follows proof of the
prescribed act only." 139 Because of the use of the word "knowingly" in
Canada's Copyright Act, it has been held that copyright infringement is a
full mens rea offense. 140
In the United States, willful intent is required for criminal copyright
infringement. 141 Before the passage of the No Electronic Theft Act, "civil
copyright infringements were violations of criminal copyright laws only if a
defendant willfully infringed a copyright 'for purposes of commercial
advantage or private financial gain.'" 142 However, the No Electronic Theft Act
now allows criminal copyright infringement without the requirement of
commercial gain. The infringing act may or may not be for profit. 143
 There is a difference, however, between the required liability in civil
copyright infringement and that in criminal copyright infringement in the United
States. Civil copyright infringement does not require culpability and employs a
strict liability regime 144 where "lack of intention to infringe is not a defense to
an action for infringement." 145
In the Philippines, the Intellectual Property Code, as amended, provides
for the prosecution of criminal actions for the following violations of intellectual
property rights: Repetition of Infringement of Patent (Section 84); Utility Model
(Section 108); Industrial Design (Section 119); Trademark Infringement
(Section 155 in relation to Section 170); Unfair Competition (Section 168 in
relation to Section 170); False Designations of Origin, False Description or
Representation (Section 169.1 in relation to Section 170); infringement of
copyright, moral rights, performers' rights, producers' rights, and broadcasting
rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and
other violations of intellectual property rights as may be defined by law.
The Intellectual Property Code requires strict liability for copyright
infringement whether for a civil action or a criminal prosecution; it does not
require mens rea or culpa: 146
SECTION 216. Remedies for Infringement. —
216.1. Any person infringing a right protected under this law shall be
liable:
a. To an injunction restraining such infringement. The court may
also order the defendant to desist from an infringement,
among others, to prevent the entry into the channels of
commerce of imported goods that involve an infringement,
immediately after customs clearance of such goods.
b. Pay to the copyright proprietor or his assigns or heirs such
actual damages, including legal costs and other expenses,
as he may have incurred due to the infringement as well as
the profits the infringer may have made due to such
infringement, and in proving profits the plaintiff shall be
required to prove sales only and the defendant shall be
required to prove every element of cost which he claims,
or, in lieu of actual damages and profits, such damages
which to the court shall appear to be just and shall not be
regarded as penalty. cSaATC

c. Deliver under oath, for impounding during the pendency of the

action, upon such terms and conditions as the court may
prescribe, sales invoices and other documents evidencing
sales, all articles and their packaging alleged to infringe a
copyright and implements for making them.
 d. Deliver under oath for destruction without any compensation all
infringing copies or devices, as well as all plates, molds, or
other means for making such infringing copies as the court
may order.
e. Such other terms and conditions, including the payment of
moral and exemplary damages, which the court may deem
proper, wise and equitable and the destruction of infringing
copies of the work even in the event of acquittal in a
criminal case.
216.2. In an infringement action, the court shall also have the power to
order the seizure and impounding of any article which may serve as
evidence in the court proceedings. (Sec. 28, P.D. No. 49a)
SECTION 217. Criminal Penalties. —
217.1. Any person infringing any right secured by provisions of Part IV
of this Act or aiding or abetting such infringement shall be guilty of a
crime punishable by:
a. Imprisonment of one (1) year to three (3) years plus a fine
ranging from Fifty thousand pesos (P50,000) to One
hundred fifty thousand pesos (P150,000) for the first
offense.
b. Imprisonment of three (3) years and one (1) day to six (6) years
plus a fine ranging from One hundred fifty thousand pesos
(P150,000) to Five hundred thousand pesos (P500,000) for
the second offense.
c. Imprisonment of six (6) years and one (1) day to nine (9) years
plus a fine ranging from Five hundred thousand pesos
(P500,000) to One million five hundred thousand pesos
(P1,500,000) for the third and subsequent offenses.
d. In all cases, subsidiary imprisonment in cases of insolvency.
217.2. In determining the number of years of imprisonment and the
amount of fine, the court shall consider the value of the infringing
materials that the defendant has produced or manufactured and the
damage that the copyright owner has suffered by reason of the
infringement.
217.3. Any person who at the time when copyright subsists in a work
has in his possession an article which he knows, or ought to know, to
be an infringing copy of the work for the purpose of:
a. Selling, letting for hire, or by way of trade offering or exposing
for sale, or hire, the article;
b. Distributing the article for purpose of trade, or for any other
purpose to an extent that will prejudice the rights of the
copyright owner in the work; or
 c. Trade exhibit of the article in public, shall be guilty of an offense
and shall be liable on conviction to imprisonment and fine
as above mentioned. (Sec. 29, P.D. No. 49a) (Emphasis
supplied)
The law is clear. Inasmuch as there is wisdom in prioritizing the flow
and exchange of ideas as opposed to rewarding the creator, it is the plain
reading of the law in conjunction with the actions of the legislature to which we
defer. We have continuously "recognized the power of the legislature . . . to
forbid certain acts in a limited class of cases and to make their commission
criminal without regard to the intent of the doer. Such legislative enactments
are based on the experience that repressive measures which depend for their
efficiency upon proof of the dealer's knowledge or of his intent are of little use
and rarely accomplish their purposes." 147
Respondents argue that live broadcast of news requires a different
treatment in terms of good faith, intent, and knowledge to commit
infringement. To argue this point, they rely on the differences of the media
used in Habana, et al. v. Robles, Columbia Pictures v. Court of Appeals, and
this case:
Petitioner ABS-CBN argues that lack of notice that the Angelo
dela Cruz was under embargo is not a defense in copyright
infringement and cites the case of Columbia Pictures vs. Court of
Appeals and Habana, et al. vs. Robles (310 SCRA 511). However,
these cases refer to film and literary work where obviously there is
"copying" from an existing material so that the copier knew that he is
copying from an existing material not owned by him. But, how could
respondents know that what they are "copying was not [theirs]"
when they were not copying but merely receiving live video feed from
Reuters and CNN which they aired? What they knew and what they
aired was the Reuters live video feed and the CNN feed which GMA-
7 is authorized to carry in its news broadcast, it being a subscriber of
these companies[.]
It is apt to stress that the subject of the alleged copyright
infringement is not a film or literary work but live broadcast of news
footage. In a film or literary work, the infringer is confronted face to
face with the material he is allegedly copying and therefore knows, or
is presumed to know, that what he is copying is owned by another.
Upon the other hand, in live broadcast, the alleged infringer
is not confronted with the fact that the material he airs or re-broadcasts
is owned by another, and therefore, he cannot be charged of
knowledge of ownership of the material by another. This specially
obtains in the Angelo dela Cruz news footage which GMA-7 received
from Reuters and CNN. Reuters and CNN were beaming live videos
from the coverage which GMA-7 received as a subscriber and, in the
exercise of its rights as a subscriber, GMA-7 picked up the live video
 and simultaneously re-broadcast it. In simultaneously broadcasting the
live video footage of Reuters, GMA-7 did not copy the video footage of
petitioner ABS-CBN[.] 148(Emphasis in the original)
Respondents' arguments must fail.
Respondents are involved and experienced in the broadcasting
business. They knew that there would be consequences in carrying ABS-
CBN's footage in their broadcast. That is why GMA-7 allegedly cut the feed
from Reuters upon seeing ABS-CBN's logo and reporter. To admit a different
treatment for broadcasts would mean abandonment of a broadcasting
organization's minimum rights, including copyright on the broadcast material
and the right against unauthorized rebroadcast of copyrighted material. The
nature of broadcast technology is precisely why related or neighboring rights
were created and developed. Carving out an exception for live broadcasts
would go against our commitments under relevant international treaties and
agreements, which provide for the same minimum rights. 149
Contrary to respondents' assertion, this court in Habana, 150 reiterating
the ruling in Columbia Pictures, 151 ruled that lack of knowledge of
infringement is not a valid defense. Habana and Columbia Pictures may have
different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and
copyright owners of English textbooks and workbooks. The case was
anchored on the protection of literary and artistic creations such as books.
In Columbia Pictures, video tapes of copyrighted films were the subject of the
copyright infringement suit.
In Habana, knowledge of the infringement is presumed when the
infringer commits the prohibited act:
The essence of intellectual piracy should be essayed in
conceptual terms in order to underscore its gravity by an appropriate
understanding thereof. Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright,
and, therefore, protected by law, and infringement of copyright, or
piracy, which is a synonymous term in this connection, consists in the
doing by any person, without the consent of the owner of the copyright,
of anything the sole right to do which is conferred by statute on the
owner of the copyright.
xxx xxx xxx
A copy of a piracy is an infringement of the original, and it is no
defense that the pirate, in such cases, did not know whether or not he
was infringing any copyright; he at least knew that what he was
copying was not his, and he copied at his peril.
xxx xxx xxx
 In cases of infringement, copying alone is not what is prohibited.
The copying must produce an "injurious effect". Here, the injury
consists in that respondent Robles lifted from petitioners' book
materials that were the result of the latter's research work and
compilation and misrepresented them as her own. She circulated the
book DEP for commercial use and did not acknowledge petitioners as
her source. 152 (Emphasis supplied)
Habana and Columbia Pictures did not require knowledge of the
infringement to constitute a violation of the copyright. One does not need to
know that he or she is copying a work without consent to violate copyright law.
Notice of fact of the embargo from Reuters or CNN is not material to find
probable cause that respondents committed infringement. Knowledge of
infringement is only material when the person is charged of aiding and
abetting a copyright infringement under Section 217 of the Intellectual
Property Code. 153
We look at the purpose of copyright in relation to criminal prosecutions
requiring willfulness:
Most importantly, in defining the contours of what it means to
willfully infringe copyright for purposes of criminal liability, the courts
should remember the ultimate aim of copyright. Copyright is not
primarily about providing the strongest possible protection for copyright
owners so that they have the highest possible incentive to create more
works. The control given to copyright owners is only a means to an
end: the promotion of knowledge and learning. Achieving that
underlying goal of copyright law also requires access to copyrighted
works and it requires permitting certain kinds of uses of copyrighted
works without the permission of the copyright owner. While a particular
defendant may appear to be deserving of criminal sanctions, the
standard for determining willfulness should be set with reference to the
larger goals of copyright embodied in the Constitution and the history
of copyright in this country. 154
In addition, "[t]he essence of intellectual piracy should be essayed in
conceptual terms in order to underscore its gravity by an appropriate
understanding thereof. Infringement of a copyright is a trespass on a private
domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a
synonymous term in this connection, consists in the doing by any person,
without the consent of the owner of the copyright, of anything the sole right to
do which is conferred by statute on the owner of the copyright." 155
Intellectual property rights, such as copyright and the neighboring right
against rebroadcasting, establish an artificial and limited monopoly to reward
creativity. Without these legally enforceable rights, creators will have extreme
difficulty recovering their costs and capturing the surplus or profit of their
works as reflected in their markets. This, in turn, is based on the theory that
the possibility of gain due to creative work creates an incentive which may
improve efficiency or simply enhance consumer welfare or utility. More
creativity redounds to the public good.
These, however, depend on the certainty of enforcement. Creativity, by
its very nature, is vulnerable to the free rider problem. It is easily replicated
despite the costs to and efforts of the original creator. The more useful the
creation is in the market, the greater the propensity that it will be copied. The
most creative and inventive individuals are usually those who are unable to
recover on their creations.
Arguments against strict liability presuppose that the Philippines has a
social, historical, and economic climate similar to those of Western
jurisdictions. As it stands, there is a current need to strengthen intellectual
property protection.
Thus, unless clearly provided in the law, offenses involving infringement
of copyright protections should be considered malum prohibitum. It is the act
of infringement, not the intent, which causes the damage. To require or
assume the need to prove intent defeats the purpose of intellectual property
protection.
Nevertheless, proof beyond reasonable doubt is still the standard for
criminal prosecutions under the Intellectual Property Code.
VIII
Respondents argue that GMA-7's officers and employees cannot be
held liable for infringement under the Intellectual Property Code since it does
not expressly provide direct liability of the corporate officers. They explain that
"(i) a corporation may be charged and prosecuted for a crime where the
penalty is fine or both imprisonment and fine, and if found guilty, may
be fined; or (ii) a corporation may commit a crime but if the statute prescribes
the penalty therefore to be suffered by the corporate officers, directors or
employees or other persons, the latter shall be responsible for the
offense." 156EATCcI

Section 217 of the Intellectual Property Code states that "any person"
may be found guilty of infringement. It also imposes the penalty of both
imprisonment and fine:
Section 217. Criminal Penalties. — 217.1. Any person infringing any
right secured by provisions of Part IV of this Act or aiding or abetting
such infringement shall be guilty of a crime punishable by:
(a) Imprisonment of one (1) year to three (3) years plus a fine
ranging from Fifty thousand pesos (P50,000) to One
 hundred fifty thousand pesos (P150,000) for the first
offense.
(b) Imprisonment of three (3) years and one (1) day to six (6)
years plus a fine ranging from One hundred fifty thousand
pesos (P150,000) to Five hundred thousand pesos
(P500,000) for the second offense.
(c) Imprisonment of six (6) years and one (1) day to nine (9) years
plus a fine ranging from five hundred thousand pesos
(P500,000) to One million five hundred thousand pesos
(P1,500,000) for the third and subsequent offenses.
(d) In all cases, subsidiary imprisonment in cases of insolvency.
(Emphasis supplied)
Corporations have separate and distinct personalities from their officers
or directors. 157 This court has ruled that corporate officers and/or agents may
be held individually liable for a crime committed under the Intellectual Property
Code: 158
Petitioners, being corporate officers and/or directors, through whose
act, default or omission the corporation commits a crime, may
themselves be individually held answerable for the crime. . . . The
existence of the corporate entity does not shield from prosecution the
corporate agent who knowingly and intentionally caused the
corporation to commit a crime. Thus, petitioners cannot hide behind
the cloak of the separate corporate personality of the corporation to
escape criminal liability. A corporate officer cannot protect himself
behind a corporation where he is the actual, present and efficient
actor. 159
However, the criminal liability of a corporation's officers or employees
stems from their active participation in the commission of the wrongful act:
The principle applies whether or not the crime requires the
consciousness of wrongdoing. It applies to those corporate agents who
themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could
be deemed responsible for its commission, if by virtue of their
relationship to the corporation, they had the power to prevent the act.
Moreover, all parties active in promoting a crime, whether agents or
not, are principals. Whether such officers or employees are benefited
by their delictual acts is not a touchstone of their criminal liability.
Benefit is not an operative fact. 160 (Emphasis supplied)
An accused's participation in criminal acts involving violations of
intellectual property rights is the subject of allegation and proof. The showing
that the accused did the acts or contributed in a meaningful way in the
commission of the infringements is certainly different from the argument of
lack of intent or good faith. Active participation requires a showing of overt
physical acts or intention to commit such acts. Intent or good faith, on the
other hand, are inferences from acts proven to have been or not been
committed.
We find that the Department of Justice committed grave abuse of
discretion when it resolved to file the Information against respondents despite
lack of proof of their actual participation in the alleged crime.
Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit,
Jr., Executive Vice-President; Flores, Vice-President for News and Public
Affairs; and Soho, Director for News, as respondents, Secretary Agra
overturned the City Prosecutor's finding that only respondents Dela Peña-
Reyes and Manalastas are responsible for the crime charged due to their
duties. 161 The Agra Resolution reads:
Thus, from the very nature of the offense and the penalty
involved, it is necessary that GMA-7's directors, officers, employees or
other officers thereof responsible for the offense shall be charged and
penalized for violation of the Sections 177 and 211 of Republic Act No.
8293. In their complaint for libel, respondents Felipe L. Gozon, Gilberto
R. Duavit, Jr., Marissa L. Flores, Jessica A. Soho, Grace Dela Peña-
Reyes, John Oliver T. Manalastas felt they were aggrieved because
they were "in charge of the management, operations and production of
news and public affairs programs of the network" (GMA-7). This is
clearly an admission on respondents' part. Of course, respondents
may argue they have no intention to infringe the copyright of ABS-
CBN; that they acted in good faith; and that they did not directly cause
the airing of the subject footage, but again this is preliminary
investigation and what is required is simply probable cause. Besides,
these contentions can best be addressed in the course of
trial. 162 (Citation omitted)
In contrast, the Office of the City Prosecutor, in the Resolution dated
December 3, 2004, found that respondents Gozon, Duavit, Jr., Flores, and
Soho did not have active participation in the commission of the crime charged:
This Office, however, does not subscribe to the view that
respondents Atty. Felipe Gozon, Gilberto Duavit, Marissa Flores and
Jessica Soho should be held liable for the said offense. Complainant
failed to present clear and convincing evidence that the said
respondents conspired with Reyes and Manalastas. No evidence was
adduced to prove that these respondents had an active participation in
the actual commission of the copyright infringement or they exercised
their moral ascendancy over Reyes and Manalastas in airing the said
footage. It must be stressed that, conspiracy must be established by
positive and conclusive evidence. It must be shown to exist as clearly
 and convincingly as the commission of the offense itself. 163 (Emphasis
supplied, citations omitted)
The City Prosecutor found respondents Dela Peña-Reyes and
Manalastas liable due to the nature of their work and responsibilities. He
found that:
[t]his Office however finds respondents Grace Dela Peña-Reyes
and John Oliver T. Manalastas liable for copyright infringement
penalized under Republic Act No. 8293. It is undisputed that
complainant ABS-CBN holds the exclusive ownership and copyright
over the "Angelo [d]ela Cruz news footage". Hence, any airing and re-
broadcast of the said footage without any consent and authority from
ABS-CBN will be held as an infringement and violation of the
intellectual property rights of the latter. Respondents Grace Dela Peña-
Reyes as the Head of the News Operation and John Oliver T.
Manalastas as the Program Manager cannot escape liability since the
news control room was under their direct control and supervision.
Clearly, they must have been aware that the said footage coming from
Reuters or CNN has a "No Access Philippines" advisory or embargo
thus cannot be re-broadcast. We find no merit to the defense of
ignorance interposed by the respondents. It is simply contrary to
human experience and logic that experienced employees of an
established broadcasting network would be remiss in their duty in
ascertaining if the said footage has an embargo. 164 (Emphasis
supplied)
We agree with the findings as to respondents Dela Peña-Reyes and
Manalastas. Both respondents committed acts that promoted infringement of
ABS-CBN's footage. We note that embargoes are common occurrences in
and between news agencies and/or broadcast organizations. 165 Under its
Operations Guide, Reuters has two (2) types of embargoes: transmission
embargo and publication embargo. 166 Under ABS-CBN's service contract
with Reuters, Reuters will embargo any content contributed by ABS-CBN from
other broadcast subscribers within the same geographical location:
4a. Contributed Content
You agree to supply us at our request with news and sports news
stories broadcast on the Client Service of up to three (3) minutes each
for use in our Services on a non-exclusive basis and at a cost of
US$300.00 (Three Hundred United States Dollars) per story. In respect
of such items we agree to embargo them against use by other
broadcast subscribers in the Territory and confirm we will observe all
other conditions of usage regarding Contributed Content, as specified
in Section 2.5 of the Reuters Business Principles for Television
Services. For the purposes of clarification, any geographical restriction
imposed by you on your use of Contributed Content will not prevent us
 or our clients from including such Contributed Content in online
transmission services including the Internet. We acknowledge
Contributed Content is your copyright and we will not acquire any
intellectual property rights in the Contributed Content. 167 (Emphasis
supplied) DHITCc

Respondents Dela Peña-Reyes and Manalastas merely denied

receiving the advisory sent by Reuters to its clients, including GMA-7. As in
the records, the advisory reads:
ADVISORY - - +++ LIVE COVER PLANS +++
PHILIPPINES: HOSTAGE RETURN
** ATTENTION ALL CLIENTS **
PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER
PLANNED FOR THURSDAY, JULY 22:
xxx xxx xxx
SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES. 168
There is probable cause that respondents Dela Peña-Reyes and
Manalastas directly committed copyright infringement of ABS-CBN's news
footage to warrant piercing of the corporate veil. They are responsible in airing
the embargoed Angelo dela Cruz footage. They could have prevented the act
of infringement had they been diligent in their functions as Head of News
Operations and Program Manager.
Secretary Agra, however, committed grave abuse of discretion when he
ordered the filing of the Information against all respondents despite the
erroneous piercing of the corporate veil. Respondents Gozon, Duavit, Jr.,
Flores, and Soho cannot be held liable for the criminal liability of the
corporation.
Mere membership in the Board or being President per se does not
mean knowledge, approval, and participation in the act alleged as criminal.
There must be a showing of active participation, not simply a constructive
one.
Under principles of criminal law, the principals of a crime are those
"who take a direct part in the execution of the act; [t]hose who directly force or
induce others to commit it; [or] [t]hose who cooperate in the commission of the
offense by another act without which it would not have been
accomplished." 169 There is conspiracy "when two or more persons come to
an agreement concerning the commission of a felony and decide to commit
it": 170
 Conspiracy is not presumed. Like the physical acts constituting the
crime itself, the elements of conspiracy must be proven beyond
reasonable doubt. While conspiracy need not be established by direct
evidence, for it may be inferred from the conduct of the accused
before, during and after the commission of the crime, all taken
together, however, the evidence must be strong enough to show the
community of criminal design. For conspiracy to exist, it is essential
that there must be a conscious design to commit an offense.
Conspiracy is the product of intentionality on the part of the cohorts.
It is necessary that a conspirator should have performed some
overt act as a direct or indirect contribution to the execution of the
crime committed. The overt act may consist of active participation in
the actual commission of the crime itself, or it may consist of moral
assistance to his co-conspirators by being present at the commission
of the crime or by exerting moral ascendancy over the other co-
conspirators[.] 171 (Emphasis supplied, citations omitted)
In sum, the trial court erred in failing to resume the proceedings after
the designated period. The Court of Appeals erred when it held that Secretary
Agra committed errors of jurisdiction despite its own pronouncement that
ABS-CBN is the owner of the copyright on the news footage. News should be
differentiated from expression of the news, particularly when the issue
involves rebroadcast of news footage. The Court of Appeals also erroneously
held that good faith, as well as lack of knowledge of infringement, is a defense
against criminal prosecution for copyright and neighboring rights infringement.
In its current form, the Intellectual Property Code is malum prohibitum and
prescribes a strict liability for copyright infringement. Good faith, lack of
knowledge of the copyright, or lack of intent to infringe is not a defense
against copyright infringement. Copyright, however, is subject to the rules of
fair use and will be judged on a case-to-case basis. Finding probable cause
includes a determination of the defendant's active participation, particularly
when the corporate veil is pierced in cases involving a corporation's criminal
liability.
WHEREFORE, the Petition is partially GRANTED. The Department of
Justice Resolution dated June 29, 2010 ordering the filing of the Information is
hereby REINSTATED as to respondents Grace Dela Peña-Reyes and John
Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon City is
directed to continue with the proceedings in Criminal Case No. Q-04-131533.
SO ORDERED.
Carpio, Brion, Del Castillo and Mendoza, JJ., concur.
(ABS-CBN Corp. v. Gozon, G.R. No. 195956 , [March 11, 2015], 755 PHIL 709-
|||

782)
 FIRST DIVISION

[G.R. No. 166391. October 21, 2015.]

MICROSOFT CORPORATION, petitioner, vs. ROLANDO D.

MANANSALA and/or MEL MANANSALA, doing business as
DATAMAN TRADING COMPANY and/or COMIC
ALLEY, respondent.

DECISION

BERSAMIN, J : p

This appeal seeks to overturn the decision promulgated on February

27, 2004, 1 whereby the Court of Appeals (CA) dismissed the petition
for certiorari filed by petitioner to annul the orders of the Department of Justice
(DOJ) dated March 20, 2000, 2 May 15, 2001, 3 and January 27,
2003 4 dismissing the criminal charge of violation of Section 29 of Presidential
Decree No. 49 (Decree on Intellectual Property) it had instituted against the
respondents; and the resolution promulgated on December 6, 2004 denying
its motion for reconsideration. 5
Antecedents
The CA summarized the factual and procedural antecedents thusly:
Petitioner (Microsoft Corporation) is the copyright and trademark
owner of all rights relating to all versions and editions of Microsoft
software (computer programs) such as, but not limited to, MS-DOS
(disk operating system), Microsoft Encarta, Microsoft Windows,
Microsoft Word, Microsoft Excel, Microsoft Access, Microsoft Works,
Microsoft Powerpoint, Microsoft Office, Microsoft Flight Simulator and
Microsoft FoxPro, among others, and their user's guide/manuals.
Private Respondent-Rolando Manansala is doing business
under the name of DATAMAN TRADING COMPANY and/or COMIC
ALLEY with business address at 3rd Floor, University Mall Building,
Taft Ave., Manila.
Private Respondent Manansala, without authority from
petitioner, was engaged in distributing and selling Microsoft computer
software programs. aDSIHc

On November 3, 1997, Mr. John Benedict A. Sacriz, a private

investigator accompanied by an agent from the National Bureau of
 Investigation (NBI) was able to purchase six (6) CD-ROMs containing
various computer programs belonging to petitioner.
As a result of the test-purchase, the agent from the NBI applied
for a search warrant to search the premises of the private respondent.
On November 17, 1997, a Search Warrant was issued against
the premises of the private respondent.
On November 19, 1997, the search warrant was served on the
private respondent's premises and yielded several illegal copies of
Microsoft programs.
Subsequently, petitioner, through Atty. Teodoro Kalaw IV filed
an Affidavit-Complaint in the DOJ based on the results of the search
and seizure operation conducted on private respondent's premises.
However, in a Resolution dated March 20, 2000, public
respondent State Prosecutor dismissed the charge against private
respondent for violation of Section 29 P.D. 49 in this wise, to quote:
'The evidence is extant in the records to show that
respondent is selling Microsoft computer software
programs bearing the copyrights and trademarks owned
by Microsoft Corporation. There is, however, no proof
that respondent was the one who really printed or copied
the products of complainant for sale in his store.
WHEREFORE, it is hereby, recommended that
respondent be charged for violation of Article 189 of the
Revised Penal Code. The charge for violation of Section
29 of PD No. 49 is recommended dismissed for lack of
evidence.'
Petitioner filed a Motion for Partial Reconsideration arguing that
printing or copying is not essential in the crime of copyright
infringement under Section 29 of PD No. 49.
On May 15, 2001, the public respondent issued a Resolution
denying the Motion for Partial Reconsideration.
Thereafter, petitioner filed a Petition for Review with the DOJ,
which denied the petition for review. 6
Dissatisfied with the outcome of its appeal, the petitioner filed its
petition for certiorari in the CA to annul the DOJ's dismissal of its petition for
review on the ground of grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the DOJ.
On February 27, 2004, the CA rendered the assailed decision affirming
the dismissal by the DOJ, 7 disposing as follows:
 WHEREFORE, premises considered, the instant petition
is DENIED. Consequently, the Orders dated March 20, 2000, May 15,
2001 and January 27, 2003 respectively are hereby AFFIRMED.
SO ORDERED. 8
Issue
The petitioner insists that printing or copying was not essential in the
commission of the crime of copyright infringement under Section 29
of Presidential Decree No. 49; hence, contrary to the holding of the DOJ, as
upheld by the CA, the mere selling of pirated computer software constituted
copyright infringement. 9
Ruling of the Court
The appeal is meritorious.
Although the general rule is that the determination of the existence of
probable cause by the public prosecutor is not to be judicially scrutinized
because it is an executive function, an exception exists when the
determination is tainted with grave abuse of discretion. 10 Bearing this in mind,
we hold that the DOJ committed grave abuse of discretion in sustaining the
public prosecutor's dismissal of the charge of copyright infringement under
Section 29 of Presidential Decree No. 49 on the ground of lack of evidence
because the public prosecutor thereby flagrantly disregarded the existence of
acts sufficient to engender the well-founded belief that the crime of copyright
infringement had been committed, and that the respondent was probably
guilty thereof. 11
Section 5 of Presidential Decree No. 49 specifically defined copyright
as an exclusive right in the following manner:
Section 5. Copyright shall consist in the exclusive right;
(A) To print, reprint, publish, copy, distribute, multiply, sell, and
make photographs, photo-engravings, and pictorial illustrations of the
works;
(B) To make any translation or other version or extracts or
arrangements or adaptations thereof; to dramatize it if it be a non-
dramatic work; to convert it into a non-dramatic work if it be a drama; to
complete or execute if it be a model or design;
(C) To exhibit, perform, represent, produce, or reproduce, the
work in any manner or by any method whatever for profit or otherwise;
it not reproduced in copies for sale, to sell any manuscript or any
record whatsoever thereof;
(D) To make any other use or disposition of the work consistent
with the laws of the land. ETHIDa
 Accordingly, the commission of any of the acts mentioned in Section 5
of Presidential Decree No. 49 without the copyright owner's consent
constituted actionable copyright infringement. In Columbia Pictures, Inc. v.
Court of Appeals, 12 the Court has emphatically declared:
Infringement of a copyright is a trespass on a private domain owned
and occupied by the owner of the copyright, and, therefore, protected
by law, and infringement of copyright, or piracy, which is a
synonymous term in this connection, consists in the doing by any
person, without the consent of the owner of the copyright, of anything
the sole right to do which is conferred by statute on the owner of the
copyright.
The "gravamen of copyright infringement," according to NBI-Microsoft
Corporation v. Hwang: 13
is not merely the unauthorized manufacturing of intellectual works but
rather the unauthorized performance of any of the acts covered by
Section 5. Hence, any person who performs any of the acts under
Section 5 without obtaining the copyright owners prior consent renders
himself civilly and criminally liable for copyright infringement. 14
The CA stated in the assailed decision as follows:
A reading of Section 5 (a) of the Copyright Law shows that the
acts enumerated therein are punctuated by commas and the last
phrase is conjoined by the words 'and'. Clearly, the same should be
interpreted to mean as 'relating to one another' because it is basic in
legal hermeneutics that the word 'and' is not meant to separate words
but is a conjunction used to denote a 'joinder' or 'union'.
In the book of Noli C. Diaz entitled as STATUTORY
CONSTRUCTION, the word 'and' was defined as a 'conjunction
connecting words or phrases expressing the idea that the latter is to be
added to or taken along with the first'. Stated differently, the word 'and'
is a conjunction pertinently defined as meaning 'together with', 'joined
with', 'along or together with', 'added to or linked to' used to conjoin
'word with word', 'phrase with phrase', 'clause with clause'. The word
'and' does not mean 'or', it is a conjunction used to denote a joinder or
union, 'binding together', relating the one to the other.
Hence the key to interpret and understand Section 5 (a) of P.D.
49 is the word 'and'. From the foregoing definitions of the word 'and' it
is unmistakable that to hold a person liable under the said provision of
law, all the acts enumerated therein must be present and proven. As
such, it is not correct to construe the acts enumerated therein as being
separate or independent from one another.
In the case at bar, petitioner failed to allege and adduce
evidence showing that the private respondent is the one who copied,
 replicated or reproduced the software programs of the petitioner. In
other words, 'sale' alone of pirated copies of Microsoft software
programs does not constitute copyright infringement punishable under
P.D. 49. 15
The CA erred in its reading and interpretation of Section 5
of Presidential Decree No. 49. Under the rules on syntax, the conjunctive
word "and" denotes a "joinder or union" of words, phrases, or clause; 16 it is
different from the disjunctive word "or" that signals disassociation or
independence. 17 However, a more important rule of statutory construction
dictates that laws should be construed in a manner that avoids absurdity or
unreasonableness. 18 As the Court pointed out in Automotive Parts &
Equipment Company, Inc. v. Lingad: 19
Nothing is better settled then that courts are not to give words a
meaning which would lead to absurd or unreasonable consequence.
That is a principle that goes back to In re Allen decided on October 29,
1903, where it was held that a literal interpretation is to be rejected if it
would be unjust or lead to absurd results. That is a strong argument
against its adoption. The words of Justice Laurel are particularly apt.
Thus: 'The fact that the construction placed upon the statute by the
appellants would lead to an absurdity is another argument for rejecting
it . . . .'
It is of the essence of judicial duty to construe statutes so as to
avoid such a deplorable result. That has long been a judicial function.
A literal reading of a legislative act which could be thus characterized
is to be avoided if the language thereof can be given a reasonable
application consistent with the legislative purpose. In the apt language
of Frankfurter: "A decent respect for the policy of Congress must save
us from imputing to it a self-defeating, if not disingenuous purpose.
Certainly, we must reject a construction that at best amounts to a
manifestation of verbal ingenuity but hardly satisfies the test of
rationality on which law must be based. 20
The conjunctive "and" should not be taken in its ordinary acceptation,
but should be construed like the disjunctive "or" if the literal interpretation of
the law would pervert or obscure the legislative intent. 21 To accept the CA's
reading and interpretation is to accept absurd results because the violations
listed in Section 5 (a) of Presidential Decree No. 49 — "To print, reprint,
publish, copy, distribute, multiply, sell, and make photographs, photo-
engravings, and pictorial illustrations of the works" — cannot be carried out on
all of the classes of works enumerated in Section 2 of Presidential Decree No.
49, viz.:
Section 2. — The Rights granted by this Decree shall, from the
moment of creation, subsist with respect to any of the following classes
of works:
 (A) Books, including composite and encyclopedic works,
manuscripts, directories, and gazetteers;
(B) Periodicals, including pamphlets and newspapers; cSEDTC

(C) Lectures, sermons, addresses, dissertations prepared for

oral delivery;
(D) Letters;
(E) Dramatic or dramatico-musical compositions; choreographic
works and entertainments in dumb shows, the acting form of which is
fixed in writing or otherwise;
(F) Musical compositions, with or without words;
(G) Works of drawing, painting, architecture, sculpture,
engraving, lithography, and other works of art; models or designs for
works of art;
(H) Reproductions of a work of art;
(I) Original ornamental designs or models for articles of
manufacture, whether or not patentable, and other works of applied art;
(J) Maps, plans, sketches, and charts;
(K) Drawings, or plastic works of a scientific or technical
character;
(L) Photographic works and works produced by a process
analogous to photography; lantern slides;
(M) Cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual
recordings;
(N) Computer programs;
(O) Prints, pictorial, illustration, advertising copies, labels, tags,
and box wraps;
(P) Dramatization, translations, adaptations, abridgements,
arrangements and other alterations of literary, musical or artistic works
or of works of the Philippine Government as herein defined, which shall
be protected as provided in Section 8 of this Decree.
(Q) Collection of literary, scholarly, or artistic works or of works
referred to in Section 9 of this Decree which by reason of the selection
and arrangement of their contents constitute intellectual creations, the
same to be protected as such in accordance with Section 8 of this
Decree.
(R) Other literary, scholarly, scientific and artistic works.
 Presidential Decree No. 49 thereby already acknowledged the
existence of computer programs as works or creations protected by
copyright. 22 To hold, as the CA incorrectly did, that the legislative intent was
to require that the computer programs be first photographed, photo-engraved,
or pictorially illustrated as a condition for the commission of copyright
infringement invites ridicule. Such interpretation of Section 5 (a)
of Presidential Decree No. 49 defied logic and common sense because it
focused on terms like "copy," "multiply," and "sell," but blatantly ignored terms
like "photographs," "photo-engravings," and "pictorial illustrations." Had the
CA taken the latter words into proper account, it would have quickly seen the
absurdity of its interpretation.
The mere sale of the illicit copies of the software programs was enough
by itself to show the existence of probable cause for copyright infringement.
There was no need for the petitioner to still prove who copied, replicated or
reproduced the software programs. Indeed, the public prosecutor and the
DOJ gravely abused their discretion in dismissing the petitioner's charge for
copyright infringement against the respondents for lack of evidence. There
was grave abuse of discretion because the public prosecutor and the DOJ
acted whimsically or arbitrarily in disregarding the settled jurisprudential rules
on finding the existence of probable cause to charge the offender in court.
Accordingly, the CA erred in upholding the dismissal by the DOJ of the
petitioner's petition for review. We reverse.
WHEREFORE, the Court GRANTS the petition for review
on certiorari; REVERSES and SETS ASIDE the decision promulgated on
February 27, 2004 in C.A.-G.R. SP No. 76402; DIRECTS the Department of
Justice to render the proper resolution to charge respondent ROLANDO D.
MANANSALA and/or MEL MANANSALA, doing business as DATAMAN
TRADING COMPANY and/or COMIC ALLEY in accordance with this
decision; and ORDERS the respondents to pay the costs of suit. acEHCD

SO ORDERED.
Sereno, C.J., Velasco, Jr., * Leonardo-de Castro and Perlas-Bernabe,
JJ., concur.
(Microsoft Corp. v. Manansala, G.R. No. 166391, [October 21, 2015], 772 PHIL
|||

14-25)

THIRD DIVISION

[G.R. No. 195835. March 14, 2016.]

 SISON OLAÑO, SERGIO T. ONG, MARILYN O. GO, and JAP
FUK HAI, petitioners, vs. LIM ENG CO, respondent.

DECISION

REYES, J : p

This is a petition for review on certiorari 1 under Rule 45 of the Rules of

Court, assailing the Decision 2 dated July 9, 2010 and Resolution 3 dated
February 24, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 95471,
which annulled the Resolutions dated March 10, 2006 4 and May 25, 2006 5 of
the Department of Justice (DOJ) in I.S. No. 2004-925, finding no probable
cause for copyright infringement against Sison Olaño, Sergio Ong, Marilyn Go
and Jap Fuk Hai (petitioners) and directing the withdrawal of the criminal
information filed against them.
The Antecedents
The petitioners are the officers and/or directors of Metrotech Steel
Industries, Inc. (Metrotech). 6 Lim Eng Co (respondent), on the other hand, is
the Chairman of LEC Steel Manufacturing Corporation (LEC), a company
which specializes in architectural metal manufacturing. 7
Sometime in 2002, LEC was invited by the architects of the Manansala
Project (Project), a high-end residential building in Rockwell Center, Makati
City, to submit design/drawings and specifications for interior and exterior
hatch doors. LEC complied by submitting on July 16, 2002, shop
plans/drawings, including the diskette therefor, embodying the designs and
specifications required for the metal hatch doors. 8
After a series of consultations and revisions, the final shop
plans/drawings were submitted by LEC on January 15, 2004 and thereafter
copied and transferred to the title block of Ski-First Balfour Joint Venture (SKI-
FB), the Project's contractor, and then stamped approved for construction on
February 3, 2004. 9
LEC was thereafter subcontracted by SKI-FB, to manufacture and
install interior and exterior hatch doors for the 7th to 22nd floors of the Project
based on the final shop plans/drawings. 10 TAacHE

Sometime thereafter, LEC learned that Metrotech was also

subcontracted to install interior and exterior hatch doors for the Project's 23rd
to 41st floors. 11
 On June 24, 2004, LEC demanded Metrotech to cease from infringing
its intellectual property rights. Metrotech, however, insisted that no copyright
infringement was committed because the hatch doors it manufactured were
patterned in accordance with the drawings provided by SKI-FB. 12
On July 2, 2004, LEC deposited with the National Library the final shop
plans/drawings of the designs and specifications for the interior and exterior
hatch doors of the Project. 13 On July 6, 2004, LEC was issued a Certificate of
Copyright Registration and Deposit showing that it is the registered owner of
plans/drawings for interior and exterior hatch doors under Registration Nos. I-
2004-13 and I-2004-14, respectively. 14 This copyright pertains to class work
"I" under Section 172 of Republic Act (R.A.) No. 8293, TheIntellectual
Property Code of the Philippines, which covers "illustrations, maps, plans,
sketches, charts and three-dimensional works relative to geography,
topography, architecture or science."
On December 9, 2004, LEC was issued another Certificate of Copyright
Registration and Deposit showing that it is the registered owner of
plans/drawings for interior and exterior hatch doors under Registration Nos.
H-2004-566 and H-2004-567 15 which is classified under Section 172 (h)
of R.A. No. 8293 as "original ornamental designs or models for articles of
manufacture, whether or not registrable as an industrial design, and other
works of applied art."
When Metrotech still refused to stop fabricating hatch doors based on
LEC's shop plans/drawings, the latter sought the assistance of the National
Bureau of Investigation (NBI) which in turn applied for a search warrant before
the Regional Trial Court (RTC) of Quezon City, Branch 24. The application
was granted on August 13, 2004 thus resulting in the confiscation of finished
and unfinished metal hatch doors as well as machines used in fabricating and
manufacturing hatch doors from the premises of Metrotech. 16
On August 13, 2004, the respondent filed a Complaint-
Affidavit 17 before the DOJ against the petitioners for copyright infringement.
In the meantime or on September 8, 2004, the RTC quashed the search
warrant on the ground that copyright infringement was not established. 18
Traversing the complaint, the petitioners admitted manufacturing hatch
doors for the Project. They denied, however, that they committed copyright
infringement and averred that the hatch doors they manufactured were
functional inventions that are proper subjects of patents and that the records
of the Intellectual Property Office reveal that there is no patent, industrial
design or utility model registration on LEC's hatch doors. Metrotech further
argued that the manufacturing of hatch doors per se is not copyright
infringement because copyright protection does not extend to the objects
depicted in the illustrations and plans. Moreover, there is no artistic or
ornamental expression embodied in the subject hatch doors that would
subject them to copyright protection. 19
Resolutions of the DOJ
In a Resolution 20 dated August 18, 2005, the investigating prosecutor
dismissed the respondent's complaint based on inadequate evidence showing
that: (1) the petitioners committed the prohibited acts under Section 177
of R.A. No. 8293; and (2) the interior and exterior hatch doors of the
petitioners are among the classes of copyrightable work enumerated in
Sections 172 and 173 of the same law. 21
Adamant, the respondent filed a petition for review before the DOJ but it
was also denied due course in the Resolution 22 dated November 16, 2005.
Upon the respondent's motion for reconsideration, however, the
Resolution 23 dated January 27, 2006 of the DOJ reversed and set aside the
Resolution dated August 18, 2005 and directed the Chief State Prosecutor to
file the appropriate information for copyright infringement against the
petitioners. 24 The DOJ reasoned that the pieces of evidence adduced show
that the subject hatch doors are artistic or ornamental with distinctive hinges,
door and jamb, among others. The petitioners were not able to sufficiently
rebut these allegations and merely insisted on the non-artistic nature of the
hatch doors. The DOJ further held that probable cause was established
insofar as the artistic nature of the hatch doors and based thereon the act of
the petitioners in manufacturing or causing to manufacture hatch doors similar
to those of the respondent can be considered as unauthorized reproduction;
hence, copyright infringement under Section 177.1 in relation to Section 216
of R.A. No. 8293. 25
Aggrieved, the petitioners moved for reconsideration. This time, the
DOJ made a complete turn around by granting the motion, vacating its
Resolution dated January 27, 2006 and declaring that the evidence on record
did not establish probable cause because the subject hatch doors were plainly
metal doors with functional components devoid of any aesthetic or artistic
features. Accordingly, the DOJ Resolution 26 dated March 10, 2006 disposed
as follows:
WHEREFORE, finding cogent reason to reverse the assailed
resolution, the motion for reconsideration is GRANTED finding no
probable cause against the [petitioners]. Consequently, the City
Prosecutor of Manila is hereby directed to cause the withdrawal of the
information, if any has been filed in court, and to report the action
taken thereon within TEN (10) DAYS from receipt hereof.
SO ORDERED. 27
 The respondent thereafter filed a motion for reconsideration of the
foregoing resolution but it was denied 28 on May 25, 2006. The respondent
then sought recourse before the CA via a petition for certiorari 29 ascribing
grave abuse of discretion on the part of the DOJ. HDICSa

In its assailed Decision 30 dated July 9, 2010, the CA granted the

petition. The CA held that the vacillating findings of the DOJ on the presence
or lack of probable cause manifest capricious and arbitrary exercise of
discretion especially since its opposite findings were based on the same
factual evidence and arguments.
The CA then proceeded to make its own finding of probable cause and
held that:
[F]or probable cause for copyright infringement to exist, essentially, it
must be shown that the violator reproduced the works without the
consent of the owner of the copyright.
In the present case before Us, [the petitioners] do not dispute
that: (1) LEC was issued copyrights for the illustrations of the hatch
doors under Section 171.i, and for the hatch doors themselves as
ornamental design or model for articles of manufacture pursuant to
Section 171.h of R.A. [No.] 8293; and (2) they manufactured hatch
doors based on drawings and design furnished by SKI-FB, which
consists of LEC works subject of copyrights. These two (2)
circumstances, taken together, are sufficient to excite the belief in a
reasonable mind that [the petitioners] are probably guilty of copyright
infringement. First, LEC has indubitably established that it is the owner
of the copyright for both the illustrations of the hatch doors and [the]
hatch doors themselves, and second, [the petitioners] manufactured
hatch doors based on LEC's works, sans LEC's consent.
xxx xxx xxx
[T]he fact that LEC enjoys ownership of copyright not only on
the illustrations of the hatch doors but on the hatch doors itself and that
[the petitioners] manufactured the same is sufficient to warrant a
finding of probable cause for copyright infringement. . . . . 31
The CA further ruled that any allegation on the non-existence of
ornamental or artistic values on the hatch doors are matters of evidence
which are best ventilated in a full-blown trial rather than during the preliminary
investigation stage. Accordingly, the CA disposed as follows:
WHEREFORE, considering the foregoing premises, the present
Petition is GRANTED, and accordingly, the assailed Resolutions dated
10 March 2006 and 25 May 2006 are ANNULLED and SET ASIDE.
The Resolution of the Secretary of Justice dated 27 January 2006
finding probable cause against [the petitioners], is REINSTATED.
 SO ORDERED. 32
The CA reiterated the above ruling in its Resolution 33 dated February
24, 2011 when it denied the petitioners' motion for reconsideration. Hence, the
present appeal, arguing that:
I. There was no evidence of actual reproduction of the hatch doors
during the preliminary investigation that would lead the
investigating prosecutor to declare the existence of probable
cause; 34
II. Even assuming that the petitioners manufactured hatch doors based
on the illustrations and plans covered by the respondent's
Certificate of Registration Nos. I-2004-13 and I-2004-14, the
petitioners could not have committed copyright infringement.
Certificate of Registration Nos. I-2004-13 and I-2004-14 are
classified under Section 172 (i) which pertains to "illustrations,
maps, plans, sketches, charts and three-dimensional works
relative to geography, topography, architecture or science."
Hence the original works that are copyrighted are the illustrations
and plans of interior hatch doors and exterior hatch doors. Thus,
it is the reproduction of the illustrations and plans covered by the
copyright registration that amounts to copyright infringement. The
petitioners did not reproduce the illustrations and plans covered
under Certificate of Registration Nos. I-2004-13 and I-2004-14.
The manufacturing of hatch doors per se does not fall within the
purview of copyright infringement because copyright protection
does not extend to the objects depicted in the illustrations and
plans; 35 and
III. LEC's copyright registration certificates are not conclusive proofs
that the items covered thereby are copyrightable. The issuance of
registration certificate and acceptance of deposit by the National
Library is ministerial in nature and does not involve a
determination of whether the item deposited is copyrightable or
not. Certificates of registration and deposit serve merely as a
notice of recording and registration of the work but do not confer
any right or title upon the registered copyright owner or
automatically put his work under the protective mantle of the
copyright law. 36
Ruling of the Court
It is a settled judicial policy that courts do not reverse the Secretary of
Justice's findings and conclusions on the matter of probable cause. Courts are
not empowered to substitute their judgment for that of the executive branch
upon which full discretionary authority has been delegated in the
determination of probable cause during a preliminary investigation. Courts
may, however, look into whether the exercise of such discretionary authority
was attended with grave abuse of discretion. 37
Otherwise speaking, "judicial review of the resolution of the Secretary of
Justice is limited to a determination of whether there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction." 38 IDaEHC

The CA anchored its act of reversing the DOJ Resolution dated March
10, 2006 upon the foregoing tenets. Thus, the Court's task in the present
petition is only to determine if the CA erred in concluding that the DOJ
committed grave abuse of discretion in directing the withdrawal of any criminal
information filed against the petitioners.
Grave abuse of discretion has been defined as "such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility and
must be so patent and gross as to amount to an evasion of positive duty or to
a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law." 39 "'Capricious,' usually used in tandem with the term
'arbitrary,' conveys the notion of willful and unreasoning action." 40
According to the CA, the DOJ's erratic findings on the presence or
absence of probable cause constitute grave abuse of discretion. The CA
explained:
This, to Our minds, in itself creates a nagging, persistent doubt as to
whether [the DOJ Secretary] issued the said resolutions untainted with
a whimsical and arbitrary use of his discretion. For one cannot rule that
there is reason to overturn the investigating prosecutor's findings at the
first instance and then go on to rule that ample evidence exists
showing that the hatch doors possess artistic and ornamental elements
at the second instance and proceed to rule that no such artistry can be
found on the purely utilitarian hatch doors at the last instance. . . . . 41
The Court disagrees. It has been held that the issuance by the DOJ of
several resolutions with varying findings of fact and conclusions of law on the
existence of probable cause, by itself, is not indicative of grave abuse of
discretion. 42
Inconsistent findings and conclusions on the part of the DOJ will denote
grave abuse of discretion only if coupled with gross misapprehension of
facts, 43 which, after a circumspect review of the records, is not attendant in
the present case.
 The facts upon which the resolutions issued by the investigating
prosecutor and the DOJ were actually uniform, viz.:
(a) LEC is the registered owner of plans/drawings for interior and
exterior hatch doors under Certificate of Registration Nos. I-2004-
13 and I-2004-14 classified under Section 172 (i) of R.A. No.
8293 as pertaining to "illustrations, maps, plans, sketches, charts
and three-dimensional works relative to geography, topography,
architecture or science";
(b) LEC is also the registered owner of plans/drawings for interior and
exterior hatch doors under Certificate of Registration Nos. H-
2004-566 and H-2004-567 classified under Section 172 (h)
of R.A. No. 8293 as to "original ornamental designs or models for
articles of manufacture, whether or not registrable as an industrial
design, and other works of applied art";
(c) LEC as the subcontractor of SKI-FB in the Project first manufactured
and installed the interior and exterior hatch doors at the
Manansala Tower in Rockwell Center, Makati City, from the 7th to
22nd floors. The hatch doors were based on the plans/drawings
submitted by LEC to SKI-FB and subject of the above copyright
registration numbers; and
(d) thereafter, Metrotech fabricated and installed hatch doors at the
same building's 23rd to 41st floor based on the drawings and
specifications provided by SKI-FB. 44
The positions taken by the DOJ and the investigating prosecutor
differed only in the issues tackled and the conclusions arrived at.
It may be observed that in the Resolution dated August 18, 2005 issued
by the investigating prosecutor, the primary issue was whether the hatch
doors of LEC fall within copyrightable works. This was resolved by ruling that
hatch doors themselves are not covered by LEC's Certificate of Registration
Nos. I-2004-13 and I-2004-14 issued on the plans/drawing depicting them.
The DOJ reversed this ruling in its Resolution dated January 27, 2006
wherein the issue was streamlined to whether the illustrations of the hatch
doors under LEC's Certificate of Registration Nos. H-2004-566 and H-2004-
567 bore artistic ornamental designs.
This situation does not amount to grave abuse of discretion but rather a
mere manifestation of the intricate issues involved in the case which thus
resulted in varying conclusions of law. Nevertheless, the DOJ ultimately
pronounced its definite construal of copyright laws and their application to the
evidence on record through its Resolution dated March 10, 2006 when it
granted the petitioners' motion for reconsideration. Such construal, no matter
how erroneous to the CA's estimation, did not amount to grave abuse of
discretion. "[I]t is elementary that not every erroneous conclusion of law or fact
is an abuse of discretion." 45
More importantly, the Court finds that no grave abuse of discretion was
committed by the DOJ in directing the withdrawal of the criminal information
against the respondents because a finding of probable cause contradicts the
evidence on record, law, and jurisprudence.
"Probable cause has been defined as the existence of such facts and
circumstances as would excite the belief in a reasonable mind, acting on the
facts within the knowledge of the prosecutor, that the person charged was
guilty of the crime for which he was prosecuted. It is a reasonable ground of
presumption that a matter is, or may be, well-founded on such a state of facts
in the mind of the prosecutor as would lead a person of ordinary caution and
prudence to believe, or entertain an honest or strong suspicion, that a thing is
so." 46DTCSHA

"The term does not mean actual and positive cause nor does it import
absolute certainty. It is merely based on opinion and reasonable belief. Thus,
a finding of probable cause does not require an inquiry into whether there is
sufficient evidence to procure a conviction. It is enough that it is believed that
the act or omission complained of constitutes the offense charged." 47
"In order that probable cause to file a criminal case may be arrived at,
or in order to engender the well-founded belief that a crime has been
committed, the elements of the crime charged should be present. This is
based on the principle that every crime is defined by its elements, without
which there should be — at the most — no criminal offense." 48
A copyright refers to "the right granted by a statute to the proprietor of
an intellectual production to its exclusive use and enjoyment to the extent
specified in the statute." 49 Under Section 177 of R.A. No. 8293, the Copyright
or Economic Rights consist of the exclusive right to carry out, authorize or
prevent the following acts:
177.1 Reproduction of the work or substantial portion of the work;
177.2 Dramatization, translation, adaptation, abridgment, arrangement
or other transformation of the work;
177.3 The first public distribution of the original and each copy of the
work by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or
cinematographic work, a work embodied in a sound recording, a
computer program, a compilation of data and other materials or a
musical work in graphic form, irrespective of the ownership of the
original or the copy which is the subject of the rental;
 177.5 Public display of the original or a copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work.
Copyright infringement is thus committed by any person who shall use
original literary or artistic works, or derivative works, without the copyright
owner's consent in such a manner as to violate the foregoing copy and
economic rights. For a claim of copyright infringement to prevail, the evidence
on record must demonstrate: (1) ownership of a validly copyrighted material
by the complainant; and (2) infringement of the copyright by the
respondent. 50
While both elements subsist in the records, they did not simultaneously
concur so as to substantiate infringement of LEC's two sets of copyright
registrations.
The respondent failed to substantiate the alleged reproduction of the
drawings/sketches of hatch doors copyrighted under Certificate of
Registration Nos. I-2004-13 and I-2004-14. There is no proof that the
respondents reprinted the copyrighted sketches/drawings of LEC's hatch
doors. The raid conducted by the NBI on Metrotech's premises yielded no
copies or reproduction of LEC's copyrighted sketches/drawings of hatch
doors. What were discovered instead were finished and unfinished hatch
doors.
Certificate of Registration Nos. I-2004-13 and I-2004-14 pertain to class
work "I" under Section 172 of R.A. No. 8293 which covers "illustrations, maps,
plans, sketches, charts and three-dimensional works relative to geography,
topography, architecture or science." 51 As such, LEC's copyright protection
there under covered only the hatch door sketches/drawings and not the actual
hatch door they depict. 52
As the Court held in Pearl and Dean (Philippines), Incorporated v.
Shoemart, Incorporated: 53
Copyright, in the strict sense of the term, is purely a statutory
right. Being a mere statutory grant, the rights are limited to what the
statute confers. It may be obtained and enjoyed only with respect to
the subjects and by the persons, and on terms and conditions specified
in the statute. Accordingly, it can cover only the works falling within the
statutory enumeration or description. 54 (Citations omitted and italics in
the original)
Since the hatch doors cannot be considered as either illustrations,
maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science, to be properly classified as a
copyrightable class "I" work, what was copyrighted were their
sketches/drawings only, and not the actual hatch doors themselves. To
constitute infringement, the usurper must have copied or appropriated the
original work of an author or copyright proprietor, absent copying, there can
be no infringement of copyright. 55
"Unlike a patent, a copyright gives no exclusive right to the art
disclosed; protection is given only to the expression of the idea — not the
idea itself." 56
The respondent claimed that the petitioners committed copyright
infringement when they fabricated/manufactured hatch doors identical to
those installed by LEC. The petitioners could not have manufactured such
hatch doors in substantial quantities had they not reproduced the copyrighted
plans/drawings submitted by LEC to SKI-FB. This insinuation, without more,
does not suffice to establish probable cause for infringement against the
petitioners. "[A]lthough the determination of probable cause requires less than
evidence which would justify conviction, it should at least be more than mere
suspicion." 57
Anent, LEC's Certificate of Registration Nos. H-2004-566 and H-2004-
567, the Court finds that the ownership thereof was not established by the
evidence on record because the element of copyrightability is absent. CScTED

"Ownership of copyrighted material is shown by proof of originality and

copyrightability." 58 While it is true that where the complainant presents a
copyright certificate in support of the claim of infringement, the validity and
ownership of the copyright is presumed. This presumption, however, is
rebuttable and it cannot be sustained where other evidence in the record
casts doubt on the question of ownership, 59 as in the instant case.
Moreover, "[t]he presumption of validity to a certificate of copyright
registration merely orders the burden of proof. The applicant should not
ordinarily be forced, in the first instance, to prove all the multiple facts that
underline the validity of the copyright unless the respondent, effectively
challenging them, shifts the burden of doing so to the applicant." 60
Here, evidence negating originality and copyrightability as elements of
copyright ownership was satisfactorily proffered against LEC's certificate of
registration.
The following averments were not successfully rebuffed by LEC:
[T]he hinges on LEC's "hatch doors" have no ornamental or artistic
value. In fact, they are just similar to hinges found in truck doors that
had been in common use since the 1960's. The gaskets on LEC's
"hatch doors", aside from not being ornamental or artistic, were merely
procured from a company named Pemko and are not original creations
 of LEC. The locking device in LEC's "hatch doors" are ordinary drawer
locks commonly used in furniture and office desks. 61
In defending the copyrightability of its hatch doors' design, LEC merely
claimed:
LEC's Hatch Doors were particularly designed to blend in with
the floor of the units in which they are installed and, therefore, appeal
to the aesthetic sense of the owner of units or any visitors thereto[;]
LEC's Hatch Doors have a distinct set of hinges, a distinct door
a distinct jamb, all of which are both functional or utilitarian and artistic
or ornamental at the same time[;] and
Moreover, the Project is a high-end residential building located
in the Rockwell Center, a very prime area in Metro Manila. As such,
the owner of the Project is not expected to settle for Hatch Doors that
simply live up to their function as such. The owner would require, as is
the case for the Project, Hatch Doors that not only fulfill their utilitarian
purposes but also appeal to the artistic or ornamental sense of their
beholders. 62
From the foregoing description, it is clear that the hatch doors were not
artistic works within the meaning of copyright laws. A copyrightable work
refers to literary and artistic works defined as original intellectual creations in
the literary and artistic domain. 63
A hatch door, by its nature is an object of utility. It is defined as a small
door, small gate or an opening that resembles a window equipped with an
escape for use in case of fire or emergency. 64 It is thus by nature, functional
and utilitarian serving as egress access during emergency. It is not primarily
an artistic creation but rather an object of utility designed to have aesthetic
appeal. It is intrinsically a useful article, which, as a whole, is not eligible for
copyright.
A "useful article" is defined as an article "having an intrinsic utilitarian
function that is not merely to portray the appearance of the article or to convey
information" is excluded from copyright eligibility. 65
The only instance when a useful article may be the subject of copyright
protection is when it incorporates a design element that is physically or
conceptually separable from the underlying product. This means that the
utilitarian article can function without the design element. In such an
instance, the design element is eligible for copyright protection. 66 The design
of a useful article shall be considered a pictorial, graphic, or sculptural work
only if, and only to the extent that, such design incorporates pictorial, graphic,
or sculptural features that can be identified separately from, and are capable
of existing independently of, the utilitarian aspects of the article. 67
 A belt, being an object utility with the function of preventing one's pants
from falling down, is in itself not copyrightable. However, an ornately designed
belt buckle which is irrelevant to or did not enhance the belt's function hence,
conceptually separable from the belt, is eligible for copyright. It is
copyrightable as a sculptural work with independent aesthetic value, and not
as an integral element of the belt's functionality. 68
A table lamp is not copyrightable because it is a functional object
intended for the purpose of providing illumination in a room. The general
shape of a table lamp is likewise not copyrightable because it contributes to
the lamp's ability to illuminate the reaches of a room. But, a lamp base in the
form of a statue of male and female dancing figures made of semi vitreous
china is copyrightable as a work of art because it is unrelated to the lamp's
utilitarian function as a device used to combat darkness. 69
In the present case, LEC's hatch doors bore no design elements that
are physically and conceptually separable, independent and distinguishable
from the hatch door itself. The allegedly distinct set of hinges and distinct
jamb, were related and necessary hence, not physically or conceptually
separable from the hatch door's utilitarian function as an apparatus for
emergency egress. Without them, the hatch door will not function. cDCEIA

More importantly, they are already existing articles of manufacture

sourced from different suppliers. Based on the records, it is unrebutted that:
(a) the hinges are similar to those used in truck doors; (b) the gaskets were
procured from a company named Pemko and are not original creations of
LEC; and (c) the locking device are ordinary drawer locks commonly used in
furniture and office desks.
Being articles of manufacture already in existence, they cannot be
deemed as original creations. As earlier stated, valid copyright ownership
denotes originality of the copyrighted material. Originality means that the
material was not copied, evidences at least minimal creativity and was
independently created by the author. 70 It connotes production as a result of
independent labor. 71 LEC did not produce the door jambs and hinges; it
bought or acquired them from suppliers and thereafter affixed them to the
hatch doors. No independent original creation can be deduced from such
acts.
The same is true with respect to the design on the door's panel. As LEC
has stated, the panels were "designed to blend in with the floor of the units in
which they [were] installed." 72 Photos of the panels indeed show that their
color and pattern design were similar to the wooden floor parquet of the
condominium units. 73 This means that the design on the hatch door panel
was not a product of LEC's independent artistic judgment and discretion but
rather a mere reproduction of an already existing design.
 Verily then, the CA erred in holding that a probable cause for copyright
infringement is imputable against the petitioners. Absent originality and
copyrightability as elements of a valid copyright ownership, no infringement
can subsist.
WHEREFORE, premises considered, the petition is hereby GRANTED.
The Decision dated July 9, 2010 and Resolution dated February 24, 2011 of
the Court of Appeals in CA-G.R. SP No. 95471 are REVERSED and SET
ASIDE. The Resolutions dated March 10, 2006 and May 25, 2006 of the
Department of Justice in I.S. No. 2004-925 dismissing the complaint for
copyright infringement are REINSTATED.
SO ORDERED.
Velasco, Jr., Peralta, Perez and Jardeleza, JJ., concur.
||| (Olaño v. Lim Eng Co, G.R. No. 195835, [March 14, 2016])

SECOND DIVISION

[G.R. No. 190706. July 21, 2014.]

SHANG PROPERTIES REALTY CORPORATION (formerly THE

SHANG GRAND TOWER CORPORATION) and SHANG
PROPERTIES, INC. (formerly EDSA PROPERTIES HOLDINGS,
INC.), petitioners, vs. ST. FRANCIS DEVELOPMENT
CORPORATION, respondent.

DECISION

PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 is the Decision 2 dated

December 18, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 105425
which affirmed with modification the Decision 3 dated September 3, 2008 of the
Intellectual Property Office (IPO) Director-General. The CA: (a) affirmed the
denial of the application for registration of the mark "ST. FRANCIS TOWERS"
filed by petitioners Shang Properties Realty Corporation and Shang Properties,
Inc. (petitioners); (b) found petitioners to have committed unfair competition for
using the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS
SHANGRI-LA PLACE"; (c) ordered petitioners to cease and desist from using
"ST. FRANCIS" singly or as part of a composite mark; and (c) ordered petitioners
to jointly and severally pay respondent St. Francis Square Development
Corporation (respondent) a fine in the amount of P200,000.00.
The Facts
Respondent — a domestic corporation engaged in the real estate business
and the developer of the St. Francis Square Commercial Center, built sometime
in 1992, located at Ortigas Center, Mandaluyong City, Metro Manila (Ortigas
Center) 4 — filed separate complaints against petitioners before the IPO-Bureau
of Legal Affairs (BLA), namely: (a) an intellectual property violation case for unfair
competition, false or fraudulent declaration, and damages arising from
petitioners' use and filing of applications for the registration of the marks "THE
ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE,"
docketed as IPV Case No. 10-2005-00030 (IPV Case); and (b) an inter
partes case opposing the petitioners' application for registration of the mark "THE
ST. FRANCIS TOWERS" for use relative to the latter's business, particularly the
construction of permanent buildings or structures for residential and office
purposes, docketed as Inter Partes Case No. 14-2006-00098 (St. Francis
Towers IP Case); and (c) an inter partes case opposing the petitioners'
application for registration of the mark "THE ST. FRANCIS SHANGRI-LA
PLACE," docketed as IPC No. 14-2007-00218 (St. Francis Shangri-La IP
Case). 5
In its complaints, respondent alleged that it has used the mark "ST.
FRANCIS" to identify its numerous property development projects located at
Ortigas Center, such as the aforementioned St. Francis Square Commercial
Center, a shopping mall called the "St. Francis Square," and a mixed-use realty
project plan that includes the St. Francis Towers. Respondent added that as a
result of its continuous use of the mark "ST. FRANCIS" in its real estate
business, it has gained substantial goodwill with the public that consumers and
traders closely identify the said mark with its property development projects.
Accordingly, respondent claimed that petitioners could not have the mark "THE
ST. FRANCIS TOWERS" registered in their names, and that petitioners' use of
the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-
LA PLACE" in their own real estate development projects constitutes unfair
competition as well as false or fraudulent declaration. 6 CSIcTa

Petitioners denied committing unfair competition and false or fraudulent

declaration, maintaining that they could register the mark "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" under their names.
They contended that respondent is barred from claiming ownership and exclusive
use of the mark "ST. FRANCIS" because the same is geographically descriptive
of the goods or services for which it is intended to be used. 7 This is because
respondent's as well as petitioners' real estate development projects are located
along the streets bearing the name "St. Francis," particularly, St. Francis Avenue
and St. Francis Street (now known as Bank Drive), 8 both within the vicinity of the
Ortigas Center.
The BLA Rulings
On December 19, 2006, the BLA rendered a Decision 9 in the IPV Case,
and found that petitioners committed acts of unfair competition against
respondent by its use of the mark "THE ST. FRANCIS TOWERS" but not with its
use of the mark "THE ST. FRANCIS SHANGRI-LA PLACE." It, however, refused
to award damages in the latter's favor, considering that there was no evidence
presented to substantiate the amount of damages it suffered due to the former's
acts. The BLA found that "ST. FRANCIS," being a name of a Catholic saint, may
be considered as an arbitrary mark capable of registration when used in real
estate development projects as the name has no direct connection or
significance when used in association with real estate. The BLA neither deemed
"ST. FRANCIS" as a geographically descriptive mark, opining that there is no
specific lifestyle, aura, quality or characteristic that the real estate projects
possess except for the fact that they are located along St. Francis Avenue and
St. Francis Street (now known as Bank Drive), Ortigas Center. In this light, the
BLA found that while respondent's use of the mark "ST. FRANCIS" has not
attained exclusivity considering that there are other real estate development
projects bearing the name "St. Francis" in other areas, 10 it must nevertheless be
pointed out that respondent has been known to be the only real estate firm to
transact business using such name within the Ortigas Center vicinity.
Accordingly, the BLA considered respondent to have gained goodwill and
reputation for its mark, which therefore entitles it to protection against the use by
other persons, at least, to those doing business within the Ortigas Center. 11
Meanwhile, on March 28, 2007, the BLA rendered a Decision 12 in the St.
Francis Towers IP Case, denying petitioners' application for registration of the
mark "THE ST. FRANCIS TOWERS". Excluding the word "TOWERS" in view of
petitioners' disclaimer thereof, the BLA ruled that petitioners cannot register the
mark "THE ST. FRANCIS" since it is confusingly similar to respondent's "ST.
FRANCIS" marks which are registered with the Department of Trade and
Industry (DTI). It held that respondent had a better right over the use of the mark
"ST. FRANCIS" because of the latter's appropriation and continuous usage
thereof for a long period of time. 13
A little over a year after, or on March 31, 2008, the BLA then rendered a
Decision 14 in the St. Francis Shangri-La IP Case, allowing petitioners'
application for registration of the mark "THE ST. FRANCIS SHANGRI-LA
PLACE." It found that respondent cannot preclude petitioners from using the
mark "ST. FRANCIS" as the records show that the former's use thereof had not
been attended with exclusivity. More importantly, it found that petitioners had
adequately appended the word "Shangri-La" to its composite mark to distinguish
it from that of respondent, in which case, the former had removed any likelihood
of confusion that may arise from the contemporaneous use by both parties of the
mark "ST. FRANCIS".
Both parties appealed the decision in the IPV Case, while petitioners
appealed the decision in the St. Francis Towers IP Case. Due to the identity of
the parties and issues involved, the IPO Director-General ordered the
consolidation of the separate appeals. 15 Records are, however, bereft of any
showing that the decision in the St. Francis Shangri-La IP Case was appealed
by either party and, thus, is deemed to have lapsed into finality.SITCEA

The IPO Director-General Ruling

In a Decision 16 dated September 3, 2008, then IPO Director-General
Adrian S. Cristobal, Jr. affirmed the rulings of the BLA that: (a) petitioners cannot
register the mark "THE ST. FRANCIS TOWERS"; and (b) petitioners are not
guilty of unfair competition in its use of the mark "THE ST. FRANCIS SHANGRI-
LA PLACE." However, the IPO Director-General reversed the BLA's finding that
petitioners committed unfair competition through their use of the mark "THE ST.
FRANCIS TOWERS," thus dismissing such charge. He found that respondent
could not be entitled to the exclusive use of the mark "ST. FRANCIS," even at
least to the locality where it conducts its business, because it is a geographically
descriptive mark, considering that it was petitioners' as well as respondent's
intention to use the mark "ST. FRANCIS" in order to identify, or at least
associate, their real estate development projects/businesses with the place or
location where they are situated/conducted, particularly, St. Francis Avenue and
St. Francis Street (now known as Bank Drive), Ortigas Center. He further opined
that respondent's registration of the name "ST. FRANCIS" with the DTI is
irrelevant since what should be controlling are the trademark registrations with
the IPO itself. 17 Also, the IPO Director-General held that since the parties are
both engaged in the real estate business, it would be "hard to imagine that a
prospective buyer will be enticed to buy, rent or purchase [petitioners'] goods or
services believing that this is owned by [respondent] simply because of the name
'ST. FRANCIS'. The prospective buyer would necessarily discuss things with the
representatives of [petitioners] and would readily know that this does not belong
to [respondent]". 18
Disagreeing solely with the IPO Director-General's ruling on the issue of
unfair competition (the bone of contention in the IPV Case), respondent elevated
the same to the CA.
In contrast, records do not show that either party appealed the IPO
Director-General's ruling on the issue of the registrability of the mark "THE ST.
FRANCIS TOWERS" (the bone of contention in the St. Francis Towers IP Case).
As such, said pronouncement is also deemed to have lapsed into finality.
 The CA Ruling
In a Decision 19 dated December 18, 2009, the CA found petitioners guilty
of unfair competition not only with respect to their use of the mark "THE ST.
FRANCIS TOWERS" but also of the mark "THE ST. FRANCIS SHANGRI-LA
PLACE". Accordingly, it ordered petitioners to cease and desist from using "ST.
FRANCIS" singly or as part of a composite mark, as well as to jointly and
severally pay respondent a fine in the amount of P200,000.00.
The CA did not adhere to the IPO Director-General's finding that the mark
"ST. FRANCIS" is geographically descriptive, and ruled that respondent — which
has exclusively and continuously used the mark "ST. FRANCIS" for more than a
decade, and, hence, gained substantial goodwill and reputation thereby — is
very much entitled to be protected against the indiscriminate usage by other
companies of the trademark/name it has so painstakingly tried to establish and
maintain. Further, the CA stated that even on the assumption that "ST.
FRANCIS" was indeed a geographically descriptive mark, adequate protection
must still be given to respondent pursuant to the Doctrine of Secondary
Meaning. 20
Dissatisfied, petitioners filed the present petition.
The Issue Before the Court
With the decisions in both Inter Partes Cases having lapsed into finality,
the sole issue thus left for the Court's resolution is whether or not petitioners are
guilty of unfair competition in using the marks "THE ST. FRANCIS TOWERS"
and "THE ST. FRANCIS SHANGRI-LA PLACE".
The Court's Ruling
The petition is meritorious.
Section 168 of Republic Act No. 8293, 21 otherwise known as the
"Intellectual Property Code of the Philippines" (IP Code), provides for the rules
and regulations on unfair competition.
To begin, Section 168.1 qualifies who is entitled to protection against
unfair competition. It states that "[a] person who has identified in the mind of the
public the goods he manufactures or deals in, his business or services from
those of others, whether or not a registered mark is employed, has a property
right in the goodwill of the said goods, business or services so identified, which
will be protected in the same manner as other property rights". cHSTEA

Section 168.2 proceeds to the core of the provision, describing forthwith

who may be found guilty of and subject to an action of unfair competition — that
is, "[a]ny 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 who shall commit any acts calculated to
produce said result . . . ."
Without limiting its generality, Section 168.3 goes on to specify examples
of acts which are considered as constitutive of unfair competition, viz.:
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 service of another
who has identified such services in the mind of the public;
or
(c) Any person who shall make any false statement in the
course of trade or who shall commit any other act
contrary to good faith of a nature calculated to discredit
the goods, business or services of another.
Finally, Section 168.4 dwells on a matter of procedure by stating that the
"[t]he remedies provided by Sections 156, 22 157, 23 and 161 24 shall
apply mutatis mutandis."
The statutory attribution of the unfair competition concept is well-
supplemented by jurisprudential pronouncements. In the recent case of Republic
Gas Corporation v. Petron Corporation, 25 the Court has echoed the classic
definition of the term which is "'the passing off (or palming off) or attempting to
pass off upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the public'.
Passing off (or palming off) takes place where the defendant, by imitative devices
on the general appearance of the goods, misleads prospective purchasers into
buying his merchandise under the impression that they are buying that of his
competitors. [In other words], the defendant gives his goods the general
appearance of the goods of his competitor with the intention of deceiving the
public that the goods are those of his competitor." 26 The "true test" of unfair
competition has thus been "whether the acts of the defendant have the intent
of deceiving or are calculated to deceive the ordinary buyer making his
purchases under the ordinary conditions of the particular trade to which
the controversy relates". Based on the foregoing, it is therefore essential to
prove the existence of fraud, or the intent to deceive, actual or
probable, 27 determined through a judicious scrutiny of the factual circumstances
attendant to a particular case. 28
TAcCDI

Here, the Court finds the element of fraud to be wanting; hence, there can
be no unfair competition. The CA's contrary conclusion was faultily premised on
its impression that respondent had the right to the exclusive use of the mark "ST.
FRANCIS," for which the latter had purportedly established considerable
goodwill. What the CA appears to have disregarded or been mistaken in its
disquisition, however, is the geographically-descriptive nature of the mark "ST.
FRANCIS" which thus bars its exclusive appropriability, unless a secondary
meaning is acquired. As deftly explained in the U.S. case of Great Southern
Bank v. First Southern Bank: 29 "[d]escriptive geographical terms are in
the 'public domain'in the sense that every seller should have the right to
inform customers of the geographical origin of his goods. A 'geographically
descriptive term' is any noun or adjective that designates geographical location
and would tend to be regarded by buyers as descriptive of the geographic
location of origin of the goods or services. A geographically descriptive term
can indicate any geographic location on earth, such as continents, nations,
regions, states, cities, streets and addresses, areas of cities, rivers, and any
other location referred to by a recognized name. In order to determine whether or
not the geographic term in question is descriptively used, the following question
is relevant: (1) Is the mark the name of the place or region from which the
goods actually come? If the answer is yes, then the geographic term is
probably used in a descriptive sense, and secondary meaning is required
for protection". 30
In Burke-Parsons-Bowlby Corporation v. Appalachian Log Homes,
Inc., 31 it was held that secondary meaning is established when a descriptive
mark no longer causes the public to associate the goods with a particular place,
but to associate the goods with a particular source. In other words, it is not
enough that a geographically-descriptive mark partakes of the name of a place
known generally to the public to be denied registration as it is also necessary to
show that the public would make a goods/place association — that is, to
believe that the goods for which the mark is sought to be registered originate in
that place. To hold such a belief, it is necessary, of course, that the purchasers
perceive the mark as a place name, from which the question of obscurity or
remoteness then comes to the fore. 32 The more a geographical area is obscure
and remote, it becomes less likely that the public shall have a goods/place
association with such area and thus, the mark may not be deemed as
geographically descriptive. However, where there is no genuine issue that
the geographical significance of a term is its primary significance and where
the geographical place is neither obscure nor remote, a public association
of the goods with the place may ordinarily be presumed from the fact that
the applicant's own goods come from the geographical place named in the
mark. 33
Under Section 123.2 34 of the IP Code, specific requirements have to be
met in order to conclude that a geographically-descriptive mark has acquired
secondary meaning, to wit: (a) the secondary meaning must have arisen as a
result of substantial commercial use of a mark in the Philippines; (b) such
use must result in the distinctiveness of the mark insofar as the goods or
the products are concerned; and (c) proof of substantially exclusive and
continuous commercial use in the Philippines for five (5) years before the
date on which the claim of distinctiveness is made. Unless secondary
meaning has been established, a geographically-descriptive mark, due to its
general public domain classification, is perceptibly disqualified from trademark
registration. Section 123.1 (j) of the IP Code states this rule as follows:
SEC. 123. Registrability. —
123.1 A mark cannot be registered if it:
xxx xxx xxx
(j) Consists exclusively of signs or of indications that may
serve in trade to designate the kind, quality, quantity,
intended purpose, value, geographical origin, time or
production of the goods or rendering of the services, or
other characteristics of the goods or services; (Emphasis
supplied) HcSETI

xxx xxx xxx

Cognizant of the foregoing, the Court disagrees with the CA that
petitioners committed unfair competition due to the mistaken notion that
petitioner had established goodwill for the mark "ST. FRANCIS" precisely
because said circumstance, by and of itself, does not equate to fraud under the
parameters of Section 168 of the IP Code as above-cited. In fact, the records are
bereft of any showing that petitioners gave their goods/services the general
appearance that it was respondent which was offering the same to the public.
Neither did petitioners employ any means to induce the public towards a false
belief that it was offering respondent's goods/services. Nor did petitioners make
any false statement or commit acts tending to discredit the goods/services
offered by respondent. Accordingly, the element of fraud which is the core of
unfair competition had not been established.
Besides, respondent was not able to prove its compliance with the
requirements stated in Section 123.2 of the IP Code to be able to conclude that it
acquired a secondary meaning — and, thereby, an exclusive right — to the "ST.
FRANCIS" mark, which is, as the IPO Director-General correctly pointed out,
geographically-descriptive of the location in which its realty developments have
been built, i.e., St. Francis Avenue and St. Francis Street (now known as "Bank
Drive"). Verily, records would reveal that while it is true that respondent had been
using the mark "ST. FRANCIS" since 1992, its use thereof has been merely
confined to its realty projects within the Ortigas Center, as specifically mentioned.
As its use of the mark is clearly limited to a certain locality, it cannot be said that
there was substantial commercial use of the same recognized all throughout the
country. Neither is there any showing of a mental recognition in buyers' and
potential buyers' minds that products connected with the mark "ST. FRANCIS"
are associated with the same source 35 — that is, the enterprise of respondent.
Thus, absent any showing that there exists a clear goods/service-association
between the realty projects located in the aforesaid area and herein respondent
as the developer thereof, the latter cannot be said to have acquired a secondary
meaning as to its use of the "ST. FRANCIS" mark.
In fact, even on the assumption that secondary meaning had been
acquired, said finding only accords respondents protectional qualification under
Section 168.1 of the IP Code as above quoted. Again, this does not automatically
trigger the concurrence of the fraud element required under Section 168.2 of
the IP Code, as exemplified by the acts mentioned in Section 168.3 of the same.
Ultimately, as earlier stated, there can be no unfair competition without this
element. In this respect, considering too the notoriety of the Shangri-La brand in
the real estate industry which dilutes petitioners' propensity to merely ride on
respondent's goodwill, the more reasonable conclusion is that the former's use of
the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-
LA PLACE" was meant only to identify, or at least associate, their real estate
project/s with its geographical location. As aptly observed by the IPO Director-
General: 36
In the case at hand, the parties are business competitors engaged in
real estate or property development, providing goods and services
directly connected thereto. The "goods" or "products" or "services" are
real estate and the goods and the services attached to it or directly
related to it, like sale or lease of condominium units, offices, and
commercial spaces, such as restaurants, and other businesses. For
these kinds of foods or services there can be no description of its
 geographical origin as precise and accurate as that of the name of
the place where they are situated. (Emphasis and underscoring
supplied)
Hence, for all the reasons above-discussed, the Court hereby grants the
instant petition, and, thus, exonerates petitioners from the charge of unfair
competition in the IPV Case. As the decisions in the Inter Partes Cases were not
appealed, the registrability issues resolved therein are hereby deemed to have
attained finality and, therefore, are now executory.
WHEREFORE, the petition is GRANTED. The Decision dated December
18, 2009 of the Court of Appeals in CA-G.R. SP No. 105425 is
hereby REVERSED and SET ASIDE. Accordingly, the Decision dated
September 3, 2008 of the Intellectual Property Office-Director General
is REINSTATED. CHaDIT

SO ORDERED.
Carpio, Brion, Peralta * and Perez, JJ., concur.
(Shang Properties Realty Corp. v. St. Francis Development Corp., G.R. No.
|||

190706, [July 21, 2014])

THIRD DIVISION

[G.R. No. 188996. February 1, 2017.]

SERI SOMBOONSAKDIKUL, petitioner, vs. ORLANE

S.A., respondent.

DECISION

JARDELEZA, J : p

Assailed in this petition is the Decision 1 of the Court of Appeals (CA) in

CA-G.R. SP No. 105229 dated July 14, 2009 which affirmed the decision of
the Director General of the Intellectual Property Office (IPO) denying the
application for the mark "LOLANE." HTcADC

Facts
On September 23, 2003, petitioner Seri Somboonsakdikul (petitioner)
filed an application for registration 2 of the mark LOLANE with the IPO for
goods 3 classified under Class 3 (personal care products) of the International
Classification of Goods and Services for the Purposes of the Registration of
Marks (International Classification of Goods). 4Orlane S.A. (respondent) filed
an opposition to petitioner's application, on the ground that the mark LOLANE
was similar to ORLANE in presentation, general appearance and
pronunciation, and thus would amount to an infringement of its
mark. 5 Respondent alleged that: (1) it was the rightful owner of the ORLANE
mark which was first used in 1948; (2) the mark was earlier registered in the
Philippines on July 26, 1967 under Registration No. 129961 for the following
goods: 6
x x x perfumes, toilet water, face powders, lotions, essential oils,
cosmetics, lotions for the hair, dentrifices, eyebrow pencils,
make-up creams, cosmetics & toilet preparations under
Registration No. 12996. 7
and (3) on September 5, 2003, it filed another application for use of the
trademark on its additional products:
x x x toilet waters; revitalizing waters, perfumes, deodorants and
body deodorants, anti-perspiration toiletries; men and women
perfume products for face care and body care; face, eye, lips,
nail, hand make-up products and make-up removal products,
towels impregnated with cosmetic lotions; tanning and instant
tanning sunproducts, sunprotection products, (not for medical
use), after-suncosmetic products; cosmetic products; slimming
cosmetic aids; toiletries; lotions, shampoos and hair care
products; shave and after shave products, shaving and hair
removing products; essential oils; toothpastes; toiletry, cosmetic
and shaving kits for travel, filled or fitted vanity-cases[.] 8
Respondent adds that by promotion, worldwide registration, widespread
and high standard use, the mark had acquired distinction, goodwill, superior
quality image and reputation and was now well-known. 9 Imputing bad faith on
the petitioner, respondent claimed that LOLANE's first usage was only on
August 19, 2003. 10
In his answer, 11 petitioner denied that the LOLANE mark was
confusingly similar to the mark ORLANE. He averred that he was the lawful
owner of the mark LOLANE which he has used for various personal care
products sold worldwide. He alleged that the first worldwide use of the mark
was in Vietnam on July 4, 1995. Petitioner also alleged that he had
continuously marketed and advertised Class 3 products bearing LOLANE
mark in the Philippines and in different parts of the world and that as a result,
the public had come to associate the mark with him as provider of quality
personal care products. 12
 Petitioner maintained that the marks were distinct and not confusingly
similar either under the dominancy test or the holistic test. The mark ORLANE
was in plain block upper case letters while the mark LOLANE was printed in
stylized word with the second letter L and the letter A co-joined. Furthermore,
the similarity in one syllable would not automatically result in confusion even if
used in the same class of goods since his products always appear with Thai
characters while those of ORLANE always had the name Paris on it. The two
marks are also pronounced differently. Also, even if the two marks contained
the word LANE it would not make them confusingly similar since the IPO had
previously allowed the co-existence of trademarks containing the syllable "joy"
or "book" and that he also had existing registrations and pending applications
for registration in other countries. 13
The Bureau of Legal Affairs (BLA) rejected petitioner's application in a
Decision 14 dated February 27, 2007, finding that respondent's application
was filed, and its mark registered, much earlier. 15 The BLA ruled that there
was likelihood of confusion based on the following observations: (1) ORLANE
and LOLANE both consisted of six letters with the same last four letters —
LANE; (2) both were used as label for similar products; (3) both marks were in
two syllables and that there was only a slight difference in the first syllable;
and (4) both marks had the same last syllable so that if these marks were
read aloud, a sound of strong similarity would be produced and such would
likely deceive or cause confusion to the public as to the two trademarks. 16
Petitioner filed a motion for reconsideration but this was denied by the
Director of the BLA on May 7, 2007. 17 The BLA ruled that the law did not
require the marks to be so identical as to produce actual error or mistake as
the likelihood of confusion was enough. The BLA also found that the dominant
feature in both marks was the word LANE; and that the marks had a strong
visual and aural resemblance that could cause confusion to the buying public.
This resemblance was amplified by the relatedness of the goods. 18
On appeal, the Director General of the IPO affirmed the Decision of the
BLA Director. Despite the difference in the first syllable, there was a strong
visual and aural resemblance since the marks had the same last four
letters, i.e., LANE, and such word is pronounced in this jurisdiction as in
"pedestrian lane." 19 Also, the mark ORLANE is a fanciful mark invented by
the owner for the sole purpose of functioning as a trademark and is highly
distinctive. Thus, the fact that two or more entities would accidentally adopt an
identical or similar fanciful mark was too good to be true especially when they
dealt with the same goods or services. 20 The Director General also noted that
foreign judgments invoked by petitioner for the grant of its application are not
judicial precedents. 21
 Thus, petitioner filed a petition for review 22 before the CA arguing that
there is no confusing similarity between the two marks. Petitioner maintained
that LANE is not the dominant feature of the mark and that the dominancy test
did not apply since the trademarks are only plain word marks and the
dominancy test presupposes that the marks involved are composite
marks. 23 Petitioner pointed out that the IPO had previously allowed the mark
GIN LANE under Registration No. 4-2004-006914 which also involved
products under Class 3. 24 While petitioner admitted that foreign judgments
are not judicial precedents, he argued that the IPO failed to recognize relevant
foreign judgments, i.e.,the Australian Registrar of Trademarks and the IPO of
Singapore which ruled that there was no confusing similarity between the
marks LOLANE and ORLANE. 25 Lastly, the Director General should have
deferred to the findings of the Trademark Examiner who made a substantive
examination of the application for trademark registration, and who is an expert
in the field and is in the best position to determine whether there already
exists a registered mark or mark for registration. Since petitioner's application
for registration of the mark LOLANE proceeded to allowance and publication
without any adverse citation of a prior confusingly similar mark, this meant
that the Trademark Examiner was of the view that LOLANE was not
confusingly similar to ORLANE. 26 aScITE

The CA Ruling
The CA denied the petition and held that there exists colorable imitation
of respondent's mark by LOLANE. 27
The CA accorded due respect to the Decision of the Director General
and ruled that there was substantial evidence to support the IPO's findings of
fact. Applying the dominancy test, the CA ruled that LOLANE's mark is
confusingly or deceptively similar to ORLANE. There are predominantly
striking similarities in the two marks including LANE, with only a slight
difference in the first letters, thus the two marks would likely cause confusion
to the eyes of the public. The similarity is highlighted when the two marks are
pronounced considering that both are one word consisting of two syllables.
The CA ruled that when pronounced, the two marks produce similar
sounds. 28 The CA did not heed petitioner's contention that since the mark
ORLANE is of French origin, the same is pronounced as "OR-LAN." Filipinos
would invariably pronounce it as "OR-LEYN." 29 The CA also noted that the
trademark ORLANE is a fanciful name and petitioner was not able to explain
why he chose the word LOLANE as trademark for his personal care products.
Thus, the only logical conclusion is that he would want to benefit from the
established reputation and goodwill of the ORLANE mark. 30
The CA rejected petitioner's assertion that his products' cheaper price
and low-income market eliminates the likelihood of confusion. Low-income
groups, and even those who usually purchased ORLANE products despite the
higher cost, may be led to believe that LOLANE products are low-end
personal care products also marketed by respondent. 31
The CA upheld the applicability of the dominancy test in this case.
According to the CA, the dominancy test is already recognized and
incorporated in Section 155.1 of Republic Act No. 8293 (RA 8293), otherwise
known as the Intellectual Property Code of the
Philippines. 32 Citing McDonald's Corporation v. MacJoy Fastfood
Corporation, 33 the CA ruled that the dominancy test is also preferred over the
holistic test. This is because the latter relies only on the visual comparison
between two trademarks, whereas the dominancy test relies not only on the
visual, but also on their aural and connotative comparisons, and their overall
impressions created. 34 Nonetheless, the CA stated that there is nothing in
this jurisdiction dictating that the dominancy test is applicable for composite
marks. 35
The CA was not swayed by the alleged favorable judgment by the IPO
in the GIN LANE application, ruling that in trademark cases, jurisprudential
precedents should be applied only to a case if they are specifically in
point. 36 It also did not consider the ruling of the IPOs in Australia, South
Africa, Thailand and Singapore which found no confusing similarity between
the marks LOLANE and ORLANE, stating that foreign judgments do not
constitute judicial precedent in this jurisdiction. 37
Finally, the CA did not give merit to petitioner's contention that the
Director General should have deferred to the findings of the Trademark
Examiner. According to the CA, the proceedings before the Trademark
Examiner are ex-parte, 38 and his findings are merely prima facie. Whatever
his decision may be is still subject to review and/or appeal. 39
The Petition 40
Petitioner maintains that the CA erred in its interpretation of the
dominancy test, when it ruled that the dominant feature of the contending
marks is the suffix "LANE." 41The CA failed to consider that in determining the
dominant portion of a mark, significant weight must be given to whether the
buyer would be more likely to remember and use one part of a mark as
indicating the origin of the goods. 42 Thus, that part which will likely make the
most impression on the ordinary viewer will be treated as the dominant portion
of conflicting marks and given greater weight in the comparison. 43
Petitioner argues that both LOLANE and ORLANE are plain word
marks which are devoid of features that will likely make the most impression
on the ordinary viewer. If at all, the very word marks themselves, LOLANE
and ORLANE are each to be regarded as dominant features. 44 Moreover, the
suffix LANE is a weak mark, being "in common use by many other sellers in
the market." 45 Thus, LANE is also used in the marks SHELLANE and GIN
LANE, the latter covering goods under Class 3. Moreover, the two marks are
aurally different since respondent's products originate from France and is read
as "OR-LAN" and not "OR-LEYN." 46
Petitioner also claims that the CA completely disregarded the holistic
test, thus ignoring the dissimilarity of context between LOLANE and ORLANE.
Assuming that the two marks produce similar sounds when pronounced, the
differences in marks in their entirety as they appear in their respective product
labels should still be the controlling factor in determining confusing
similarity. 47
Besides, there has been no explicit declaration abandoning the holistic
test. 48 Thus, petitioner urges us to go beyond the similarities in spelling and
instead consider how the marks appear in their respective labels, the
dissimilarities in the size and shape of the containers, their color, words
appearing thereon and the general appearance, 49 hence: (1) the commonality
of the marks ORLANE and LOLANE starts from and ends with the four-letter
similarity — LANE and nothing else; 50 (2) ORLANE uses "safe" or
conventional colors while LOLANE uses loud or psychedelic colors and
designs with Thai characters; 51 and (3) ORLANE uses the term "Paris,"
indicating the source of origin of its products. 52
HEITAD

Petitioner likewise claims that consumers will be more careful in their

choice because the goods in question are directly related to personal hygiene
and have direct effects on their well-being, health and safety. 53 Moreover,
with the huge price difference between ORLANE and LOLANE products,
relevant purchasers are less likely to be confused. 54
Finally, petitioner notes that respondent has neither validly proven nor
presented sufficient evidence that the mark ORLANE is in actual commercial
use in the Philippines. Respondent failed to allege in any of its pleadings
submitted to the IPO's BLA and the IPO Director General the names of local
outlets that products bearing the mark ORLANE are being marketed or sold to
the general consuming public. 55
Respondent's Comment 56
Respondent reiterates the decisions of the CA and the IPO. 57 It
maintains that ORLANE is entitled to protection under RA 8293 since it is
registered with the IPO with proof of actual use. 58 Respondent posits that it
has established in the world 59 and in the Philippines an image and reputation
for manufacturing and selling quality beauty products. Its products have been
sold in the market for 61 years and have been used in the Philippines since
1972. 60 Thus, to allow petitioner's application would unduly prejudice
respondent's right over its registered trademark. 61 Lastly, respondent argue
that decisions of administrative agencies such as the IPO shall not be
disturbed by the courts, absent any showing that the former have acted
without or in excess of their jurisdiction, or with grave abuse of discretion. 62
Issue
We resolve the issue of whether there is confusing similarity between
ORLANE and LOLANE which would bar the registration of LOLANE before
the IPO.
Our Ruling
We find that the CA erred when it affirmed the Decision of the IPO.
While it is an established rule in administrative law that the courts of
justice should respect the findings of fact of administrative agencies, the
courts may not be bound by such findings of fact when there is absolutely no
evidence in support thereof or such evidence is clearly, manifestly and
patently insubstantial; and when there is a clear showing that the
administrative agency acted arbitrarily or with grave abuse of discretion or in a
capricious and whimsical manner, such that its action may amount to an
excess or lack of jurisdiction. 63 Moreover, when there is a showing that the
findings or conclusions, drawn from the same pieces of evidence, were
arrived at arbitrarily or in disregard of the evidence on record, they may be
reviewed by the courts. 64 Such is the case here.
There is no colorable imitation between the marks LOLANE and
ORLANE which would lead to any likelihood of confusion to the ordinary
purchasers.
A trademark is defined under Section 121.1 of RA 8293 as any visible
sign capable of distinguishing the goods. It is susceptible to registration if it is
crafted fancifully or arbitrarily and is capable of identifying and distinguishing
the goods of one manufacturer or seller from those of another. 65 Thus, the
mark must be distinctive. 66 The registrability of a trademark is governed by
Section 123 of RA 8293. Section 123.1 provides:
Section 123. Registrability. —
123.1. A mark cannot be registered if it:
xxx xxx xxx
d. Is identical with a registered mark belonging to a different
proprietor or a mark with an earlier filing or priority date, in
respect of:
i. The same goods or services, or
ii. Closely related goods or services, or
 iii. If it nearly resembles such a mark as to be likely to deceive or
cause confusion;
e. Is identical with, or confusingly similar to, or constitutes a
translation of a mark which is considered by the competent
authority of the Philippines to be well-known internationally
and in the Philippines, whether or not it is registered here,
as being already the mark of a person other than the
applicant for registration, and used for identical or similar
goods or services: Provided, That in determining whether a
mark is well-known, account shall be taken of the
knowledge of the relevant sector of the public, rather than
of the public at large, including knowledge in the
Philippines which has been obtained as a result of the
promotion of the mark; ATICcS

xxx xxx xxx

In Mighty Corporation v. E. & J. Gallo Winery, 67 we laid down the
requirements for a finding of likelihood of confusion, thus:
There are two types of confusion in trademark.
infringement. The first is "confusion of goods" when an
otherwise prudent purchaser is induced to purchase one
product in the belief that he is purchasing another, in
which case defendant's goods are then bought as the
plaintiff's and its poor quality reflects badly on the
plaintiff's reputation. The other is "confusion of business"
wherein the goods of the parties are different but the
defendant's product can reasonably (though mistakenly)
be assumed to originate from the plaintiff, thus deceiving
the public into believing that there is some connection
between the plaintiff and defendant which, in fact, does
not exist.
In determining the likelihood of confusion, the
Court must consider: [a] the resemblance between
the trademarks; [b] the similarity of the goods to
which the trademarks are attached; [c] the likely
effect on the purchaser and [d] the registrant's
express or implied consent and other fair and
equitable considerations. (Citations omitted, emphasis
supplied.) 68
While Mighty Corporation enumerates four requirements, the most
essential requirement, to our mind, for the determination of likelihood of
confusion is the existence of resemblance between the
trademarks, i.e., colorable imitation. Absent any finding of its existence, there
can be no likelihood of confusion. Thus we held:
 Whether a trademark causes confusion and is
likely to deceive the public hinges on "colorable imitation"
which has been defined as "such similarity in form,
content, words, sound, meaning, special arrangement or
general appearance of the trademark or trade name in
their overall presentation or in their essential and
substantive and distinctive parts as would likely mislead
or confuse persons in the ordinary course of purchasing
the genuine article." (Citations omitted.) 69
We had the same view in Emerald Garment Manufacturing Corporation
v. Court of Appeals, 70 where we stated:
Proceeding to the task at hand, the essential
element of infringement is colorable imitation. This
term has been defined as "such a close or ingenious
imitation as to be calculated to deceive ordinary
purchasers, or such resemblance of the infringing mark
to the original as to deceive an ordinary purchaser giving
such attention as a purchaser usually gives, and to cause
him to purchase the one supposing it to be the other." ETHIDa

Colorable imitation does not mean such similitude

as amounts to identity. Nor does it require that all the
details be literally copied. x x x (Citation omitted,
emphasis supplied.) 71
In determining colorable imitation, we have used either the dominancy
test or the holistic or totality test. The dominancy test considers the similarity
of the prevalent or dominant features of the competing trademarks that might
cause confusion, mistake, and deception in the mind of the purchasing public.
More consideration is given on the aural and visual impressions created by
the marks on the buyers of goods, giving little weight to factors like process,
quality, sales outlets, and market segments. 72 On the other hand, the holistic
test considers the entirety of the marks as applied to the products, including
the labels and packaging, in determining confusing similarity. The focus is not
only on the predominant words but also on the other features appearing on
the labels. 73
The CA's use of the dominancy test is in accord with our more recent
ruling in UFC Philippines, Inc. (now merged with Nutria-Asia, Inc. as the
surviving entity) v. Barrio Fiesta Manufacturing Corporation. 74 In UFC
Philippines, Inc., we relied on our declarations in McDonald's Corporation v.
L.C. Big Mak Burger, Inc., 75 Co Tiong Sa v. Director of Patents, 76and Societe
Des Produits Nestle, S.A. v. Court of Appeals 77 that the dominancy test is
more in line with the basic rule in trademarks that confusing similarity is
determined by the aural, visual and connotative and overall impressions
created by the marks. Thus, based on the dominancy test, we ruled that there
is no confusing similarity between "PAPA BOY & DEVICE" mark, and "PAPA
KETSARAP" and "PAPA BANANA CATSUP."
While there are no set rules as what constitutes a dominant feature with
respect to trademarks applied for registration, usually, what are taken into
account are signs, color, design, peculiar shape or name, or some special,
easily remembered earmarks of the brand that readily attracts and catches
the attention of the ordinary consumer. 78 In UFC Philippines, Inc., what we
considered as the dominant feature of the mark is the first word/figure that
catches the eyes or that part which appears prominently to the eyes and
ears. 79
However, while we agree with the CA's use of the dominancy test, we
arrive at a different conclusion. Based on the distinct visual and aural
differences between LOLANE and ORLANE, we find that there is no
confusing similarity between the two marks.
The suffix LANE is not the dominant feature of petitioner's mark. Neither
can it be considered as the dominant feature of ORLANE which would make
the two marks confusingly similar.
First, an examination of the appearance of the marks would show that
there are noticeable differences in the way they are written or printed as
shown below: 80
As correctly argued by petitioner in his answer before the BLA, there
are visual differences between LOLANE and ORLANE since the mark
ORLANE is in plain block upper case letters while the mark LOLANE was
rendered in stylized word with the second letter L and the letter A co-joined. 81
Second, as to the aural aspect of the marks, LOLANE and ORLANE do
not sound alike. Etepha v. Director of Patents, et al. 82 finds application in this
case. In Etepha, we ruled that there is no confusing similarity between
PERTUSSIN and ATUSSIN. The Court considered among other factors the
aural differences between the two marks as follows:
5. As we take up Pertussin and Atussin once
again, we cannot escape notice of the fact that the two
words do not sound alike — when pronounced. There is
not much phonetic similarity between the two. The
Solicitor General well-observed that in Pertussin the
pronunciation of the prefix "Per", whether correct or
incorrect, includes a combination of three letters P,
e and r; whereas, in Atussin the whole starts with the
single letter A added to suffix "tussin". Appeals to
the ear are dissimilar. And this, because in a word
combination, the part that comes first is the most
 pronounced. An expositor of the applicable rule here is
the decision in the Syrocol-Cheracol controversy. There,
the ruling is that trademark Syrocol (a cough medicine
preparation) is not confusedly similar to
trademark Cheracol (also a cough medicine preparation).
Reason: the two words "do not look or sound enough
alike to justify a holding of trademark infringement", and
the "only similarity is in the last syllable, and that is not
uncommon in names given drug compounds". (Citation
omitted, emphasis supplied.) 83
Similar to Etepha, appeals to the ear in pronouncing ORLANE and
LOLANE are dissimilar. The first syllables of each mark, i.e., OR and LO do
not sound alike, while the proper pronunciation of the last syllable LANE —
"LEYN" for LOLANE and "LAN" for ORLANE, being of French origin, also
differ. We take exception to the generalizing statement of the Director
General, which was affirmed by the CA, that Filipinos would invariably
pronounce ORLANE as "ORLEYN." This is another finding of fact which has
no basis, and thus, justifies our reversal of the decisions of the IPO Director
General and the CA. While there is possible aural similarity when certain
sectors of the market would pronounce ORLANE as "ORLEYN," it is not also
impossible that some would also be aware of the proper pronunciation —
especially since, as respondent claims, its trademark ORLANE has been sold
in the market for more than 60 years and in the Philippines, for more than 40
years. 84cSEDTC

Respondent failed to show proof that the suffix LANE has registered in
the mind of consumers that such suffix is exclusively or even predominantly
associated with ORLANE products. Notably and as correctly argued by
petitioner, the IPO previously allowed the registration of the mark GIN LANE
for goods also falling under Class 3, i.e., perfume, cologne, skin care
preparations, hair care preparations and toiletries. 85
We are mindful that in the earlier cases of Mighty
Corporation and Emerald, despite a finding that there is no colorable imitation,
we still discussed the nature of the goods using the trademark and whether
the goods are identical, similar, competing or related. We need not belabor a
similar discussion here considering that the essential element in determining
likelihood of confusion, i.e., colorable imitation by LOLANE of the mark
ORLANE, is absent in this case. Resemblance between the marks is a
separate requirement from, and must not be confused with, the requirement of
a similarity of the goods to which the trademarks are attached. In Great White
Shark Enterprises, Inc. v. Caralde, Jr., 86after we ruled that there was no
confusing similarity between Great White Shark's "GREG NORMAN LOGO"
and Caralde's "SHARK & LOGO" mark due to the visual and aural
 dissimilarities between the two marks, we deemed it unnecessary to resolve
whether Great White Shark's mark has gained recognition as a well-known
mark.
Finding that LOLANE is not a colorable imitation of ORLANE due to
distinct visual and aural differences using the dominancy test, we no longer
find it necessary to discuss the contentions of the petitioner as to the
appearance of the marks together with the packaging, nature of the goods
represented by the marks and the price difference, as well as the applicability
of foreign judgments. We rule that the mark LOLANE is entitled to registration.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated July 14, 2009 is REVERSED and SET ASIDE. Petitioner's
application of the mark LOLANE for goods classified under Class 3 of the
International Classification of Goods is GRANTED.
SO ORDERED.
Velasco, Jr., Bersamin, Reyes and Caguioa, * JJ., concur.
(Seri Somboonsakdikul v. Orlane S.A., G.R. No. 188996, [February 1, 2017],
|||

805 PHIL 37-58)

FIRST DIVISION

[G.R. No. 198889. January 20, 2016.]

UFC PHILIPPINES, INC. (now merged with NUTRI-ASIA, INC.,

with NUTRI-ASIA, INC. as the surviving
entity), petitioner, vs. BARRIO FIESTA MANUFACTURING
CORPORATION, respondent.

DECISION

LEONARDO-DE CASTRO, J : p

For our disposition is a petition for review on certiorari under Rule 45

seeking to annul and set aside the June 23, 2011 Decision 1 and the October
4, 2011 Resolution 2 of the Court of Appeals in CA-G.R. SP No. 107570,
which reversed and set aside the March 26, 2008 Decision 3 of the Bureau of
Legal Affairs of the Intellectual Property Office (IPO-BLA) and the January 29,
2009 Decision 4 of the Director General of the IPO.
 Petitioner Nutri-Asia, Inc. (petitioner) is a corporation duly organized
and existing under Philippine laws. 5 It is the emergent entity in a merger with
UFC Philippines, Inc. that was completed on February 11,
2009. 6 Respondent Barrio Fiesta Manufacturing Corporation (respondent) is
likewise a corporation organized and existing under Philippine laws.
On April 4, 2002, respondent filed Application No. 4-2002-002757 for
the mark "PAPA BOY & DEVICE" for goods under Class 30, specifically for
"lechon sauce." 7 The Intellectual Property Office (IPO) published said
application for opposition in the IP Phil. e-Gazette released on September 8,
2006. The mark appears as follows:
On December 11, 2006, petitioner filed with the IPO-BLA a Verified
Notice of Opposition to the above-mentioned application and alleged that:
1. The mark "PAPA" for use on banana catsup and other similar goods
was first used [in] 1954 by Neri Papa, and thus, was taken from
his surname;
2. After using the mark "PAPA" for about twenty-seven (27) years, Neri
Papa subsequently assigned the mark "PAPA" to Hernan D.
Reyes who, on September 17, 1981, filed an application to
register said mark "PAPA" for use on banana catsup, chili sauce,
achara, banana chips, and instant ube powder; CAIHTE

3. On August 14, 1983, Hernan D. Reyes was issued Certificate of

Registration No. 32416;
4. [Certificate of] Registration No. 32416 was subsequently assigned to
the following in successive fashion: Acres & Acres Food, Inc.,
Southeast Asia Food, Inc., Heinz-UFC Philippines, Inc., and
Opposer UFC Philippines, Inc.;
5. Last October 28, 2005, Heinz-UFC Philippines, Inc. filed Application
Serial No. 4-2005-010788 which, in effect, is a re-registration of
Registration No. 32416 which expired on August 11, 2003;
6. Hernan D. Reyes also filed on March 04, 1982 an application to
register in the Supplemental Register the "PAPA BANANA
CATSUP Label";
7. On August 11, 1983, Hernan D. Reyes was issued Certificate of
Registration No. SR-6282 which was subsequently assigned to
Acres & Acres Food, Inc., Southeast Asia Food, Inc., Heinz-UFC
Philippines, Inc.;
8. After its expiration, Opposer filed on November 15, 2006 Trademark
Application Serial No. 4-2006-012346 for the re-registration of the
"PAPA Label Design";
9. The mark "PAPA KETSARAP" for use on banana sauce falling under
Class 30 was also registered in favor of Acres & Acres Food, Inc.
 under Registration No. 34681 issued on August 23, 1985 and
renewed last August 23, 2005 by Heinz-UFC Philippines, Inc. for
ten (10) years;
10. On November 07, 2006, Registration No. 34681 was assigned to
Opposer;
11. Opposer has not abandoned the use of the mark "PAPA" and the
variations thereof as Opposer has continued their use up to the
present;
12. The mark "PAPA BOY & DEVICE" is identical to the mark "PAPA"
owned by Opposer and duly registered in its favor, particularly the
dominant feature thereof;
13. [With the] dominant feature of respondent-applicant's mark "PAPA
BOY & DEVICE", which is Opposer's "PAPA" and the variations
thereof, confusion and deception is likely to result: The consuming
public, particularly the unwary customers, will be deceived,
confused, and mistaken into believing that respondent-applicant's
goods come from Opposer or are authorized by Opposer to
Opposer's prejudice, which is particularly true considering that
Opposer's sister company, Southeast Asia Food, Inc., and its
predecessors-in-interest have been major manufacturers and
distributors of lechon sauce and other table sauces since 1965
under its registered mark "Mang Tomas";
14. Respondent-applicant's mark "PAPA BOY & DEVICE" which nearly
resembles Opposer's mark "PAPA" and the variations thereof will
impress upon the gullible or unsuspecting public that it is the
same or related to Opposer as to source because its dominant
part is the same as Opposer's mark and, thus, will likely be
mistaken to be the mark, or related to, or a derivative or variation
of, Opposer's mark;
15. The goods covered by respondent-applicant's application fall under
Class 30, the same Class under which Opposer's goods
enumerated in its earlier issued registrations;
16. The test of dominancy is now explicitly incorporated into law in
Section 155.1 of the IP Code which defines infringement as the
colorable imitation of a registered mark or a dominant feature
thereof, and is provided for by jurisprudence;
17. As a corporation also engaged in the food business, Respondent-
applicant knew and/or ought to know that Opposer and its
predecessors-in-interest have been using the mark "PAPA" and
the variations thereof for the last fifty-two (52) years while its
sister company is engaged in the business of manufacturing and
distributing "lechon sauce" and other table sauces for the last
forty-one (41) years;
18. The approval of the subject application will violate Opposer's right to
the exclusive use of its registered mark "PAPA" and the variations
thereof per Section 138 of the IP Code;
19. The approval of the subject application has caused and will continue
to cause great and irreparable damage and injury to Opposer;
20. Respondent-applicant filed the subject application fraudulently and in
bad faith; and
21. Respondent-applicant is not entitled to register the subject mark in its
favor. 8
In its verified opposition before the IPO, petitioner contended
that "PAPA BOY & DEVICE" is confusingly similar with its "PAPA"
marks inasmuch as the former incorporates the term "PAPA," which is
the dominant feature of petitioner's "PAPA" marks. Petitioner averred
that respondent's use of "PAPA BOY & DEVICE" mark for its lechon
sauce product, if allowed, would likely lead the consuming public to
believe that said lechon sauce product originates from or is authorized
by petitioner, and that the "PAPA BOY & DEVICE" mark is a variation
or derivative of petitioner's "PAPA" marks. Petitioner argued that this
was especially true considering that petitioner's ketchup product and
respondent's lechon sauce product are related articles that fall under
the same Class 30. 9
Petitioner alleged that the registration of respondent's
challenged mark was also likely to damage the petitioner, considering
that its former sister company, Southeast Asia Food, Inc., and the
latter's predecessors-in-interest, had been major manufacturers and
distributors of lechon and other table sauces since 1965, such as
products employing the registered "Mang Tomas" mark. DETACa

In its Verified Answer, respondent argued that there is no

likelihood of confusion between petitioner's family of "PAPA"
trademarks and respondent's "PAPA BOY & DEVICE" trademark.
Respondent raised affirmative defenses and we quote the relevant
ones below:
3. Opposer cites several of its following marks in
support of its opposition to the application but an
examination of said marks [reveals] that these have
already expired and/or that no confusing similarity exists .
. .;
4. Assuming that the mark "PAPA KETSARAP"
had been timely renewed on August 23, 2005 for
"banana sauce" under Class 30, the same is not a
hindrance to the successful registration of the mark
"PAPA BOY & DEVICE": Jurisprudence provides that a
certificate of registration confers upon the trademark
owner the exclusive right to use its own symbol only to
those goods specified in the certificate subject to the
conditions and limitations stated therein;
5. As a result, Opposer's right to use the mark
"PAPAKETSARAP" is limited to the products covered by
its certificate of registration which is Class 30 for banana
sauce;
6. Contrary to Opposer's belief, the dominant
features of Respondent-applicant's mark "PAPA BOY &
DEVICE" are the words "PAPA BOY" and the
representation of a smiling hog-like character gesturing
the thumbs-up sign and wearing a traditional Filipino hat
and scarf while the dominant feature of Opposer's mark
"PAPA KETSARAP" are the words "Papa" and
"Ketsarap", not the word "Papa"; and the word "Ketsarap"
is more prominently printed and displayed in the
foreground than the word "Papa" for which reasons
opposer's reference to the Dominancy Test fails;
7. Opposer's allegation that the registration of
Respondent-applicant's mark "PAPA BOY & DEVICE"
will damage and prejudice the mark "MANG TOMAS" is
irrelevant considering that Opposer's basis for filing this
opposition is the alleged confusing similarity between
Respondent-applicant's mark and Opposer's mark "PAPA
KETSARAP", not the mark "MANG TOMAS";
8. Respondent-applicant's mark "PAPA BOY &
DEVICE" is neither identical nor confusingly similar to
Opposer's mark "PAPA KETSARAP": Respondent-
applicant's mark "PAPABOY & DEVICE" is an arbitrary
mark which differs in overall sound, spelling, meaning,
style, configuration, presentation, and appearance from
Opposer's mark "PAPA KETSARAP";
9. The dissimilarities between the marks are so
distinct, thus, confusion is very unlikely: While Opposer's
mark is a plain word mark, Respondent-applicant's mark
"PAPA BOY & DEVICE" is much more intricate and
distinctive such as Opposer's mark not having the words
"Lechon Sauce" printed inside a blue ribbon-like device
which is illustrated below the words "PAPA BOY",
Opposer's mark not having a prominent smiling hog-like
character gesturing a thumbs-up sign and wearing a
Filipino hat and scarf stands beside the words "PAPA
BOY", and Opposer's mark not having the words "Barrio
Fiesta" albeit conspicuously displayed above the mark,
all which leave no doubt in the consumer's mind on the
product that he is purchasing;
10. Aside from the fact that Respondent-
applicant's mark "PAPA BOY & DEVICE" is distinct and
different in appearance, spelling, sound, meaning, and
style from Opposer's mark "PAPA KETSARAP", the
difference in the goods covered by both marks is
obvious: Since the goods covered by Respondent-
applicant's mark is unrelated and non-competing to those
covered by Opposer's mark, the doctrine allowing the
registrations of marks covering unrelated and non-
competing goods as enunciated by the Supreme Court is
therefore applicable in this case;
11. Respondent-applicant's mark cannot be
confusingly similar to Opposer's mark considering that
the products covered by these marks are different: While
Respondent-applicant's mark "PAPA BOY & DEVICE"
covers lechon sauce under Class 30, Opposer's mark
"PAPA KETSARAP" covers banana sauce;
12. If a consumer is in the market for banana
sauce, he will not buy lechon sauce and vice-versa and
as a result, the margin of error in the acquisition of one
from the other is simply remote;
13. Respondent-applicant is the exclusive owner
of the mark "PAPA BOY & DEVICE" for lechon sauce
under Class 30: The words "PAPA BOY" is a combination
of the nickname of Bonifacio Ongpauco who is one of
Respondent-applicant's incorporators and founders-
"BOY"- and the word "PAPA" as Bonifacio Ongpauco's
mother, Sixta P. Evangelista, had been fondly known as
"Mama Chit", making Respondent-applicant the prior
adopter, user, and applicant of the mark "PAPA BOY &
DEVICE" in the Philippines; aDSIHc

14. To protect its ownership over the mark "PAPA

BOY & DEVICE" considering that it is the first to adopt
and use said mark, Respondent-applicant applied for its
registration under Application Serial No. 4-2002-002757
for Class 30, and said application was found registrable
by the Examiner as a consequence of which the same
was recommended for allowance after undergoing a
thorough process of examination, which recommendation
was then approved by the Director of the Bureau of
Trademarks (BOT);
 15. Respondent-applicant's mark "PAPA BOY &
DEVICE" has been commercially used in the Philippines;
16. Respondent-applicant's mark "PAPA BOY &
DEVICE" has been promoted and advertised for a
considerable duration of time and over wide geographical
areas: Respondent-applicant has invested tremendous
amount of resources in the promotion of its mark "PAPA
BOY & DEVICE" through various media including print
publications and promotional materials;
17. The widespread local commercial use of the
subject mark by Respondent-applicant to distinguish and
identify its various high-quality consumer products has
earned Respondent-applicant a well-deserved business
reputation and goodwill;
18. Respondent-applicant's mark is distinctive and
capable of identifying its goods and distinguishing them
from those offered for sale by others in the market
including Opposer's goods for which reason no confusion
will result because Respondent-applicant's mark is for
lechon sauce while Opposer's mark is for banana sauce;
and
19. The presence of a common prefix "PAPA" in
the marks of both parties does not render said marks
identical or confusingly similar: Opposer cannot
exclusively appropriate said prefix considering that other
marks such as "Papa Heinz Pizza", "Papa Heinz
Sausage", "Papa Beaver", "Papa Pop", "Pizza Papa
John's & Design", "Papadoods", and "Papa in Wine and
Device" are valid and active. 10
Petitioner's mark and its variations appear as follows:
1. "PAPA" under Registration No. 32416 for Class 29 goods; 11
2. The mark "PAPA" as it appeared upon re-registration of
Certificate No. 32416, under Application No. 4-2005-
010788 for Classes 29 and 30 goods; 12
3. "PAPA LABEL DESIGN" under Registration No. 4-2006-
012364; 13 and
4. "PAPA KETSARAP" under Certificate of Registration No.
34681, for banana sauce (Class 30). 14
PROCEEDINGS BEFORE THE
INTELLECTUAL PROPERTY
OFFICE
 The case was referred to mediation but the parties failed to arrive at an
amicable settlement. The case was thus set for preliminary conference.
Subsequently, the IPO-BLA directed the parties to file their respective position
papers and draft decisions.
The IPO-BLA rendered a Decision on March 26, 2008 sustaining
petitioner's Opposition and rejecting respondent's application for "PAPA BOY
& DEVICE." The fallo of said decision reads as follows:
WHEREFORE, the VERIFIED NOTICE OF OPPOSITION filed
by UFC Philippines, Inc. is, as it is hereby, SUSTAINED.
Consequently, Application Serial No. 4-2002-002757 for the mark
"PAPA BOY & DEVICE" for lechon sauce under Class 30 filed on April
04, 2002 by Barrio Fiesta Manufacturing Corporation, is, as it is
hereby, REJECTED.
Let the file wrapper of PAPA BOY & Device subject matter of
this case be forwarded to the Bureau of Trademarks (BOT) for
appropriate action in accordance with this Decision. 15
Respondent filed an appeal before the IPO Director General, who found
it unmeritorious, and disposed of the case in the following manner:
WHEREFORE, the instant appeal is hereby DISMISSED. Let a
copy of this Decision as well as the trademark application and records
be furnished and returned to the Director of the Bureau of Legal Affairs
for appropriate action. Further, let also the Director of the Bureau of
Trademarks and the library of the Documentation, Information and
Technology Transfer Bureau be furnished a copy of this Decision for
information, guidance, and records purposes." 16
DECISION OF THE COURT OF
APPEALS
Respondent then filed a petition with the Court of Appeals, questioning
the above decision of the IPO Director General that affirmed the decision of
the IPO Bureau of Legal Affairs Director, which disallowed respondent's
application for trademark registration. Respondent's arguments before the
Court of Appeals are quoted below:
A.
REGISTRATION NOS. 32416 AND 42005010788 ISSUED FOR THE
"PAPA" MARK AND REGISTRATION NOS. SR-6282 AND
42006012364 ISSUED FOR THE TRADEMARK "PAPA BANANA
CATSUP LABEL/PAPA LABEL DESIGN" SHOULD NOT BE USED AS
BASIS IN DETERMINING THE EXISTENCE OF CONFUSING
SIMILARITY.
B.
THERE IS NO CONFUSING SIMILARITY BETWEEN PETITIONER-
APPLICANT'S "PAPA BOY & DEVICE" AND RESPONDENT'S "PAPA
KETSARAP" MARK.
C.
PETITIONER-APPLICANT IS ENTITLED TO THE REGISTRATION
OF THE MARK "PAPA BOY & DEVICE."
D.
THE OPPOSITION STATES NO CAUSE OF ACTION, AND HENCE,
SHOULD BE DENIED OUTRIGHT. 17
As regards the first ground, the Court of Appeals held:
Records show that respondent UFC has Certificates of
Registration for the trademarks PAPA, PAPA BANANA CATSUP label
and PAPA KETSARAP. A closer look at the respective Certificate[s] of
Registration of the aforementioned marks, however, reveals that at the
time the trademark application of petitioner was published in the IPO e-
Gazette on September 8, 2006, the duration of the trademark
registration of respondent over the marks PAPA and PAPA BANANA
CATSUP have already expired. On the other hand, the mark PAPA
KETSARAP was timely renewed by respondent as shown by the
Certificate of Renewal of Registration issued on September 1,
2006 by the Director of the Bureau of Trademarks.
Under R.A. No. 8293, as amended by R.A. No. 9150, the
duration of a trademark registration is 10 years, renewable for periods
of 10 years each renewal. The request for renewal must be made
within 6 months before or after the expiration of the registration.
Respondent's PAPA mark was not renewed within the period provided
for under RA No. 8293. Its registered term ended on August 11, 2003
but was reapplied for registration only on April 4, 2005. Meanwhile, the
mark PAPA BANANA CATSUP was registered by respondent only in
the Supplemental Register, hence, was not provided any protection. . .
. . It is noted that the PAPA BANANA CATSUP label was applied for
registration on November 15, 2006, over three years after the
expiration of its registration in the Supplemental Register of the
Philippine Patent Office on August 11, 2003. Thus, while petitioner
has a point that the marks PAPA and PAPA BANANA CATSUP
have already expired and the latter having been afforded no
protection at all and should not be juxtaposed with petitioner's
trademark, respondent can still use the marks PAPA KETSARAP
and PAPA BANANA CATSUP, it appearing that the Intellectual
Property Office issued a Certificate of Registration No. 4-2006-
012364 for the latter on April 30, 2007, to bar the registration of
petitioner's "PAPA BOY & DEVICE" mark. 18 (Emphases supplied,
citations omitted.)
TIADCc
 Anent the second ground, the Court of Appeals ruled in the following
manner:
After taking into account the aforementioned doctrines and
the factual circumstances of the case at bar, this Court, after
considering the trademarks involved as a whole, is of the view
that petitioner's trademark "PAPA BOY & DEVICE" is not
confusingly similar to respondent's "PAPA KETSARAP" and
"PAPA BANANA CATSUP" trademark. Petitioner's trademark is
"PAPA BOY" as a whole as opposed to respondent's "PAPA".
Although on its label the word "PAPA" is prominent, the trademark
should be taken as a whole and not piecemeal. The difference
between the two marks are conspicuous and noticeable. While
respondent's products are both labeled as banana sauces, that of
petitioner Barrio Fiesta is labeled as lechon sauce.
Moreover, it appears on the label of petitioner's product that the
said lechon sauce is manufactured by Barrio Fiesta thus, clearly
informing the public [of] the identity of the manufacturer of the lechon
sauce. As claimed by respondent, its products have been in
commercial use for decades. It is safe to assume then that the
consumers are already aware that "PAPA KETSARAP" and "PAPA
BANANA CATSUP" are products of UFC and not of petitioner or the
other way around. In addition, as correctly pointed out by petitioner, if a
consumer is in the market for banana sauce, he will not buy lechon
sauce and vice-versa because aside from the fact that the labels of
both parties' products contain the kind of sauce they are marketing, the
color of the products is visibly different. An ordinary consumer is
familiar with the fact that the color of a banana sauce is red while a
lechon sauce is dark brown. There can be no deception as both
products are marketed in bottles making the distinction visible to the
eye of the consumer and the likelihood of acquiring a wrong sauce,
remote. Even if the products are placed side by side, the dissimilarities
between the two marks are conspicuous, noticeable and substantial
enough to matter especially in the light of the following variables that
must be factored in.
Lastly, respondent avers that the word "PAPA" was coined after
the surname of the person who first created and made use of the mark.
Admittedly, while "PAPA" is a surname, it is more widely known as a
term of endearment for one's father. Respondent cannot, therefore,
claim exclusive ownership over and singular use of [the] term.
Petitioner was able to explain that it adopted the word "PAPA" in
parallel to the nickname of the founder of Barrio fiesta which is "MAMA
CHIT". "PAPA BOY" was derived from the nickname of one of the
incorporators of herein petitioner, a certain Bonifacio Ongpauco, son of
Mama Chit. 19 (Emphasis ours, citation omitted.)
THEORY OF PETITIONER
Thus, petitioner came to this Court, seeking the reversal of the
questioned decision and resolution of the Court of Appeals, and the
reinstatement of the decision of the IPO Director General affirming the
decision of the IPO-BLA. Petitioner raises the following grounds:
I.
The court a quo erred in applying the "holistic test" to determine
whether there is confusing similarity between the contending marks,
and in reversing the IPO-BLA and the Director General's application of
the "dominancy test."
II.
The court a quo erred in holding that there is no likelihood of confusion
between the contending marks given that the "PAPA BOY & DEVICE"
mark is used on lechon sauce, as opposed to ketchup products.
III.
The court a quo erred in holding that Petitioner cannot claim exclusive
ownership and use of the "PAPA" mark for its sauce products because
"PAPA" is supposedly a common term of endearment for one's
father. 20
Under the first ground, petitioner submitted the following arguments:
1. The findings of administrative agencies, if supported by substantial
evidence, are binding upon the courts. 21
Petitioner alleges that the Court of Appeals should have respected the
ruling of the IPO Director General, which was consistent with the ruling of the
IPO-BLA and supported by substantial evidence, instead of substituting its
findings of fact for those of the Director General and the IPO-BLA.
2. The dominancy test should have been applied to determine if there is
confusing similarity between the competing marks. 22
Petitioner points out that the Director General and the IPO-BLA found
that the dominant feature of the competing marks is the word "PAPA" and the
minor additions to respondent's "PAPA BOY & DEVICE" mark do not negate
likelihood of confusion caused by the latter's use of the dominant word
"PAPA." Petitioner claims that even compared solely to petitioner's "PAPA
KETSARAP" mark (Registration No. 34681), which is conceded to have been
timely renewed and to have never expired, respondent's "PAPA BOY &
DEVICE" would still create the likelihood of confusion. 23 AIDSTE

According to petitioner, the Court of Appeals based its decision

on Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd., 24 a case decided almost
five decades ago, long before Republic Act No. 8293 or the 1998 Intellectual
Property Code was enforced. Thus, the Court of Appeals erroneously applied
the holistic test since given the nature of the products bearing the competing
marks, the dominancy test should have been applied.
Petitioner claims that "[k]etchup and lechon sauce are common and
inexpensive household products that are sold in groceries and regularly
encountered by the ordinary or common purchaser who is not expected to
examine, scrutinize, and compare the details of the competing marks." 25
Petitioner distinguishes this case from Mead Johnson and claims that
the ordinary purchaser of ketchup or lechon sauce is not likely to closely
scrutinize each mark as a whole, for the latter is "undiscerningly rash" and
usually in a hurry, and cannot be expected to take note of the smiling hog-like
character or the blue ribbon-like device with the words "Lechon Sauce."
Petitioner argues that under the Intellectual Property Code, it is not necessary
for one to colorably imitate the competing trademark as a whole. It is sufficient
that one imitates a "dominant feature" of the mark to constitute trademark
infringement.
Petitioner asserts that as the IPO-BLA and the Director General
observed that the ordinary purchaser is most likely to notice the words "PAPA
BOY," which, in turn, may lead him to believe that there is a connection
between respondent's lechon sauce and petitioner's ketchup products.
Under the second ground, petitioner argues that the Court of Appeals
seemed to be unmindful that two kinds of confusion may arise from the use of
similar or colorable imitation marks, i.e., confusion of goods (product
confusion) and confusion of business (source or origin confusion). Petitioner
claims that it is reasonable to assume that it may expand its business to
producing lechon sauce, inasmuch as it already produces food sauce
products and its Articles of Incorporation authorizes it to do so.
Petitioner alleges that the IPO-BLA recognized that confusion of
business may arise from respondent's use of its "PAPA BOY & DEVICE" mark
for lechon sauce products, and that the Director-General agreed with the IPO-
BLA's findings on this issue.
Petitioner asserts that ketchup and lechon sauce are undeniably related
goods; that they belong to the same class, i.e., Class 30 of the Nice
Classifications; that they serve practically the same purpose, i.e., to spice up
dishes; and that they are sold in similar bottles in the same shelves in grocery
stores. Petitioner argues that the Court of Appeals had absolutely no basis for
stating that a person who is out to buy ketchup is not likely to buy lechon
sauce by mistake, as this analysis allegedly only applies to "product
confusion" and does not consider confusion of business. Petitioner alleges
that "[t]here equally is actionable confusion when a buyer purchases
Respondent's 'PAPA BOY' lechon sauce believing that the said product is
related to or associated with the famous 'PAPA KETSUP' makers." Petitioner
further alleges that "it is reasonable and likely for a consumer to believe that
Respondent's 'PAPA BOY' lechon sauce originated from or is otherwise
connected with Petitioner's line of sauces" and that this is "the precise evil that
recognition of confusion of business seeks to prevent." 26
Petitioner avers that "PAPA" is a well-known mark and that it has been
in commercial use as early as 1954 on banana ketchup and similar goods.
The "PAPA" mark is also registered as a trademark and in commercial use in
other parts of the world such as the United States of America and the Middle
East. Petitioner claims that "[b]eing a trademark that is registered and well-
known both locally and internationally, Petitioner's 'PAPA' marks cannot be
appropriated by another person or entity not only with respect to goods similar
to those with respect to which it is registered, but also with respect to goods
which are not similar to those for which the 'PAPA' marks are registered." 27
Under the third ground, petitioner claims that the fact that the word
"PAPA" is a known term of endearment for fathers does not preclude it from
being used as a mark to identify goods. Petitioner claims that their mark falls
under a type of mark known as "arbitrary or fanciful marks," which are "marks
that bear no logical relation to the actual characteristics of the products they
represent," are "highly distinctive and valid," and "are entitled to the greatest
protection." 28
Petitioner claims that the mark "PAPA" falls under this class of arbitrary
marks, even if "PAPA" is also a common term of endearment for one's father.
Petitioner states that there is no logical connection between one's father and
food sauces, such as ketchup; thus, with respect to ketchup, food sauces, and
their related products, and for the purpose of identifying its products, petitioner
claims exclusive ownership of the term "PAPA" as an arbitrary mark.
Petitioner alleges that if respondent "has a good faith and proud desire
to unmistakably and distinctly identify its lechon sauce product out in the
market, it should have coined a mark that departs from and is distinguished
from those of its competitors." Petitioner claims that respondent, with full
knowledge of the fame and the decades-long commercial use of petitioner's
"PAPA" marks, opted for "PAPA BOY & DEVICE," which obviously is just a
"colorable imitation." 29
AaCTcI

THEORY OF RESPONDENT
In its Comment, 30 respondent claims that petitioner's marks have
either expired and/or "that no confusing similarity exists between them and
respondent's "PAPA BOY & DEVICE' mark." Respondent alleges that under
Section 15 of Republic Act No. 166, a renewal application should be filed
within six months before the expiration of the period or within three months
after such expiration. Respondent avers that the expiration of the 20-year
term for the "PAPA" mark under Registration No. 32416 issued on August 11,
1983 was August 11, 2003. The sixth month before August 11, 2003 was
February 11, 2003 and the third month after August 11, 2003 was November
11, 2003. Respondent claims that the application that petitioner filed on
October 28, 2005 was almost two years late. Thus, it was not a renewal
application, but could only be considered a new application under the new
Trademark Law, with the filing date reckoned on October 28, 2005. The
registrability of the mark under the new application was examined again, and
any certificate issued for the registration of "PAPA" could not have been a
renewal certificate.
As for petitioner's other mark "PAPA BANANA CATSUP LABEL,"
respondent claims that its 20-year term also expired on August 11, 2003 and
that petitioner only filed its application for the new "PAPA LABEL DESIGN" on
November 15, 2006. Having been filed three years beyond the renewal
application deadline, petitioner was not able to renew its application on time,
and cannot claim a "continuous existence of its rights over the 'PAPA
BANANA CATSUP LABEL.'" Respondent claims that the two marks are
different from each other and that the registration of one is independent of the
other. Respondent concludes that the certificate of registration issued for
"PAPA LABEL DESIGN" is "not and will never be a renewal certificate." 31
Respondent also avers as follows:
1.3. With regard to the two new registrations of petitioner
namely: "PAPA" (Reg. No. 4-2005-010788) and "PAPA LABEL
DESIGN" (Reg. No. 4-2006-012364), these were filed on October 28,
2005 and November 15, 2006, respectively, under the Intellectual
Property Code (RA 8293), which follows the "first to file" rule, and were
obviously filed later than respondent's "PAPA BOY & DEVICE" mark
filed on April 4, 2002. These new marks filed much later than the
opposed "PAPA BOY & DEVICE" mark cannot, therefore, be used as
basis for the opposition and should in fact, be denied outrightly.
xxx xxx xxx
A search of the Online Trademark Database of Intellectual
Property Office (IPO) will show that only Registration No. 34681 issued
for "PAPA KETSARAP" was properly renewed on August 23, 2005. . . .
Clearly, the registrations of "PAPA" and "PAPA BANANA CATSUP
LABEL" marks under registration nos. 32416 and SR-6282
respectively, have already expired when Petitioner filed its opposition
proceeding against Respondent's trademark on December 11, 2006.
Having expired, and therefore, no longer legally existing, the "PAPA"
and "PAPA BANANA CATSUP LABEL" marks CANNOT BAR the
 registration of respondent's mark. To allow petitioner's expired marks
to prevent respondent's distinct "PAPA BOY & DEVICE" mark from
being registered would be the ultimate absurdity. 32
Respondent posits that the Court of Appeals did not err in reversing the
decisions of the administrative agencies, alleging that "[while] it is true that the
general rule is that the factual findings of administrative bodies deserve
utmost respect when supported by evidence, the same is subject to
exceptions," 33 and that the Court of Appeals had justifiable reasons to
disregard the factual finding of the IPO. Here, the Court of Appeals wisely
identified certain material facts that were overlooked by the IPO-BLA and the
IPO Director General which it opined, when correctly appreciated, would alter
the result of the case.
Respondent alleges that the IPO-BLA erroneously considered
petitioner's marks "PAPA" and "PAPA BANANA CATSUP LABEL" when it
applied the dominancy test in determining whether petitioner's marks are
confusingly similar to those of respondent's mark "PAPA BOY & DEVICE."
Respondent avers that the IPO-BLA absurdly took emphasis on the
mark "PAPA" to arrive at its decision and did not take into consideration that
petitioner's mark was already expired when respondent applied for the
registration of its "PAPA BOY & DEVICE" mark. Respondent compares its
"PAPA BOY & DEVICE" with the only mark that respondent allegedly has,
"PAPA KETSARAP," and found no confusing similarity between the two.
We quote below respondent's discussion of its application of the
dominancy test to the marks in question:
Applying the Dominancy test, as correctly emphasized by the
Court of Appeals, the dominant feature in respondent's mark is "PAPA
BOY" and not "PAPA". It can be gleaned from respondent's mark that
the word "PAPA" was written in the same font, style and color as the
word "BOY". There is also the presence of a "smiling hog-like
character" which is positioned very prominently, both in size and
location in said mark, at glance (sic) even more dominant than the
word "PAPA BOY".
xxx xxx xxx
On the other hand, the dominant feature in petitioner's mark is
"KETSARAP", not "PAPA". Even an ordinary examiner could observe
that the word "KETSARAP" in petitioner's mark is more prominently
printed than the word "PAPA".
xxx xxx xxx
In a dominancy test, the prominent feature of the competing
trademarks must be similar to cause confusion or deception. . . . . 34
 Verily, respondent's dominant feature "PAPA BOY" and the
smiling hog-like character and petitioner's dominant feature
"KETSARAP", being the word written in a larger font, are neither
confusing nor deceiving to the public. In fact, the differences between
their dominant marks are very noticeable and conspicuous to every
purchaser.
Furthermore, the Supreme Court in Societe des Produits Nestle,
S.A. v. Dy, [641 Phil. 345], applied the dominancy test by taking into
account the aural effects of the words and letters contained in the
marks in determining the issue of confusing similarity. Obviously,
petitioners' "PAPA KETSARAP" mark does not in any way
sounds (sic) like respondent's "PAPA BOY" mark. The common prefix
"PAPA" does not render the marks aurally the same. As discussed
above, the dominant feature in petitioner's mark is "KETSARAP" and
the dominant feature in respondent's mark is "PAPA BOY". Thus, the
words "KETSARAP" and "PAPA BOY" in petitioner's and respondent's
respective marks are obviously different in sound, making "PAPA BOY
& DEVICE" even more distinct from petitioner's "PAPA KETSARAP"
mark. 35
Using the holistic test, respondent further discusses the differences in
the marks in this wise:
Even the use of the holistic test . . . takes into consideration the
entirety of the marks in question [to] be considered in resolving
confusing similarity. The differences are again very obvious.
Respondent's mark has (1) the word "lechon sauce" printed inside a
blue ribbon-like device which is illustrated below the word "PAPA
BOY": (2) a prominent smiling hog-like character gesturing a thumbs-
up sign and wearing a Filipino hat and scarf stands beside the word
"PAPA BOY"; and the word "BARRIO FIESTA" conspicuously
displayed above the said trademark which leaves no doubt in the
consumer's mind on the product that he or she is purchasing. On the
other hand, petitioner's mark is the word "PAPA" enclosed by a cloud
on top of the word "KETSARAP" enclosed by a geometrical figure.
xxx xxx xxx
In the instant case, the respective marks are obviously different
in color scheme, logo, spelling, sound, meaning and connotation.
Thus, yet again, under the holistic test there can be no confusion or
deception between these marks.
It also bears stressing that petitioner's "PAPA KETSARAP"
mark covers "banana catsup" while respondent's "PAPA BOY &
DEVICE" covers "lechon sauce", thereby obliterating any confusion of
products of both marks as they travel different channels of trade. If a
consumer is in the market for banana catsup, he or she will not buy
lechon sauce and vice-versa. As a result, the margin of error in the
 acquisition of one for the other is simply remote. Lechon sauce which
is liver sauce is distinct from catsup extracted/made from banana fruit.
The flavor and taste of a lechon sauce are far from those of a banana
catsup. Lechon sauce is sauce for "lechon" while banana catsup is
apparently catsup made from banana. 36 SDHTEC

Respondent also contends that "PAPA BOY & DEVICE" mark is not
confusingly similar to petitioner's trademark "PAPA KETSARAP" in terms of
appearance, sound, spelling and meaning. The difference in nature, usage,
taste and appearance of products decreases the possibility of deception
among buyers. 37
Respondent alleges that since petitioner merely included banana
catsup as its product in its certificate, it cannot claim any further right to the
mark "PAPA KETSARAP" on products other than banana catsup. Respondent
also alleges that petitioner cannot raise "international notoriety of the mark"
for the first time on appeal and that there is no proof that petitioner's mark is
internationally well-known. 38
Furthermore, respondent argues that petitioner cannot claim exclusive
ownership over the use of the word "PAPA," a term of endearment for one's
father. Respondent points out that there are several other valid and active
marks owned by third parties which use the word "PAPA," even in classes of
goods similar to those of petitioner's. Respondent avers that petitioner's claim
that its "PAPA" mark is an arbitrary mark is belatedly raised in the instant
petition, and cannot be allowed because the "PAPA KETSARAP" mark would
immediately bring the consuming public to thinking that the product involved is
catsup and the description of said catsup is "masarap" (delicious) and due to
the logical relation of the petitioner's mark to the actual product, it being
descriptive or generic, it is far from being arbitrary or fanciful. 39
Lastly, respondent claims that the Court of Appeals correctly ruled that
respondent's product cannot be confused as originating from the petitioner.
Since it clearly appears in the product label of the respondent that it is
manufactured by Barrio Fiesta, the public is dutifully informed of the identity of
the lechon sauce manufacturer. The Court of Appeals further took into
account the fact that petitioner's products have been in commercial use for
decades. 40
Petitioner, in its Reply 41 to respondent's Comment, contends that
respondent cannot invoke a prior filing date for the "PAPA BOY" mark as
against Petitioner's "PAPA" and "PAPA BANANA CATSUP LABEL" marks,
because the latter marks were still registered when respondent applied for
registration of its "PAPA BOY" mark. Thus, the IPO-BLA and Director General
correctly considered them in deciding whether the "PAPA BOY" mark should
be registered, using the "first to file" rule under Section 123.1 (d) of Republic
Act No. 8293, or the Intellectual Property Code (IP Code).
Petitioner reiterates its argument that the Court of Appeals erred in
applying the holistic test and that the proper test under the circumstances is
the dominancy test, which was correctly applied by the IPO-BLA and the
Director General. 42
THIS COURT'S RULING
The petition has merit.
We find that the Court of Appeals erred in applying the holistic test and
in reversing and setting aside the decision of the IPO-BLA and that of the IPO
Director General, both of which rejected respondent's application for the mark
"PAPA BOY & DEVICE."
In Dermaline, Inc. v. Myra Pharmaceuticals, Inc., 43 we defined a
trademark as "any distinctive word, name, symbol, emblem, sign, or device, or
any combination thereof, adopted and used by a manufacturer or merchant on
his goods to identify and distinguish them from those manufactured, sold, or
dealt by others." We held that a trademark is "an intellectual property
deserving protection by law."
The rights of the trademark owner are found in the Intellectual Property
Code, which provides:
Section 147. Rights Conferred. — 147.1. The owner of a
registered mark shall have the exclusive right to prevent all third
parties not having the owner's consent from using in the course of
trade identical or similar signs or containers for goods or services
which are identical or similar to those in respect of which the trademark
is registered where such use would result in a likelihood of confusion.
In case of the use of an identical sign for identical goods or services, a
likelihood of confusion shall be presumed.
Section 168. Unfair Competition, Rights, Regulation and
Remedies. — 168.1. A person who has identified in the mind of the
public the goods he manufactures or deals in, his business or services
from those of others, whether or not a registered mark is employed,
has a property right in the goodwill of the said goods, business or
services so identified, which will be protected in the same manner as
other property rights.
The guideline for courts in determining likelihood of confusion is found
in A.M. No. 10-3-10-SC, or the Rules of Procedure for Intellectual Property
Rights Cases, Rule 18, which provides:
RULE 18
Evidence in Trademark Infringement and Unfair Competition Cases
 SECTION 1. Certificate of Registration. — A certificate of
registration of a mark shall be prima facie evidence of:
a) the validity of the registration;
b) the registrant's ownership of the mark; and
c) the registrant's exclusive right to use the same in connection
with the goods or services and those that are related
thereto specified in the certificate. AScHCD

xxx xxx xxx

SECTION 3. Presumption of Likelihood of Confusion. —
Likelihood of confusion shall be presumed in case an identical sign or
mark is used for identical goods or services.
SECTION 4. Likelihood of Confusion in Other Cases. — In
determining whether one trademark is confusingly similar to or is a
colorable imitation of another, the court must consider the general
impression of the ordinary purchaser, buying under the normally
prevalent conditions in trade and giving the attention such purchasers
usually give in buying that class of goods. Visual, aural, connotative
comparisons and overall impressions engendered by the marks in
controversy as they are encountered in the realities of the marketplace
must be taken into account. Where there are both similarities and
differences in the marks, these must be weighed against one another
to see which predominates.
In determining likelihood of confusion between marks used on
non-identical goods or services, several factors may be taken into
account, such as, but not limited to:
a) the strength of plaintiff's mark;
b) the degree of similarity between the plaintiff's and the defendant's
marks;
c) the proximity of the products or services;
d) the likelihood that the plaintiff will bridge the gap;
e) evidence of actual confusion;
f) the defendant's good faith in adopting the mark;
g) the quality of defendant's product or service; and/or
h) the sophistication of the buyers.
"Colorable imitation" denotes such a close or ingenious imitation
as to be calculated to deceive ordinary persons, or such a
resemblance to the original as to deceive an ordinary purchaser giving
such attention as a purchaser usually gives, as to cause him to
purchase the one supposing it to be the other.
 SECTION 5. Determination of Similar and Dissimilar Goods or
Services. — Goods or services may not be considered as being similar
or dissimilar to each other on the ground that, in any registration or
publication by the Office, they appear in different classes of the Nice
Classification.
In this case, the findings of fact of the highly technical agency, the
Intellectual Property Office, which has the expertise in this field, should have
been given great weight by the Court of Appeals. As we held in Berris
Agricultural Co., Inc. v. Abyadang: 44
R.A. No. 8293 defines a "mark" as any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an
enterprise and shall include a stamped or marked container of goods.
It also defines a "collective mark" as any visible sign designated as
such in the application for registration and capable of distinguishing the
origin or any other common characteristic, including the quality of
goods or services of different enterprises which use the sign under the
control of the registered owner of the collective mark.
On the other hand, R.A. No. 166 defines a "trademark" as any
distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant
on his goods to identify and distinguish them from those manufactured,
sold, or dealt by another. A trademark, being a special property, is
afforded protection by law. But for one to enjoy this legal protection,
legal protection ownership of the trademark should rightly be
established.
The ownership of a trademark is acquired by its registration and
its actual use by the manufacturer or distributor of the goods made
available to the purchasing public. Section 122 of R.A. No.
8293 provides that the rights in a mark shall be acquired by means of
its valid registration with the IPO. A certificate of registration of a mark,
once issued, constitutes prima facie evidence of the validity of the
registration, of the registrant's ownership of the mark, and of the
registrant's exclusive right to use the same in connection with the
goods or services and those that are related thereto specified in the
certificate. R.A. No. 8293, however, requires the applicant for
registration or the registrant to file a declaration of actual use (DAU) of
the mark, with evidence to that effect, within three (3) years from the
filing of the application for registration; otherwise, the application shall
be refused or the mark shall be removed from the register. In other
words, the prima facie presumption brought about by the registration of
a mark may be challenged and overcome, in an appropriate action, by
proof of the nullity of the registration or of non-use of the mark, except
when excused. Moreover, the presumption may likewise be defeated
by evidence of prior use by another person, i.e., it will controvert a
 claim of legal appropriation or of ownership based on registration by a
subsequent user. This is because a trademark is a creation of use and
belongs to one who first used it in trade or commerce.
The determination of priority of use of a mark is a question of
fact. Adoption of the mark alone does not suffice. One may make
advertisements, issue circulars, distribute price lists on certain goods,
but these alone will not inure to the claim of ownership of the mark until
the goods bearing the mark are sold to the public in the market.
Accordingly, receipts, sales invoices, and testimonies of witnesses as
customers, or orders of buyers, best prove the actual use of a mark in
trade and commerce during a certain period of time.
xxx xxx xxx
Verily, the protection of trademarks as intellectual property is
intended not only to preserve the goodwill and reputation of the
business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as
consumers against confusion on these goods. On this matter of
particular concern, administrative agencies, such as the IPO, by
reason of their special knowledge and expertise over matters
falling under their jurisdiction, are in a better position to pass
judgment thereon. Thus, their findings of fact in that regard are
generally accorded great respect, if not finality by the courts, as
long as they are supported by substantial evidence, even if such
evidence might not be overwhelming or even preponderant. It is
not the task of the appellate court to weigh once more the
evidence submitted before the administrative body and to
substitute its own judgment for that of the administrative agency
in respect to sufficiency of evidence. (Emphasis added, citations
omitted.)AcICHD

In trademark controversies, each case must be scrutinized according to

its peculiar circumstances, such that jurisprudential precedents should only be
made to apply if they are specifically in point. 45 The cases discussed below
are mentioned only for purposes of lifting the applicable doctrines, laws, and
concepts, but not for their factual circumstances, because of the uniqueness
of each case in controversies such as this one.
There are two tests used in jurisprudence to determine likelihood of
confusion, namely the dominancy test used by the IPO, and the holistic test
adopted by the Court of Appeals. In Skechers, U.S.A., Inc. v. Inter Pacific
Industrial Trading Corp., 46 we held:
The essential element of infringement under R.A. No. 8293 is
that the infringing mark is likely to cause confusion. In determining
similarity and likelihood of confusion, jurisprudence has developed
tests — the Dominancy Test and the Holistic or Totality Test. The
Dominancy Test focuses on the similarity of the prevalent or dominant
features of the competing trademarks that might cause confusion,
mistake, and deception in the mind of the purchasing public.
Duplication or imitation is not necessary; neither is it required that the
mark sought to be registered suggests an effort to imitate. Given more
consideration are the aural and visual impressions created by the
marks on the buyers of goods, giving little weight to factors like prices,
quality, sales outlets, and market segments.
xxx xxx xxx
Relative to the question on confusion of marks and trade
names, jurisprudence has noted two (2) types of confusion, viz.: (1)
confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that
he was purchasing the other; and (2) confusion of business (source or
origin confusion), where, although the goods of the parties are
different, the product, the mark of which registration is applied for by
one party, is such as might reasonably be assumed to originate with
the registrant of an earlier product, and the public would then be
deceived either into that belief or into the belief that there is some
connection between the two parties, though inexistent.
Applying the Dominancy Test to the case at bar, this Court finds
that the use of the stylized "S" by respondent in its Strong rubber
shoes infringes on the mark already registered by petitioner with the
IPO. While it is undisputed that petitioner's stylized "S" is within an oval
design, to this Court's mind, the dominant feature of the trademark is
the stylized "S," as it is precisely the stylized "S" which catches the eye
of the purchaser. Thus, even if respondent did not use an oval design,
the mere fact that it used the same stylized "S", the same being the
dominant feature of petitioner's trademark, already constitutes
infringement under the Dominancy Test.
This Court cannot agree with the observation of the CA that the
use of the letter "S" could hardly be considered as highly identifiable to
the products of petitioner alone. The CA even supported its conclusion
by stating that the letter "S" has been used in so many existing
trademarks, the most popular of which is the trademark "S" enclosed
by an inverted triangle, which the CA says is identifiable to Superman.
Such reasoning, however, misses the entire point, which is that
respondent had used a stylized "S," which is the same stylized "S"
which petitioner has a registered trademark for. The letter "S" used in
the Superman logo, on the other hand, has a block-like tip on the
upper portion and a round elongated tip on the lower portion.
Accordingly, the comparison made by the CA of the letter "S" used in
the Superman trademark with petitioner's stylized "S" is not appropriate
to the case at bar.
 Furthermore, respondent did not simply use the letter "S," but it
appears to this Court that based on the font and the size of the
lettering, the stylized "S" utilized by respondent is the very same
stylized "S" used by petitioner; a stylized "S" which is unique and
distinguishes petitioner's trademark. Indubitably, the likelihood of
confusion is present as purchasers will associate the respondent's use
of the stylized "S" as having been authorized by petitioner or that
respondent's product is connected with petitioner's business.
xxx xxx xxx
While there may be dissimilarities between the appearances of
the shoes, to this Court's mind such dissimilarities do not outweigh the
stark and blatant similarities in their general features. . . . .
Based on the foregoing, this Court is at a loss as to how the
RTC and the CA, in applying the holistic test, ruled that there was no
colorable imitation, when it cannot be any more clear and apparent to
this Court that there is colorable imitation. The dissimilarities between
the shoes are too trifling and frivolous that it is indubitable that
respondent's products will cause confusion and mistake in the eyes of
the public. Respondent's shoes may not be an exact replica of
petitioner's shoes, but the features and overall design are so similar
and alike that confusion is highly likely.
TAIaHE

xxx xxx xxx

Neither can the difference in price be a complete defense in
trademark infringement. In McDonald's Corporation v. L.C. Big Mak
Burger, Inc., this Court held:
Modern law recognizes that the protection to
which the owner of a trademark is entitled is not limited to
guarding his goods or business from actual market
competition with identical or similar products of the
parties, but extends to all cases in which the use by a
junior appropriator of a trade-mark or trade-name is likely
to lead to a confusion of source, as where prospective
purchasers would be misled into thinking that the
complaining party has extended his business into the
field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in
any way connected with the activities of the infringer; or
when it forestalls the normal potential expansion of his
business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). . . . .
Indeed, the registered trademark owner may use its mark on the
same or similar products, in different segments of the market, and at
different price levels depending on variations of the products for
specific segments of the market. The purchasing public might be
mistaken in thinking that petitioner had ventured into a lower market
 segment such that it is not inconceivable for the public to think that
Strong or Strong Sport Trail might be associated or connected with
petitioner's brand, which scenario is plausible especially since both
petitioner and respondent manufacture rubber shoes.
Withal, the protection of trademarks as intellectual property is
intended not only to preserve the goodwill and reputation of the
business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as
consumers against confusion on these goods. While respondent's
shoes contain some dissimilarities with petitioner's shoes, this Court
cannot close its eye to the fact that for all intents and purpose,
respondent had deliberately attempted to copy petitioner's mark and
overall design and features of the shoes. Let it be remembered, that
defendants in cases of infringement do not normally copy but only
make colorable changes. The most successful form of copying is to
employ enough points of similarity to confuse the public, with enough
points of difference to confuse the courts. (Citations omitted.)
The Court discussed the concept of confusion of business in the case
of Societe Des Produits Nestle, S.A. v. Dy, Jr., 47 as quoted below:
Among the elements, the element of likelihood of confusion is
the gravamen of trademark infringement. There are two types of
confusion in trademark infringement: confusion of goods and confusion
of business. In Sterling Products International, Inc. v. Farbenfabriken
Bayer Aktiengesellschaft, the Court distinguished the two types of
confusion:
Callman notes two types of confusion. The first is
the confusion of goods "in which event the ordinarily
prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other." In
which case, "defendant's goods are then bought as the
plaintiff's, and the poorer quality of the former reflects
adversely on the plaintiff's reputation." The other is
the confusion of business: "Here though the goods of the
parties are different, the defendant's product is such as
might reasonably be assumed to originate with the
plaintiff, and the public would then be deceived either into
that belief or into the belief that there is some connection
between the plaintiff and defendant which, in fact, does
not exist."
There are two tests to determine likelihood of confusion: the
dominancy test and holistic test. The dominancy test focuses on the
similarity of the main, prevalent or essential features of the competing
trademarks that might cause confusion. Infringement takes place when
the competing trademark contains the essential features of another.
Imitation or an effort to imitate is unnecessary. The question is whether
the use of the marks is likely to cause confusion or deceive
purchasers.
xxx xxx xxx
In cases involving trademark infringement, no set of rules can
be deduced. Each case must be decided on its own merits.
Jurisprudential precedents must be studied in the light of the facts of
each particular case. In McDonald's Corporation v. MacJoy Fastfood
Corporation, the Court held:
In trademark cases, particularly in ascertaining
whether one trademark is confusingly similar to another,
no set rules can be deduced because each case must be
decided on its merits. In such cases, even more than in
any other litigation, precedent must be studied in the light
of the facts of the particular case. That is the reason why
in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.
In the light of the facts of the present case, the Court holds that
the dominancy test is applicable. In recent cases with similar factual
milieus, the Court has consistently applied the dominancy test. . . . .
xxx xxx xxx
In McDonald's Corporation v. MacJoy Fastfood Corporation, the
Court applied the dominancy test in holding that "MACJOY" is
confusingly similar to "MCDONALD'S." The Court held: cDHAES

While we agree with the CA's detailed

enumeration of differences between the two (2)
competing trademarks herein involved, we believe that
the holistic test is not the one applicable in this case, the
dominancy test being the one more suitable. In recent
cases with a similar factual milieu as here, the Court has
consistently used and applied the dominancy test in
determining confusing similarity or likelihood of confusion
between competing trademarks.
xxx xxx xxx
Applying the dominancy test to the instant case,
the Court finds that herein petitioner's "MCDONALD'S"
and respondent's "MACJOY" marks are confusingly
similar with each other that an ordinary purchaser can
conclude an association or relation between the marks.
To begin with, both marks use the corporate "M"
design logo and the prefixes "Mc" and/or "Mac" as
dominant features. . . . .
 For sure, it is the prefix "Mc," and abbreviation of
"Mac," which visually and aurally catches the attention of
the consuming public. Verily, the word "MACJOY"
attracts attention the same way as did "McDonalds,"
"Mac Fries," "Mc Spaghetti," "McDo," "Big Mac" and the
rest of the MCDONALD'S marks which all use the
prefixes Mc and/or Mac.
Besides and most importantly, both trademarks
are used in the sale of fastfood products. Indisputably,
the respondent's trademark application for the "MACJOY
& DEVICE" trademark covers goods under Classes 29
and 30 of the International Classification of Goods,
namely, fried chicken, chicken barbeque, burgers, fries,
spaghetti, etc. Likewise, the petitioner's trademark
registration for the MCDONALD'S marks in the
Philippines covers goods which are similar if not identical
to those covered by the respondent's application.
In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the
Court applied the dominancy test in holding that "BIG MAK" is
confusingly similar to "BIG MAC." The Court held:
This Court . . . has relied on the dominancy test
rather than the holistic test. The dominancy test
considers the dominant features in the competing marks
in determining whether they are confusingly similar.
Under the dominancy test, courts give greater weight to
the similarity of the appearance of the product arising
from the adoption of the dominant features of the
registered mark, disregarding minor differences. Courts
will consider more the aural and visual impressions
created by the marks in the public mind, giving little
weight to factors like prices, quality, sales outlets and
market segments.
Thus, in the 1954 case of Co Tiong Sa v. Director
of Patents, the Court ruled:
. . . It has been consistently held that the question of
infringement of a trademark is to be determined by the
test of dominancy. Similarity in size, form and color, while
relevant, is not conclusive. If the competing trademark
contains the main or essential or dominant features of
another, and confusion and deception is likely to result,
infringement takes place. Duplication or imitation is not
necessary; nor is it necessary that the infringing label
should suggest an effort to imitate. (G. Heilman Brewing
Co. vs. Independent Brewing Co., 191 F., 489, 495,
 citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed.
579). The question at issue in cases of infringement of
trademarks is whether the use of the marks involved
would be likely to cause confusion or mistakes in the
mind of the public or deceive purchasers. (Auburn
Rubber Corporation vs. Honover Rubber Co., 107 F. 2d
588; . . .)
xxx xxx xxx
The test of dominancy is now explicitly
incorporated into law in Section 155.1 of the Intellectual
Property Code which defines infringement as the
"colorable imitation of a registered mark . . . or
a dominant feature thereof."
Applying the dominancy test, the Court finds that
respondents' use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly
the same as "Big Mac." Second, the first word in "Big
Mak" is exactly the same as the first word in "Big Mac."
Third, the first two letters in "Mak" are the same as the
first two letters in "Mac." Fourth, the last letter "Mak"
while a "k" sounds the same as "c" when the word "Mak"
is pronounced. Fifth, in Filipino, the letter "k" replaces "c"
in spelling, thus "Caloocan" is spelled "Kalookan."
In Societe Des Produits Nestle, S.A. v. Court of Appeals, the
Court applied the dominancy test in holding that "FLAVOR MASTER"
is confusingly similar to "MASTER ROAST" and "MASTER BLEND."
The Court held:
While this Court agrees with the Court of Appeals'
detailed enumeration of differences between the
respective trademarks of the two coffee products, this
Court cannot agree that totality test is the one applicable
in this case. Rather, this Court believes that the
dominancy test is more suitable to this case in light of its
peculiar factual milieu.ASEcHI

Moreover, the totality or holistic test is contrary to

the elementary postulate of the law on trademarks and
unfair competition that confusing similarity is to be
determined on the basis of visual, aural, connotative
comparisons and overall impressions engendered by the
marks in controversy as they are encountered in the
realities of the marketplace. The totality or holistic test
only relies on visual comparison between two trademarks
whereas the dominancy test relies not only on the visual
 but also on the aural and connotative comparisons and
overall impressions between the two trademarks.
For this reason, this Court agrees with the BPTTT
when it applied the test of dominancy and held that:
xxx xxx xxx
The scope of protection afforded to registered trademark
owners is not limited to protection from infringers with identical
goods. The scope of protection extends to protection from
infringers with related goods, and to market areas that are the
normal expansion of business of the registered trademark
owners. Section 138 of R.A. No. 8293 states:
Certificates of Registration. — A certificate of
registration of a mark shall be prima facie evidence of
validity of the registration, the registrant's ownership of
the mark, and of the registrant's exclusive right to use the
same in connection with the goods or services and those
that are related thereto specified in the certificate. . . . .
In Mighty Corporation v. E. & J. Gallo Winery, the Court held
that, "Non-competing goods may be those which, though they are not
in actual competition, are so related to each other that it can
reasonably be assumed that they originate from one manufacturer, in
which case, confusion of business can arise out of the use of similar
marks." In that case, the Court enumerated factors in determining
whether goods are related: (1) classification of the goods; (2) nature of
the goods; (3) descriptive properties, physical attributes or essential
characteristics of the goods, with reference to their form, composition,
texture or quality; and (4) style of distribution and marketing of the
goods, including how the goods are displayed and sold.
xxx xxx xxx
. . . . However, as the registered owner of the "NAN" mark,
Nestle should be free to use its mark on similar products, in
different segments of the market, and at different price levels.
In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court held
that the scope of protection afforded to registered trademark owners
extends to market areas that are the normal expansion of business:
xxx xxx xxx
Even respondent's use of the "Big Mak" mark on non-
hamburger food products cannot excuse their infringement of
petitioners' registered mark, otherwise registered marks will lose their
protection under the law.
The registered trademark owner may use his mark on the
same or similar products, in different segments of the market, and
 at different price levels depending on variations of the products
for specific segments of the market. The Court has recognized
that the registered trademark owner enjoys protection in product
and market areas that are the normal potential expansion of his
business. Thus, the Court has declared:
Modern law recognizes that the protection to
which the owner of a trademark is entitled is not limited to
guarding his goods or business from actual market
competition with identical or similar products of the
parties, but extends to all cases in which the use by a
junior appropriator of a trade-mark or trade-name is likely
to lead to a confusion of source, as where prospective
purchasers would be misled into thinking that the
complaining party has extended his business into the
field (see 148 ALR 56 et sq; 53 Am. Jur. 576) or is in any
way connected with the activities of the infringer; or when
it forestalls the normal potential expansion of his
business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).
(Emphases supplied, citations omitted.)
Again, this Court discussed the dominancy test and confusion of
business in Dermaline, Inc. v. Myra Pharmaceuticals, Inc., 48 and we quote:
The Dominancy Test focuses on the similarity of the prevalent
features of the competing trademarks that might cause confusion or
deception. It is applied when the trademark sought to be registered
contains the main, essential and dominant features of the earlier
registered trademark, and confusion or deception is likely to result.
Duplication or imitation is not even required; neither is it necessary that
the label of the applied mark for registration should suggest an effort to
imitate. The important issue is whether the use of the marks involved
would likely cause confusion or mistake in the mind of or deceive the
ordinary purchaser, or one who is accustomed to buy, and therefore to
some extent familiar with, the goods in question. Given greater
consideration are the aural and visual impressions created by the
marks in the public mind, giving little weight to factors like prices,
quality, sales outlets, and market segments. The test of dominancy is
now explicitly incorporated into law in Section 155.1 of R.A. No.
8293which provides —
155.1. Use in commerce any reproduction,
counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant
featurethereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services
including other preparatory steps necessary to carry out
the sale of any goods or services on or in connection with
 which such use is likely to cause confusion, or to cause
mistake, or to deceive . . . .
ITAaHc

xxx xxx xxx

Relative to the question on confusion of marks and trade
names, jurisprudence has noted two (2) types of confusion, viz.: (1)
confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that
he was purchasing the other; and (2) confusion of business (source or
origin confusion), where, although the goods of the parties are
different, the product, the mark of which registration is applied for by
one party, is such as might reasonably be assumed to originate with
the registrant of an earlier product, and the public would then be
deceived either into that belief or into the belief that there is some
connection between the two parties, though inexistent.
xxx xxx xxx
We agree with the findings of the IPO. As correctly applied by
the IPO in this case, while there are no set rules that can be deduced
as what constitutes a dominant feature with respect to trademarks
applied for registration; usually, what are taken into account are signs,
color, design, peculiar shape or name, or some special, easily
remembered earmarks of the brand that readily attracts and catches
the attention of the ordinary consumer.
xxx xxx xxx
Further, Dermaline's stance that its product belongs to a
separate and different classification from Myra's products with the
registered trademark does not eradicate the possibility of mistake on
the part of the purchasing public to associate the former with the latter,
especially considering that both classifications pertain to treatments for
the skin.
Indeed, the registered trademark owner may use its mark on the
same or similar products, in different segments of the market, and at
different price levels depending on variations of the products for
specific segments of the market. The Court is cognizant that the
registered trademark owner enjoys protection in product and market
areas that are the normal potential expansion of his business. Thus,
we have held —
Modern law recognizes that the protection to
which the owner of a trademark is entitled is not limited to
guarding his goods or business from actual market
competition with identical or similar products of the
parties, but extends to all cases in which the use by a
junior appropriator of a trade-mark or trade-name
is likely to lead to a confusion of source, as where
 prospective purchasers would be misled into
thinking that the complaining party has extended his
business into the field (see 148 ALR 56 et seq; 53 Am
Jur. 576) or is in any way connected with the activities of
the infringer, or when it forestalls the normal potential
expansion of his business (v. 148 ALR 77, 84; 52 Am.
Jur. 576, 577).
Thus, the public may mistakenly think that Dermaline is
connected to or associated with Myra, such that, considering the
current proliferation of health and beauty products in the market, the
purchasers would likely be misled that Myra has already expanded its
business through Dermaline from merely carrying pharmaceutical
topical applications for the skin to health and beauty services.
Verily, when one applies for the registration of a trademark or
label which is almost the same or that very closely resembles one
already used and registered by another, the application should be
rejected and dismissed outright, even without any opposition on the
part of the owner and user of a previously registered label or
trademark. This is intended not only to avoid confusion on the part of
the public, but also to protect an already used and registered
trademark and an established goodwill. (Citations omitted.)
Section 123.1 (d) of the IP Code provides:
A mark cannot be registered if it:
xxx xxx xxx
(d) Is identical with a registered mark belonging to a different
proprietor or a mark with an earlier filing or priority date, in
respect of:
i. The same goods or services, or
ii. Closely related goods or services, or
iii. If it nearly resembles such a mark as to be likely to deceive or
cause confusion[.]
A scrutiny of petitioner's and respondent's respective marks would show
that the IPO-BLA and the IPO Director General correctly found the word
"PAPA" as the dominant feature of petitioner's mark "PAPA KETSARAP."
Contrary to respondent's contention, "KETSARAP" cannot be the dominant
feature of the mark as it is merely descriptive of the product. Furthermore, it is
the "PAPA" mark that has been in commercial use for decades and has
established awareness and goodwill among consumers. CHTAIc

We likewise agree with the IPO-BLA that the word "PAPA" is also the
dominant feature of respondent's "PAPA BOY & DEVICE" mark subject of the
application, such that "the word 'PAPA' is written on top of and before the
other words such that it is the first word/figure that catches the
eyes." 49 Furthermore, as the IPO Director General put it, the part of
respondent's mark which appears prominently to the eyes and ears is the
phrase "PAPA BOY" and that is what a purchaser of respondent's product
would immediately recall, not the smiling hog.
We quote the relevant portion of the IPO-BLA decision on this point
below:
A careful examination of Opposer's and Respondent-applicant's
respective marks shows that the word "PAPA" is the dominant feature:
In Opposer's marks, the word "PAPA" is either the mark by itself or the
predominant word considering its stylized font and the conspicuous
placement of the word "PAPA" before the other words. In Respondent-
applicant's mark, the word "PAPA" is written on top of and before the
other words such that it is the first word figure that catches the eyes.
The visual and aural impressions created by such dominant word
"PAPA" at the least is that the respective goods of the parties
originated from the other, or that one party has permitted or has been
given license to the other to use the word "PAPA" for the other party's
product, or that there is a relation/connection between the two parties
when, in fact, there is none. This is especially true considering that the
products of both parties belong to the same class and are closely
related: Catsup and lechon sauce or liver sauce are both gravy-like
condiments used to spice up dishes. Thus, confusion of goods and of
business may likely result.
Under the Dominancy Test, the dominant features of the
competing marks are considered in determining whether these
competing marks are confusingly similar. Greater weight is given to the
similarity of the appearance of the products arising from the adoption
of the dominant features of the registered mark, disregarding minor
differences. The visual, aural, connotative, and overall comparisons
and impressions engendered by the marks in controversy as they are
encountered in the realities of the marketplace are the main
considerations (McDonald's Corporation, et al. v. L.C. Big Mak Burger,
Inc., et al., G.R. No. 143993, August 18, 2004; Societe Des Produits
Nestle, S.A., et al. v. Court of Appeals, et al., G.R. No. 112012, April 4,
2001). If the competing trademark contains the main or essential or
dominant features of another, and confusion and deception is likely to
result, infringement takes place. (Lim Hoa v. Director of Patents, 100
Phil. 214 [1956]); Co Tiong Sa v. Director of Patents, et al., G.R. No. L-
5378, May 24, 1954). Duplication or imitation is not necessary; nor is it
necessary that the infringing label should suggest an effort to imitate
(Lim Hoa v. Director of Patents, supra, and Co Liong Sa v. Director of
Patents, supra). Actual confusion is not required: Only likelihood of
confusion on the part of the buying public is necessary so as to render
two marks confusingly similar so as to deny the registration of the
junior mark (Sterling Products International, Inc. v. Farbenfabriken
Bayer Aktiengesellschaft, 137 Phil. 838 [1969]).
As to the first issue of whether PAPA BOY is confusingly similar
to Opposer's PAPA mark, this Bureau rules in the affirmative.
The records bear the following:
1. Registration No. 32416 issued for the mark "PAPA" under Class 29
goods was deemed expired as of February 11, 2004 (Exhibit "A"
attached to the VERIFIED NOTICE OF OPPOSITION). Application
Serial No. 4-2005-010788 was filed on October 28, 2005 for the same
mark "PAPA" for Class 30 goods and Registration No. 42005010788
was issued on March 19, 2007;
2. Opposer was issued for the mark "PAPA BANANA CATSUP
LABEL" on August 11, 1983 Registration No. SR-6282 for Class 30
goods in the Supplemental Register, which registration expired in
2003. Application Serial No. 4-2006-012364 was filed for the mark
"PAPA LABEL DESIGN" for Class 30 goods on November 15, 2006,
and Registration No. 42006012364 was issued on April 30, 2007; and
3. Lastly, Registration No. 34681 for the mark "PAPA KETSARAP" for
Class 30 goods was issued on August 23, 1985 and was renewed on
August 23, 2005.
Though Respondent-applicant was first to file the subject
application on April 04, 2002 vis-a-vis the mark "PAPA" the filing date
of which is reckoned on October 28, 2005, and the mark "PAPA
LABEL DESIGN" the filing date of which is reckoned on November 15,
2006, Opposer was able to secure a registration for the mark "PAPA
KETSARAP" on August 23, 1985 considering that Opposer was the
prior registrant and that its renewal application timely filed on August
23, 2005.
xxx xxx xxx
Pursuant to [Section 123.1(d) of the IP Code], the application for
registration of the subject mark cannot be allowed considering that
Opposer was earlier registrant of the marks PAPA and PAPA
KETSARAP which registrations were timely renewed upon its
expiration. Respondent-applicant's mark "PAPA BOY & DEVICE" is
confusingly similar to Opposer's mark "PAPA KETSARAP" and is
applied to goods that are related to Opposer's goods, but Opposer's
mark "PAPA KETSARAP" was registered on August 23, 1985 per
Certificate of Registration No. 34681, which registration was renewed
for a period of 10 years counted from August 23, 2005 per Certificate
of Renewal of Registration No. 34681 issued on August 23, 2005. To
repeat, Opposer has already registered a mark which Respondent-
applicant's mark nearly resembles as to likely deceive or cause
 confusion as to origin and which is applied to goods to which
respondent-applicant's goods under Class 30 are closely related.
Section 138 of the IP Code provides that a certificate of
registration of a mark is prima facie evidence of the validity of the
registration, the registrant's ownership of the mark, and of the
registrant's exclusive right to use the same in connection with the
goods and those that are related thereto specified in the
certificate. 50
EATCcI

We agree that respondent's mark cannot be registered. Respondent's

mark is related to a product, lechon sauce, an everyday all-purpose
condiment and sauce, that is not subjected to great scrutiny and care by the
casual purchaser, who knows from regular visits to the grocery store under
what aisle to find it, in which bottle it is contained, and approximately how
much it costs. Since petitioner's product, catsup, is also a household product
found on the same grocery aisle, in similar packaging, the public could think
that petitioner had expanded its product mix to include lechon sauce, and that
the "PAPA BOY" lechon sauce is now part of the "PAPA" family of sauces,
which is not unlikely considering the nature of business that petitioner is in.
Thus, if allowed registration, confusion of business may set in, and petitioner's
hard-earned goodwill may be associated to the newer product introduced by
respondent, all because of the use of the dominant feature of petitioner's mark
on respondent's mark, which is the word "PAPA." The words "Barrio Fiesta"
are not included in the mark, and although printed on the label of respondent's
lechon sauce packaging, still do not remove the impression that "PAPA BOY"
is a product owned by the manufacturer of "PAPA" catsup, by virtue of the use
of the dominant feature. It is possible that petitioner could expand its business
to include lechon sauce, and that would be well within petitioner's rights, but
the existence of a "PAPA BOY" lechon sauce would already eliminate this
possibility and deprive petitioner of its rights as an owner of a valid mark
included in the Intellectual Property Code.
The Court of Appeals likewise erred in finding that "PAPA," being a
common term of endearment for one's father, is a word over which petitioner
could not claim exclusive use and ownership. The Merriam-Webster dictionary
defines "Papa" simply as "a person's father." True, a person's father has no
logical connection with catsup products, and that precisely makes "PAPA" as
an arbitrary mark capable of being registered, as it is distinctive, coming from
a family name that started the brand several decades ago. What was
registered was not the word "Papa" as defined in the dictionary, but the word
"Papa" as the last name of the original owner of the brand. In fact, being part
of several of petitioner's marks, there is no question that the IPO has found
"PAPA" to be a registrable mark.
 Respondent had an infinite field of words and combinations of words to
choose from to coin a mark for its lechon sauce. While its claim as to the
origin of the term "PAPA BOY" is plausible, it is not a strong enough claim to
overrule the rights of the owner of an existing and valid mark. Furthermore,
this Court cannot equitably allow respondent to profit by the name and
reputation carefully built by petitioner without running afoul of the basic
demands of fair play. 51
WHEREFORE, we hereby GRANT the petition. We SET ASIDE the
June 23, 2011 Decision and the October 4, 2011 Resolution of the Court of
Appeals in CA-G.R. SP No. 107570, and REINSTATE the March 26,
2008 Decision of the Bureau of Legal Affairs of the Intellectual Property
Office (IPO-BLA) and the January 29, 2009 Decision of the Director General
of the IPO.
SO ORDERED.
(UFC Philippines, Inc. v. Barrio Fiesta Manufacturing Corp., G.R. No. 198889,
|||

[January 20, 2016], 778 PHIL 763-807)

SECOND DIVISION

[G.R. No. 222366. December 4, 2017.]

W LAND HOLDING, INC., petitioner, vs. STARWOOD HOTELS

AND RESORTS WORLDWIDE, INC., respondent.

DECISION

PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 are the

Decision 2 dated June 22, 2015 and the Resolution 3 dated January 7, 2016 of
the Court of Appeals (CA) in CA-G.R. SP No. 133825 affirming the
Decision 4 dated January 10, 2014 of the Intellectual Property Office (IPO)-
Director General (IPO DG), which, in turn, reversed the Decision 5 dated May
11, 2012 of the IPO Bureau of Legal Affairs (BLA) in Inter Partes Case No.
14-2009-00143, and accordingly, dismissed petitioner W Land Holdings, Inc.'s
(W Land) petition for cancellation of the trademark "W" registered in the name
of respondent Starwood Hotels and Resorts, Worldwide, Inc. (Starwood).
 The Facts

On December 2, 2005, Starwood filed before the IPO an application for

registration of the trademark "W" for Classes 43 6 and 44 7 of the International
Classification of Goods and Services for the Purposes of the Registration of
Marks 8 (Nice Classification). 9 On February 26, 2007, Starwood's application
was granted and thus, the "W" mark was registered in its name. 10 However,
on April 20, 2006, W Land applied 11 for the registration of its own "W" mark
for Class 36, 12 which thereby prompted Starwood to oppose the same. 13 In a
Decision 14 dated April 23, 2008, the BLA found merit in Starwood's
opposition, and ruled that W Land's "W" mark is confusingly similar with
Starwood's mark, 15which had an earlier filing date. W Land filed a motion for
reconsideration 16 on June 11, 2008, which was denied by the BLA in a
Resolution 17 dated July 23, 2010.
On May 29, 2009, W Land filed a Petition for Cancellation 18 of
Starwood's mark for non-use under Section 151.1 19 of Republic Act No.
8293 or the "Intellectual Property Code of the Philippines" (IP
Code), 20 claiming that Starwood has failed to use its mark in the Philippines
because it has no hotel or establishment in the Philippines rendering the
services covered by its registration; and that Starwood's "W" mark application
and registration barred its own "W" mark application and registration for use
on real estate. 21
In its defense, 22 Starwood denied having abandoned the subject mark
on the ground of non-use, asserting that it filed with the Director of
Trademarks a notarized Declaration of Actual Use 23 (DAU) 24 with evidence
of use on December 2, 2008, 25 which was not rejected. In this relation,
Starwood argued that it conducts hotel and leisure business both directly and
indirectly through subsidiaries and franchisees, and operates interactive
websites for its W Hotels in order to accommodate its potential clients
worldwide. 26 According to Starwood, apart from viewing agents, discounts,
promotions, and other marketing fields being offered by it, these interactive
websites allow Philippine residents to make reservations and bookings, which
presuppose clear and convincing use of the "W" mark in the Philippines. 27

The BLA Ruling

In a Decision 28 dated May 11, 2012, the BLA ruled in W Land's favor,
and accordingly ordered the cancellation of Starwood's registration for the "W"
mark. The BLA found that the DAU and the attachments thereto submitted by
Starwood did not prove actual use of the "W" mark in the Philippines,
considering that the "evidences of use" attached to the DAU refer to hotel or
establishments that are located abroad. 29 In this regard, the BLA opined that
"the use of a trademark as a business tool and as contemplated under
[Section 151.1 (c) of RA 8293] refers to the actual attachment thereof to
goods and services that are sold or availed of and located in the
Philippines." 30
Dissatisfied, Starwood appealed 31 to the IPO DG.

The IPO DG Ruling

In a Decision 32 dated January 10, 2014, the IPO DG granted

Starwood's appeal, 33 thereby dismissing W Land's Petition for Cancellation.
Contrary to the BLA's findings, the IPO DG found that Starwood's submission
of its DAU and attachments, coupled by the acceptance thereof by the IPO
Bureau of Trademarks, shows that the "W" mark still bears a "registered"
status. Therefore, there is a presumption that Starwood sufficiently complied
with the registration requirements for its mark. 34 The IPO DG likewise held
that the absence of any hotel or establishment owned by Starwood in the
Philippines bearing the "W" mark should not be equated to the absence of its
use in the country, opining that Starwood's pieces of evidence, particularly its
interactive website, indicate actual use in the Philippines, 35 citing Rule
205 36 of the Trademark Regulations, as amended by IPO Office Order No.
056-13. 37 Finally, the IPO DG stressed that since Starwood is the undisputed
owner of the "W" mark for use in hotel and hotel-related services, any
perceived damage on the part of W Land in this case should be subordinated
to the essence of protecting Starwood's intellectual property rights. To rule
otherwise is to undermine the intellectual property system. 38
Aggrieved, W Land filed a petition for review 39 under Rule 43 of
the Rules of Court before the CA.

The CA Ruling

In a Decision 40 dated June 22, 2015, the CA affirmed the IPO DG

ruling. At the onset, the CA observed that the hotel business is peculiar in
nature in that the offer, as well as the acceptance of room reservations or
bookings wherever in the world is an indispensable element. As such, the
actual existence or presence of a hotel in one place is not necessary before it
can be considered as doing business therein. 41 In this regard, the CA
recognized that the internet has become a powerful tool in allowing
businesses to reach out to consumers in a given market without being
physically present thereat; thus, the IPO DG correctly held that Starwood's
interactive websites already indicate its actual use in the Philippines of the
"W" mark. 42 Finally, the CA echoed the IPO DG's finding that since Starwood
is the true owner of the "W" mark — as shown by the fact that Starwood had
already applied for the registration of this mark even before W Land was
incorporated — its registration over the same should remain valid, absent any
showing that it has abandoned the use thereof. 43
Unperturbed, W Land moved for reconsideration, 44 but was denied in a
Resolution 45 dated January 7, 2016; hence, this petition.

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA
correctly affirmed the IPO DG's dismissal of W Land's Petition for Cancellation
of Starwood's "W" mark.

The Court's Ruling

The petition is without merit.

The IP Code defines a "mark" as "any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an
enterprise." 46 Case law explains that "[t]rademarks deal with the
psychological function of symbols and the effect of these symbols on the
public at large." 47 It is a merchandising short-cut, and, "[w]hatever the means
employed, the aim is the same — to convey through the mark, in the minds of
potential customers, the desirability of the commodity upon which it
appears." 48 Thus, the protection of trademarks as intellectual property is
intended not only to preserve the goodwill and reputation of the business
established on the goods or services bearing the mark through actual use
over a period of time, but also to safeguard the public as consumers against
confusion on these goods or services. 49 As viewed by modern authorities
on trademark law, trademarks perform three (3) distinct functions: (1) they
indicate origin or ownership of the articles to which they are attached; (2) they
guarantee that those articles come up to a certain standard of quality; and (3)
they advertise the articles they symbolize. 50
In Berris Agricultural Co., Inc. v. Abyadang, 51 this Court explained that
"[t]he ownership of a trademark is acquired by its registration and its actual
use by the manufacturer or distributor of the goods made available to the
purchasing public. x x x. A certificate of registration of a mark, once issued,
constitutes prima facie evidence of the validity of the registration, of the
registrant's ownership of the mark, and of the registrant's exclusive right to
use the same in connection with the goods or services and those that are
related thereto specified in the certificate." 52 However, "the prima
facie presumption brought about by the registration of a mark may be
challenged and overcome, in an appropriate action, by proof of[, among
others,] non-use of the mark, except when excused." 53
The actual use of the mark representing the goods or services
introduced and transacted in commerce over a period of time creates that
goodwill which the law seeks to protect. For this reason, the IP Code, under
Section 124.2, 54 requires the registrant or owner of a registered mark to
declare "actual use of the mark" (DAU) and present evidence of such use
within the prescribed period. Failing in which, the IPO DG may cause
the motu proprio removal from the register of the mark's registration. 55 Also,
any person, believing that "he or she will be damaged by the registration of a
mark," which has not been used within the Philippines, may file a petition for
cancellation. 56 Following the basic rule that he who alleges must prove his
case, 57 the burden lies on the petitioner to show damage and non-use. CAIHTE

The IP Code and the Trademark Regulations have not specifically

defined "use." However, it is understood that the "use" which the law
requires to maintain the registration of a mark must be genuine, and not
merely token. Based on foreign authorities, 58 genuine use may be
characterized as a bona fide use which results or tends to result, in one
way or another, into a commercial interaction or transaction "in the
ordinary course of trade." 59
What specific act or acts would constitute use of the mark sufficient to
keep its registration in force may be gleaned from the Trademark Regulations,
Rule 205 of which reads:
RULE 205. Contents of the Declaration and Evidence of Actual
Use. — The declaration shall be under oath, must refer to only one
application or registration, must contain the name and address of the
applicant or registrant declaring that the mark is in actual use in the
Philippines, list of goods where the mark is attached; list the name or
names and the exact location or locations of the outlet or
outlets where the products are being sold or where the services are
being rendered, recite sufficient facts to show that the mark
described in the application or registration is being actually used
in the Philippines and, specifying the nature of such use. The
declarant shall attach five labels as actually used on the goods or the
picture of the stamped or marked container visibly and legibly showing
the mark as well as proof of payment of the prescribed fee. [As
amended by Office Order No. 08 (2000)] (Emphases supplied)
 The Trademark Regulations was amended by Office Order No. 056-13.
Particularly, Rule 205 now mentions certain items which "shall be accepted as
proof of actual use of the mark:"
RULE 205. Contents of the Declaration and Evidence of Actual
Use. —
(a) The declaration shall be under oath and filed by the
applicant or registrant (or the authorized officer in case of a juridical
entity) or the attorney or authorized representative of the applicant or
registrant. The declaration must refer to only one application or
registration, shall contain the name and address of the applicant or
registrant declaring that the mark is in actual use in the Philippines, the
list of goods or services where the mark is used, the name/s of the
establishment and address where the products are being sold or where
the services are being rendered. If the goods or services are available
only by online purchase, the website must be indicated on the form in
lieu of name or address of the establishment or outlet. The applicant or
registrant may include other facts to show that the mark described in
the application or registration is actually being used in the Philippines.
The date of first use shall not be required.
(b) Actual use for some of the goods and services in the same
class shall constitute use for the entire class of goods and services.
Actual use for one class shall be considered use for related classes. In
the event that some classes are not covered in the declaration, a
subsequent declaration of actual use may be filed for the other classes
of goods or services not included in the first declaration, provided that
the subsequent declaration is filed within the three-year period or the
extension period, in case an extension of time to file the declaration
was timely made. In the event that no subsequent declaration of actual
use for the other classes of goods and services is filed within the
prescribed period, the classes shall be automatically dropped from the
application or registration without need of notice to the applicant or
registrant.
(c) The following shall be accepted as proof of actual use of
the mark: (1) labels of the mark as these are used; (2) downloaded
pages from the website of the applicant or registrant clearly
showing that the goods are being sold or the services are being
rendered in the Philippines; (3) photographs (including digital
photographs printed on ordinary paper) of goods bearing the marks as
these are actually used or of the stamped or marked container of
goods and of the establishment/s where the services are being
rendered; (4) brochures or advertising materials showing the actual
use of the mark on the goods being sold or services being rendered in
the Philippines; (5) for online sale, receipts of sale of the goods or
services rendered or other similar evidence of use, showing that
 the goods are placed on the market or the services are available
in the Philippines or that the transaction took place in the
Philippines; (6) copies of contracts for services showing the use of the
mark. Computer printouts of the drawing or reproduction of marks will
not be accepted as evidence of use.
(d) The Director may, from time to time, issue a list of
acceptable evidence of use and those that will not be accepted by
the Office. (Emphases and underscoring supplied)
Office Order No. 056-13 was issued by the IPO DG on April 5, 2013,
pursuant to his delegated rule-making authority under Section 7 of the IP
Code. 60 The rationale for this issuance, per its whereas clauses, is to further
"the policy of the [IPO] to streamline administrative procedures in registering
trademarks" and in so doing, address the need "to clarify what will be
accepted as proof of use." In this regard, the parameters and list of evidence
introduced under the amended Trademark Regulations are thus mere
administrative guidelines which are only meant to flesh out the types of
acceptable evidence necessary to prove what the law already provides, i.e.,
the requirement of actual use. As such, contrary to W Land's
postulation, 61 the same does not diminish or modify any substantive right and
hence, may be properly applied to "all pending and registered marks," 62 as in
Starwood's "W" mark for hotel/hotel reservation services being rendered or, at
the very least, made available in the Philippines.
Based on the amended Trademark Regulations, it is apparent that the
IPO has now given due regard to the advent of commerce on the internet.
Specifically, it now recognizes, among others, "downloaded pages from the
website of the applicant or registrant clearly showing that the goods are being
sold or the services are being rendered in the Philippines," as well as "for
online sale, receipts of sale of the goods or services rendered or other similar
evidence of use, showing that the goods are placed on the market or the
services are available in the Philippines or that the transaction took place in
the Philippines," 63 as acceptable proof of actual use. Truly, the Court discerns
that these amendments are but an inevitable reflection of the realities of the
times. In Mirpuri v. CA, 64 this Court noted that "[a]dvertising on the Net and
cybershopping are turning the Internet into a commercial marketplace:" 65
The Internet is a decentralized computer network linked
together through routers and communications protocols that enable
anyone connected to it to communicate with others likewise connected,
regardless of physical location. Users of the Internet have a wide
variety of communication methods available to them and a tremendous
wealth of information that they may access. The growing popularity of
the Net has been driven in large part by the World Wide Web, i.e., a
system that facilitates use of the Net by sorting through the great mass
of information available on it. Advertising on the Net and
 cybershopping are turning the Internet into a commercial
marketplace. 66(Emphasis and underscoring supplied)
Thus, as modes of advertising and acquisition have now permeated into
virtual zones over cyberspace, the concept of commercial goodwill has indeed
evolved:
In the last half century, the unparalleled growth of industry and the
rapid development of communications technology have enabled
trademarks, tradenames and other distinctive signs of a product to
penetrate regions where the owner does not actually manufacture or
sell the product itself. Goodwill is no longer confined to the territory
of actual market penetration; it extends to zones where the
marked article has been fixed in the public mind through
advertising. Whether in the print, broadcast or electronic
communications medium, particularly on the Internet, advertising
has paved the way for growth and expansion of the product by
creating and earning a reputation that crosses over borders,
virtually turning the whole world into one vast
marketplace. 67 (Emphasis and underscoring supplied)
Cognizant of this current state of affairs, the Court therefore agrees with
the IPO DG, as affirmed by the CA, that the use of a registered mark
representing the owner's goods or services by means of an interactive
website may constitute proof of actual use that is sufficient to maintain the
registration of the same. Since the internet has turned the world into one vast
marketplace, the owner of a registered mark is clearly entitled to generate and
further strengthen his commercial goodwill by actively marketing and
commercially transacting his wares or services throughout multiple platforms
on the internet. The facilities and avenues present in the internet are, in fact,
more prominent nowadays as they conveniently cater to the modern-day
consumer who desires to procure goods or services at any place and at any
time, through the simple click of a mouse, or the tap of a screen. Multitudinous
commercial transactions are accessed, brokered, and consummated
everyday over websites. These websites carry the mark which represents the
goods or services sought to be transacted. For the owner, he intentionally
exhibits his mark to attract the customers' interest in his goods or services.
The mark displayed over the website no less serves its functions of indicating
the goods or services' origin and symbolizing the owner's goodwill than a
mark displayed in the physical market. Therefore, there is no less premium to
recognize actual use of marks through websites than their actual use through
traditional means. Indeed, as our world evolves, so too should our
appreciation of the law. Legal interpretation — as it largely affects the lives of
people in the here and now — never happens in a vacuum. As such, it should
not be stagnant but dynamic; it should not be ensnared in the obsolete but
rather, sensitive to surrounding social realities.DETACa
 It must be emphasized, however, that the mere exhibition of goods or
services over the internet, without more, is not enough to constitute actual
use. To reiterate, the "use" contemplated by law is genuine use — that is,
a bona fide kind of use tending towards a commercial transaction in the
ordinary course of trade. Since the internet creates a borderless
marketplace, it must be shown that the owner has actually transacted, or
at the very least, intentionally targeted customers of a particular
jurisdiction in order to be considered as having used the trade mark in
the ordinary course of his trade in that country. A showing of an actual
commercial link to the country is therefore imperative. Otherwise, an
unscrupulous registrant would be able to maintain his mark by the mere
expedient of setting up a website, or by posting his goods or services on
another's site, although no commercial activity is intended to be pursued in
the Philippines. This type of token use renders inutile the commercial purpose
of the mark, and hence, negates the reason to keep its registration active. As
the IP Code expressly requires, the use of the mark must be "within the
Philippines." This is embedded in Section 151 of the IP Code on
cancellation, which reads:
SECTION 151. Cancellation. — 151.1. A petition to cancel a
registration of a mark under this Act may be filed with the Bureau of
Legal Affairs by any person who believes that he is or will be damaged
by the registration of a mark under this Act as follows:
(a) Within five (5) years from the date of the registration of the
mark under this Act.
(b) At any time, if the registered mark becomes the generic name
for the goods or services, or a portion thereof, for which it
is registered, or has been abandoned, or its registration
was obtained fraudulently or contrary to the provisions of
this Act, or if the registered mark is being used by, or with
the permission of, the registrant so as to misrepresent the
source of the goods or services on or in connection with
which the mark is used. If the registered mark becomes the
generic name for less than all of the goods or services for
which it is registered, a petition to cancel the registration
for only those goods or services may be filed. A registered
mark shall not be deemed to be the generic name of goods
or services solely because such mark is also used as a
name of or to identify a unique product or service. The
primary significance of the registered mark to the relevant
public rather than purchaser motivation shall be the test for
determining whether the registered mark has become the
generic name of goods or services on or in connection with
which it has been used.
 (c) At any time, if the registered owner of the mark without
legitimate reason fails to use the mark within the
Philippines, or to cause it to be used in the Philippines
by virtue of a license during an uninterrupted period of
three (3) years or longer. (Emphasis and underscoring
supplied)
The hotel industry is no stranger to the developments and advances in
technology. Like most businesses nowadays, hotels are utilizing the internet
to drive almost every aspect of their operations, most especially the offering
and accepting of room reservations or bookings, regardless of the client or
customer base. The CA explained this booking process in that the "business
transactions commence with the placing of room reservations, usually by or
through a travel agent who acts for or in behalf of his principal, the hotel
establishment. [The] reservation is first communicated to the reservations and
booking assistant tasked to handle the transaction. After the reservation is
made, the specific room reserved for the guest will be blocked and will not be
offered to another guest. As such, on the specified date of arrival, the room
reserved will be available to the guest." 68
In this accord, a hotel's website has now become an integral element of
a hotel business. Especially with the uptrend of international travel and
tourism, the hotel's website is now recognized as an efficient and necessary
tool in advertising and promoting its brand in almost every part of the world.
More so, interactive websites that allow customers or clients to
instantaneously book and pay for, in advance, accommodations and other
services of a hotel anywhere in the world, regardless of the hotel's actual
location, dispense with the need for travel agents or hotel employees to
transact the reservations for them. In effect, the hotel's website acts as a
bridge or portal through which the hotel reaches out and provides its services
to the client/customer anywhere in the world, with the booking transaction
completed at the client/customer's own convenience. It is in this sense that
the CA noted that the "actual existence or presence of a hotel in one place is
not necessary before it can be considered as doing business therein." 69
As earlier intimated, mere use of a mark on a website which can be
accessed anywhere in the world will not automatically mean that the mark has
been used in the ordinary course of trade of a particular country. Thus, the
use of mark on the internet must be shown to result into a within-State sale, or
at the very least, discernibly intended to target customers that reside in that
country. This being so, the use of the mark on an interactive website, for
instance, may be said to target local customers when they contain
specific details regarding or pertaining to the target State, sufficiently
showing an intent towards realizing a within-State commercial activity or
interaction. These details may constitute a local contact phone number,
specific reference being available to local customers, a specific local
webpage, whether domestic language and currency is used on the website,
and/or whether domestic payment methods are accepted. 70 Notably, this
paradigm of ascertaining local details to evince within-state commercial intent
is subscribed to by a number of jurisdictions, namely, the European Union,
Hong Kong, Singapore, Malaysia, Japan, Australia, Germany, France, Russia,
and the United Kingdom. 71 As for the U.S. — where most of our intellectual
property laws have been patterned 72 — there have been no decisions to date
coming from its Trademark Trial and Appeal Board involving cases
challenging the validity of mark registrations through a cancellation action
based on the mark's internet use. However, in International Bancorp LLC v.
Societe des Bains de Mer et du Cercle des Etrangers a Monaco, 73 it was
ruled that mere advertising in the U.S. combined with rendering of services to
American customers in a foreign country constituted "use" for the purpose of
establishing trademark rights in the U.S.
In this case, Starwood has proven that it owns Philippine registered
domain
names, 74 i.e., www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.
wreservation.ph, for its website that showcase its mark. The website is readily
accessible to Philippine citizens and residents, where they can avail and book
amenities and other services in any of Starwood's W Hotels worldwide. Its
website also readily provides a phone number 75 for Philippine consumers to
call for information or other concerns. The website further uses the English
language 76 — considered as an official language in this country 77 — which
the relevant market in the Philippines understands and often uses in the daily
conduct of affairs. In addition, the prices for its hotel accommodations and/or
services can be converted into the local currency or the Philippine
Peso. 78 Amidst all of these features, Starwood's "W" mark is prominently
displayed in the website through which consumers in the Philippines can
instantaneously book and pay for their accommodations, with immediate
confirmation, in any of its W Hotels. Furthermore, it has presented data
showing a considerably growing number of internet users in the Philippines
visiting its website since 2003, which is enough to conclude that Starwood has
established commercially-motivated relationships with Philippine
consumers. 79
Taken together, these facts and circumstances show that Starwood's
use of its "W" mark through its interactive website is intended to produce a
discernable commercial effect or activity within the Philippines, or at the very
least, seeks to establish commercial interaction with local consumers.
Accordingly, Starwood's use of the "W" mark in its reservation services
through its website constitutes use of the mark sufficient to keep its
registration in force.
 To be sure, Starwood's "W" mark is registered for Classes 43, i.e., for
hotel, motel, resort and motor inn services, hotel reservation services,
restaurant, bar and catering services, food and beverage preparation
services, café and cafeteria services, provision of conference, meeting and
social function facilities, under the Nice Classification. 80 Under Section 152.3
of the IP Code, "[t]he use of a mark in connection with one or more of the
goods or services belonging to the class in respect of which the mark is
registered shall prevent its cancellation or removal in respect of all other
goods or services of the same class." Thus, Starwood's use of the "W" mark
for reservation services through its website constitutes use of the mark which
is already sufficient to protect its registration under the entire subject
classification from non-use cancellation. This, notwithstanding the absence of
a Starwood hotel or establishment in the Philippines.
Finally, it deserves pointing out that Starwood submitted in 2008 its
DAU with evidence of use which the IPO, through its Director of Trademarks
and later by the IPO DG in the January 10, 2014 Decision, had accepted and
recognized as valid. The Court finds no reason to disturb this recognition.
According to jurisprudence, administrative agencies, such as the IPO, by
means of their special knowledge and expertise over matters falling within
their jurisdiction are in a better position to pass judgment on this
issue. 81 Thus, their findings are generally accorded respect and finality, as
long as they are supported by substantial evidence. In this case, there is no
compelling basis to reverse the IPO DG's findings — to keep Starwood's
registration for the "W" mark in force — as they are well supported by the
facts and the law and thus, deserve respect from this Court. aDSIHc

WHEREFORE, the petition is DENIED. The Decision dated June 22,

2015 and the Resolution dated January 7, 2016 of the Court of Appeals in
CA-G.R. SP No. 133825 are hereby AFFIRMED.
SO ORDERED.
Peralta, Caguioa and Reyes, Jr., JJ., concur.
Jardeleza, * J., is on leave.
(W Land Holding, Inc. v. Starwood Hotels and Resorts Worldwide, Inc., G.R.
|||

No. 222366, [December 4, 2017])

SECOND DIVISION

[G.R. No. 217916. June 20, 2018.]

 ABS-CBN PUBLISHING, INC., petitioner, vs. DIRECTOR OF THE
BUREAU OF TRADEMARKS, respondent.

DECISION

REYES, JR., J : p

The Case

Challenged before the Court via this Petition for Review

on Certiorari under Rule 45 of the Rules of Court is the Resolution 1 of the
Court of Appeals promulgated on May 20, 2014, which denied ABS-CBN
Publishing, Inc.'s (petitioner) "Motion for Extension of Time [To File Petition for
Review]." Likewise challenged is the subsequent Resolution 2 of the Court of
Appeals promulgated on April 15, 2015, which upheld the earlier Resolution.

The Antecedent Facts

In 2004, 3 the petitioner filed with the Intellectual Property Office of the
Philippines (IPO) its application for the registration of its trademark "METRO"
(applicant mark) under class 16 of the Nice classification, with specific
reference to "magazines." 4 The case was assigned to Examiner Arlene M.
Icban (Examiner Icban), who, after a judicious examination of the application,
refused the applicant mark's registration.
According to Examiner Icban, the applicant mark is identical with three
other cited marks, and is therefore unregistrable according to Section 123.1
(d) of the Intellectual Property Code of the Philippines (IPC). 5 The cited
marks were identified as (1) "Metro" (word) by applicant Metro International
S.A. with Application No. 42000002584, 6 (2) "Metro" (logo) also by applicant
Metro International S.A. with Application No. 42000002585, 7 and (3) "Inquirer
Metro" by applicant Philippine Daily Inquirer, Inc. with Application No.
42000003811. 8
On August 16, 2005, the petitioner wrote a letter 9 in response to
Examiner Icban's assessment, and the latter, through Official Action Paper
No. 04, subsequently reiterated her earlier finding which denied the
registration of the applicant mark. Eventually, in the "Final Rejection" 10 of the
petitioner's application, Examiner Icban "determined that the mark subject of
the application cannot be registered because it is identical with the cited
marks METRO with Regn. No. 42000002584 ['Metro' (word)] and Regn. No.
42000003811 ['Inquirer Metro']." 11
The petitioner appealed the assessment of Examiner Icban before the
Director of the Bureau of Trademarks of the IPO, who eventually affirmed
Examiner Icban's findings. The decision averred that the applicant and cited
marks were indeed confusingly similar, so much so that there may not only be
a confusion as to the goods but also a confusion as to the source or origin of
the goods. The fallo of the Bureau Director's decision reads:
WHEREFORE, premises considered, the instant appeal is
hereby DENIED and the Final Rejection contained in Official Action
Paper No. 04, SUSTAINED. Serve copies of this Decision to
[petitioner] and herein Examiner Arlene M. Icban.
SO ORDERED. 12
Upon the denial of the petitioner's motion for reconsideration, the
petitioner appealed to the Office of the Director General (ODG) of the IPO.
After the submission of the memoranda from the parties, the ODG, on
September 19, 2013, rendered a Decision which upheld Examiner Icban's
assessment and the Bureau Director's decision.
According to the ODG, there is no merit in the petitioner's appeal
because (1) the applicant and cited marks are identical and confusingly
similar, 13 (2) the petitioner's mark was deemed abandoned under the
old Trademark Law, and thus, petitioner's prior use of the same did not create
a vested right 14 under the IPC, 15 and (3) the applicant mark has not acquired
secondary meaning. 16 The fallo of the ODG decision reads:
Wherefore, premises considered, the appeal is
hereby DENIED and the Decision dated 29 March 2010 and the Order
denying the Appellant's Motion for Reconsideration, of the Director of
the Bureau of Trademarks, are hereby SUSTAINED. The Appellant's
Trademark Application No. 4-2004-004507 for METRO is
likewise DENIED.
Let a copy of this Decision as well as the trademark application
and records be furnished and returned to the Director of the Bureau of
Trademarks. Let a copy of this Decision be furnished also the library of
the Documentation, Information and Technology Transfer Bureau for
its information and records purposes.
SO ORDERED. 17
The petitioner received a copy of the ODG decision only on October 9,
2013. On the same day, the petitioner filed before the Court of Appeals its
"Motion for Extension of Time (To File Petition for Review)" which requested
for an extension of fifteen (15) days from October 24, 2013, or until November
8, 2013, to file its petition for review. 18 On October 25, 2013, the petitioner
once more filed a motion for extension of time. In the second motion, the
petitioner asked the appellate court for another extension of the deadline from
November 8, 2013 to November 23, 2013. 19
Meanwhile, on October 25, 2013, the Court of Appeals issued a
Resolution which granted the petitioner's first motion praying for an extension
of time to file its petition for review, subject to the "warning against further
extension." Thus, the Court of Appeals extended the deadline only until
November 8, 2013. 20
Relying on the appellate court's favorable response to its second
motion for extension (which was not acted upon by the Court of Appeals), the
petitioner failed to file its petition for review on the deadline set in the
Resolution dated October 25, 2013. Instead, the petitioner filed its petition for
review only on November 11, 2013 — three (3) days after the deadline. 21
To justify this delay in filing, the petitioner stated that: (1) it received a
copy of the October 25, 2013 Resolution only on November 8, 2013 at 11:30
in the morning; (2) on that same day, this Court, through its Public Information
Office, suspended offices in the National Capital Judicial Region in view of
Typhoon Yolanda; and (3) November 9 and 10, 2013 fell on a Saturday and
Sunday, respectively. 22
On May 20, 2014, the Court of Appeals rendered the assailed
Resolution. It ruled that the petitioner violated its October 25, 2013
Resolution, as well as Section 4, Rule 43 of the Rules of Court, which
provides for the period of appeal. 23
On the basis of the foregoing, and the prevailing jurisprudence, the
Court of Appeals consequently denied the petitioner's second motion for
extension of time, and dismissed the petition for the petitioner's failure to file
its petition for review within the deadline. 24
On April 15, 2015, the appellate court denied the petitioner's motion for
reconsideration. 25
Hence, this petition.

The Issues

The ground upon which the petitioner prays for the reversal of the ruling
of the Court of Appeals is two-fold: first is on procedural law — whether or not
the Court of Appeals erred in dismissing the petition outright for the
petitioner's failure to file its petition for review within the time prescribed by the
Court of Appeals; and second is on substantive law — whether or not the
ODG was correct in refusing to register the applicant mark for being identical
and confusingly similar with the cited marks already registered with the IPO.

The Court's Ruling

After a careful perusal of the arguments presented and the evidence

submitted, the Court finds no merit in the petition.
First, on the procedural issue:
In Bañez vs. Social Security System, 26 the Court had occasion to
reiterate that appeal is not a constitutional right, but a mere statutory privilege.
Hence, parties who seek to avail themselves of it must comply with the
statutes or rules allowing it. 27 The rule is that failure to file or perfect an
appeal within the reglementary period will make the judgment final and
executory by operation of law. Perfection of an appeal within the statutory or
reglementary period is not only mandatory but also jurisdictional; failure to do
so renders the questioned decision/resolution final and executory, and
deprives the appellate court of jurisdiction to alter the decision/resolution,
much less to entertain the appeal. 28
In connection herewith, Section 4, Rule 43 of the Rules of Court is
clear. The appeal shall be taken within fifteen (15) days from the notice of the
award, judgment, final order or resolution, or from the date of its last
publication, if publication is required by law for its effectivity, or of the denial of
petitioner's motion for new trial or reconsideration duly filed in accordance with
the governing law of the court or agency a quo. 29
More, a litigant is allowed to file only one (1) motion for reconsideration,
subject to the payment of the full amount of the docket fee prior to the
expiration of the reglementary period. Beyond this, another motion for
extension of time may be granted but only for the most compelling reasons. 30
Again, in Bañez, the Court ruled that filing of an appeal beyond the
reglementary period may, under meritorious cases, be excused if the barring
of the appeal would be inequitable and unjust in light of certain circumstances
therein. 31 While there are instances when the Court has relaxed the
governing periods of appeal in order to serve substantial justice, this was
done only in exceptional cases. 32
In this case, no exceptional circumstance exists.
In asking the Court of Appeals for a second extension to file its petition
for review, the petitioner merely cited as its excuse the following: (1) heavy
pressure of other professional work; and (2) attendance of the lawyers in
charge in an international lawyers' conference. It said:
 However, due to the heavy pressure of other equally important
professional work coupled with intervening delays and the fact of the
necessary attendance of the lawyers in charge of the case in an
international lawyer's (sic) conference, the undersigned counsel will
need more time to review and finalize petitioner ABS-CBN Publishing,
Inc.'s Petition for Review. 33
As the Court has ruled upon in a number of cases, a lawyer has the
responsibility of monitoring and keeping track of the period of time left to file
pleadings, and to see to it that said pleadings are filed before the lapse of the
period. 34 Personal obligations and heavy workload do not excuse a lawyer
from complying with his obligations particularly in timely filing the pleadings
required by the Court. 35 Indeed, if the failure of the petitioner's counsel to
cope with his heavy workload should be considered a valid justification to
sidestep the reglementary period, there would be no end to litigations so long
as counsel had not been sufficiently diligent or experienced. 36
Further, the petitioner should not assume that its motion for extension
of time would be granted by the appellate court. Otherwise, the Court will be
setting a dangerous precedent where all litigants will assume a favorable
outcome of a motion which is addressed to the discretion of the courts based
on the prevailing circumstances of the case.
To be sure, there is a dearth of jurisprudence that upholds the Court of
Appeals' power of discretion in disallowing a second extension of fifteen (15)
days. As correctly cited by the appellate court, Spouses Dycoco vs. Court of
Appeals 37 explains that the Court of Appeals could not be faulted for merely
applying the rules, and that a dismissal of a petition in accordance therewith is
discretion duly exercised, and not misused or abused. 38
Based on the foregoing, and for the guidance of both the bench and the
bar, the rule as it currently stands is that, in the absence of, or in the event of
a party's failure to receive, any resolution from the courts which specifically
grants a motion for extension of time to file the necessary pleading, the
parties are required to abide by the reglementary period provided for in
the Rules of Court. Failure to comply thereto would result to a dismissal or
denial of the pleadings for being filed beyond the reglementary period.
In the case at hand, the Court of Appeals was correct in dismissing the
petition. The petitioner could not assume that its motion would be granted,
especially in light of its flimsy excuse for asking the second extension of time
to file its petition for review.
On this ground alone, the dismissal of the current petition for review is
justifiable. The Court reiterates its warning in the case of Hernandez vs.
Agoncillo: 39
 Time and again, this Court has cautioned lawyers to handle only
as many cases as they can efficiently handle. The zeal and fidelity
demanded of a lawyer to his client's cause require that not only should
he be qualified to handle a legal matter, he must also prepare
adequately and give appropriate attention to his legal work. Since a
client is, as a rule, bound by the acts of his counsel, a lawyer, once he
agrees to take a case, should undertake the task with dedication and
care. This Court frowns upon a lawyer's practice of repeatedly seeking
extensions of time to file pleadings and thereafter simply letting the
period lapse without submitting any pleading or even any explanation
or manifestation for his omission. Failure of a lawyer to seasonably
file a pleading constitutes inexcusable negligence on his
part. 40 (Emphasis and underscoring supplied)
That said, however, even on the merits, the petition still fails to
convince.
Second, on the substantive issue:
According to Section 123.1 (d) of the Intellectual Property Code of the
Philippines (IPC), 41 a mark cannot be registered if it is "identical with a
registered mark belonging to a different proprietor or a mark with an earlier
filing or priority date," in respect of the following: (i) the same goods or
services, or (ii) closely related goods or services, or (iii) if it nearly resembles
such a mark as to be likely to deceive or cause confusion. 42
To determine whether a mark is to be considered as "identical" or that
which is confusingly similar with that of another, the Court has developed two
(2) tests: the dominancy and holistic tests. While the Court has time and again
ruled that the application of the tests is on a case to case basis, upon the
passage of the IPC, the trend has been to veer away from the usage of the
holistic test and to focus more on the usage of the dominancy test. As stated
by the Court in the case of McDonald's Corporation vs. L.C. Big Mak Burger,
Inc., 43 the "test of dominancy is now explicitly incorporated into law in Section
155.1 of the Intellectual Property Code which defines infringement as the
'colorable imitation of a registered mark x x x or a dominant feature
thereof.'" 44 This is rightly so because Sec. 155.1 provides that:
SECTION 155. Remedies; Infringement. — Any person who
shall, without the consent of the owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark or the same container or a
dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause
 confusion, or to cause mistake, or to deceive; or x x x. (Emphasis and
underscoring supplied)
In using this test, focus is to be given to the dominant features of the
marks in question. In the 1954 case of Co Tiong Sa vs. Director of
Patents, 45 the Court, in using the dominancy test, taught that:
But differences of variations in the details of one trademark and
of another are not the legally accepted tests of similarity in trademarks.
It has been consistently held that the question of infringement of a
trademark is to be determined by the test of dominancy. Similarity in
size, form, and color, while relevant, is not conclusive. If the
competing trademark contains the main or essential or dominant
features of another, and confusion and deception is likely to
result, infringement takes place. 46(Emphasis and underscoring
supplied)
The Court, in Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading
Corp., 47 and in once again using the dominancy test, reiterated Del Monte
Corporation vs. Court of Appeals 48 in saying that "the defendants in cases of
infringement do not normally copy but only make colorable changes." 49 The
Court emphasized that "the most successful form of copying is to employ
enough points of similarity to confuse the public, with enough points of
difference to confuse the courts." 50
In other words, in committing the infringing act, the infringer merely
introduces negligible changes in an already registered mark, and then banks
on these slight differences to state that there was no identity or confusing
similarity, which would result in no infringement. This kind of act, which leads
to confusion in the eyes of the public, is exactly the evil that the dominancy
test refuses to accept. The small deviations from a registered mark are
insufficient to remove the applicant mark from the ambit of infringement.
In the present case, the dominant feature of the applicant mark is the
word "METRO" which is identical, both visually and aurally, to the cited marks
already registered with the IPO. As held by the ODG — and correctly at that
—
x x x there is no dispute that the subject and cited marks
share the same dominant word, "Metro". (sic) Even if, as the
Appellant (petitioner herein) points out, the second cited mark owned
by Metro International contains an accompanying device, and the third
cited mark contains the terms "Philippine Daily Inquirer", (sic) the
dominant feature of the subject and cited marks is still clearly the
word "Metro", (sic) spelled and pronounced in exactly the same
way. The identity between the marks would indubitably result in
confusion of origin as well as goods. 51 (Emphasis and underscoring
supplied, citations omitted)
 Also, greater relevance is to be accorded to the finding of Examiner
Icban on the confusing similarity between, if not the total identity of, the
applicant and cited marks. Examiner Icban, in reiterating with finality her
earlier findings, said that the applicant and cited marks are "the same in
sound, spelling, meaning, overall commercial impression, covers substantially
the same goods and flows through the same channel of trade," which leads to
no other conclusion than that "confusion as to the source of origin is likely to
occur." 52 This is also the tenor of Examiner Icban's "Final Rejection" of the
application, which stated that:
After an examination of the application, the undersigned IPRS
has determined that the mark subject of the application cannot be
registered because it is identical with the cited marks METRO with
Regn. No. 42000002584 and Regn. No. 42000003811. METRO being
dominant word (sic) among the marks causes remarkable similarity in
sound, spelling, meaning, connotation, overall commercial impression,
covers identical goods and flows through the same channel of
trade. The concurrent use by the parties of the word METRO is
likely to cause confusion among purchasers as well as confusion
of business or origin hence, registration of this subject
application is proscribed under R.A. 8293, Sec.
123.1(d). 53 (Emphasis and underscoring supplied)
The findings of Examiner Icban, reviewed first by the Director of the
Bureau of Trademarks, and again by the Director General of the IPO, are the
result of a judicious study of the case by no less than the government agency
duly empowered to examine applications for the registration of
marks. 54 These findings deserve great respect from the Court. Absent any
strong justification for the reversal thereof — as in this case — the Court shall
not reverse and set aside the same. As such, the prior findings remain: the
applicant mark, "METRO," is identical to and confusingly similar with the other
cited marks already registered. By authority of the Sec. 123.1 (d) of the IPC,
the applicant mark cannot be registered. The ODG is correct in upholding the
Decision of both the Director of the Bureau of Trademarks and Examiner
Icban.
This ruling stands despite the specious arguments presented by the
petitioner in the current petition.
The petitioner asserts that it has a vested right over the applicant mark
because Metro Media Publishers, Inc. (Metro Media), the corporation from
which the petitioner acquired the applicant mark, first applied for the
registration of the same under the old Trademark Law, 55 and since then,
actually used the applicant mark in commerce. The petitioner belabors the
point that under the old Trademark law, actual use in commerce is a pre-
requisite to the acquisition of ownership over a trademark and a trade
name. 56The petitioner even went on further in asserting that its actual use of
the applicant mark enabled it to automatically acquire trademark rights, which
should have extended even upon the promulgation of the IPC in 1998.
Two things must be said of this argument.
First, there is no question that the petitioner's predecessor already
applied for the registration of the applicant mark "METRO" on November 3,
1994 under Class 16 of the Nice classification. It was docketed as Application
No. 4-1994-096162. 57 There is likewise no question that as early as 1989,
Metro Media has already used the applicant mark "METRO" in its magazine
publication. At that point, Metro Media exercised all the rights conferred by
law to a trademark applicant.
Second, however, the petitioner itself admitted in its petition that its
application/registration with the IPO under Application No. 4-1994-096162
was already "deemed abandoned." 58
While it is quite noticeable that the petitioner failed to discuss the
implications of this abandonment, it remains a fact that once a trademark is
considered abandoned, the protection accorded by the IPC, or in this case the
old Trademark Law, is also withdrawn. The petitioner, in allowing this
abandonment, cannot now come before the Court to cry foul if another entity
has, in the time that it has abandoned its trademark and in full cognizance of
the IPC and the IPO rules, registered its own.
In fact, in Birkenstock Orthopaedie GMBH and Co. KG. vs. Philippine
Shoe Expo Marketing Corporation, 59 the Court accorded no right at all to a
trademark owner whose trademark was abandoned for failure to file the
declaration of actual use as required by Sec. 12 of the old Trademark
Law. 60 In Mattel, Inc. vs. Francisco, 61 the Court rendered a petition as moot
and academic because the cited mark has effectively been abandoned for the
non-filing of a declaration of actual use, and thus presents no hindrance to the
registration of the applicant mark.
Also, as correctly pointed out by the ODG, this abandonment is the very
reason why the petitioner lost its rights over its trademark, and that it is also
the reason why, after twenty years (20) from the initial application and after
actual use of the applicant mark, the petitioner once again came before the
IPO to apply for registration. The ODG said:
Records show that this is the very situation the [petitioner] finds
itself in. It has acquired no right under the old trademark law since
its original application way back 1994 has been deemed
abandoned, which is the reason why it filed the current
application in 2004 under the new law. Clearly, then, if [petitioner]
has acquired no right under R.A. 166, it possesses no existing right
 that ought to be preserved by virtue of Section 236 of
the IP Code. 62 (Emphasis and underscoring supplied)
Anent the petitioner's argument that "confusion between the marks is
highly unlikely," 63 the petitioner asserts that the applicant mark "METRO"
(word) is covered by class 16 of the Nice classification under "magazines," the
copies of which are sold in "numerous retail outlets in the
Philippines," 64 whereas the cited mark "METRO" (word) is used in the
Philippines only in the internet through its website and does not have any
printed circulation. 65
But like the petitioner's earlier argument, this does not hold water.
Section 3, Rule 18 of the Rules of Procedure for Intellectual Property
Cases 66 provides for the legal presumption that there is likelihood of
confusion if an identical mark is used for identical goods. The provision states:
SEC. 3. Presumption of likelihood of confusion. —
Likelihood of confusion shall be presumed in case an identical sign or
mark is used for identical goods or services.
In the present case, the applicant mark is classified under "magazines,"
which is found in class 16 of the Nice classification. A perusal of the records
would reveal, however, that the cited marks "METRO" (word) and "METRO"
(logo) are also both classified under magazines. In fact, Examiner Icban found
that the cited marks were used on the following classification of goods:
Paper, cardboard and goods made from these materials, not
included in other classes; newspapers, magazines, printed matter and
other printed publications; bookbinding material; photographs;
stationery; adhesives for stationery or household purposes; artists
materials; paint brushes; typewriters and office requisites (except
furniture); instructional and teaching material (except apparatus);
plastics materials for packaging (not included in other classes); playing
cards; printers types; printing blocks. 67(Emphasis and underscoring
supplied)
Thus, the presumption arises.
Even then, it must be emphasized that absolute certainty of confusion
or even actual confusion is not required to refuse registration. Indeed, it is the
mere likelihood of confusion that provides the impetus to accord protection to
trademarks already registered with the IPO. The Court cannot emphasize
enough that the cited marks "METRO" (word) and "METRO" (logo) are
identical with the registrant mark "METRO" both in spelling and in sound. In
fact, it is the same exact word. Considering that both marks are used in goods
which are classified as magazines, it requires no stretch of imagination that a
likelihood of confusion may occur. Again, the Court points to the finding of
 Examiner Icban which was reviewed and upheld twice: one by the Director of
the Bureau of Trademarks and another by the Director General of the IPO.
As a final point, the petitioner, in the pleadings submitted, manifested
that the cited marks are no longer valid. It said that: (1) the cited mark
"METRO" (logo) was removed from the IPO register for non-use, citing the
IPO online database, 68 (2) the cited mark "INQUIRER METRO," while valid
according to the IPO online database, was cancelled according to a certain
certification from the Bureau of Trademarks of the IPO; and (3) the cited mark
"METRO" (word) already expired on June 26, 2016 according to yet another
certification from the IPO.
A perusal of the records, however, would reveal that these alleged de-
registration and cancellation all allegedly occurred after the ODG has already
ruled on the instant case. Considering that the Court is not a trier of facts, the
Court could therefore not make a determination of the validity and accuracy of
the statements made in the petitioner's manifestation. As such, the Court,
through the limited facts extant in the records, could not give weight and
credence thereto.
Nonetheless, not all is lost for the petitioner. Should it be true that the
cited marks, which were the basis of the IPO in refusing to register the
applicant mark, were already de-registered and cancelled, nothing prevents
the petitioner from once again applying for the registration of the applicant
mark before the IPO.
WHEREFORE, premises considered, the Resolutions of the Court of
Appeals dated May 20, 2014 and April 15, 2015, are
hereby AFFIRMED without prejudice to the petitioner's refiling of its
application for the registration of the trademark "METRO" before the
Intellectual Property Office.
SO ORDERED.
Peralta, Del Castillo, * Perlas-Bernabe and Caguioa, JJ., concur.
(ABS-CBN Publishing, Inc. v. Director of the Bureau of Trademarks, G.R. No.
|||

217916, [June 20, 2018])

THIRD DIVISION
[G.R. Nos. 213365-66. December 10, 2018.]
ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS, LTD.,
petitioner, vs. PAPERONE, INC., respondent.
 DECISION
GESMUNDO, J : p

Before the Court is a Petition for Review on Certiorari 1 under Rule

45 of the Rules of Court, assailing the November 28, 2013 Decision 2 and the
July 9, 2014 Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP Nos.
122288 and 122535. The CA reversed and set aside the November 10, 2011
Decision 4 of the Intellectual Property Office (IPO) Director General, finding
Paperone, Inc. (respondent) liable for unfair competition.

The Facts

The dispute in this case arose from a complaint for unfair

competition, trademark infringement, and damages filed against respondent
by Asia Pacific Resources International Holdings, Ltd. (petitioner).

Petitioner is engaged in the production, marketing, and sale of pulp

and premium wood free paper. 5 It alleged that it is the owner of a well-known
trademark, PAPER ONE, with Certificate of Registration No. 4-1999-01957
issued on September 5, 2003. 6 The said trademark enjoyed legal protection
in different countries worldwide and enjoyed goodwill and high reputation
because of aggressive marketing and promotion. Petitioner claimed that the
use of PAPERONE in respondent's corporate name without its prior consent
and authority was done in bad faith and designed to unfairly ride on its good
name and to take advantage of its goodwill. It was calculated to mislead the
public into believing that respondent's business and/or products were
manufactured, licensed or sponsored by petitioner. It was also alleged that
respondent had presumptive, if not actual knowledge, of petitioner's rights to
the trademark PAPER ONE, even prior to respondent's application for
registration of its corporate name before the Securities and Exchange
Commission (SEC). 7

Respondent, on its part, averred that it had no obligation to secure

prior consent or authority from petitioner to adopt and use its corporate
name. The Department of Trade and Industry (DTI) and the SEC had
allowed it to use Paperone, Inc., thereby negating any violation on
petitioner's alleged prior rights. Respondent was registered with the SEC,
having been organized and existing since March 30, 2001. Its business
name was likewise registered with the DTI. Respondent also denied any
awareness of the existence of petitioner and/or the registration of PAPER
ONE, as the latter is a foreign corporation not doing business in the
Philippines. While the business of respondent dealt with paper conversion
such as manufacture of table napkins, notebooks and intermediate/collegiate
writing pads, it did not use its corporate name PAPERONE on any of its
 products. Further, its products had been widely sold in the Philippines even
before petitioner could claim any business transaction in the country. The
public could not have possibly been deceived into believing that any relation
or sponsorship existed between the parties, considering these
circumstances. 8 HESIcT

In its decision, 9 the Bureau of Legal Affairs (BLA) Director,

Intellectual Property Office, found respondent liable for unfair competition. It
ordered respondent to cease and desist from using PAPERONE in its
corporate name, and to pay petitioner P300,000.00, as temperate damages;
P200,000.00, as exemplary damages; and P100,000.00, as attorney's fees.
It ruled that petitioner was the first to use PAPER ONE in 1999 which had
become a symbol of goodwill of its paper business. Respondent's use of
PAPERONE in its corporate name was to benefit from the established
goodwill of petitioner. There was, however, no trademark infringement since
PAPER ONE was registered in the Philippines only in 2003. 10

On appeal to the IPO Director General, the BLA decision was

affirmed with modification insofar as the increase in the award of attorney's
fees to P300,000.00. 11

The CA Ruling

Both parties appealed to the CA. Petitioner maintained that it was

entitled to actual damages amounting to P46,032,569.72 due to unfair
competition employed by respondent. Respondent claimed that it was not
liable for unfair competition.

In its decision, the CA reversed and set aside the IPO Director
General's decision. It held that there was no confusing similarity in the
general appearance of the goods of both parties. Petitioner failed to establish
through substantial evidence that respondent intended to deceive the public
or to defraud petitioner. Thus, the essential elements of unfair competition
were not present. 12

ISSUES

In the petition before us, petitioner raises various issues for our
resolution. However, given the facts of this case, we find that the only issues
to be resolved are:

I.

WHETHER RESPONDENT IS LIABLE FOR UNFAIR COMPETITION, and

 II.

WHETHER PETITIONER IS ENTITLED TO ACTUAL DAMAGES.

OUR RULING

The core of the controversy is the adoption of "PAPERONE" in the

trade name of respondent, which petitioner claims it has prior right to, since it
was the first to use it as its trademark for its paper products. Petitioner claims
that respondent committed unfair competition by adopting PAPERONE in its
trade name. It is noteworthy that the issue of trademark infringement is not
the subject of the appeal before us.

The relevant provisions of the Intellectual Property Code 13 provide:

SECTION 168. Unfair Competition, Rights, Regulation
and Remedies. —

168.1. A person who has identified in the mind of the

public the goods he manufactures or deals in, his business or
services from those of others, whether or not a registered mark is
employed, has a property right in the goodwill of the said goods,
business or services so identified, which will be protected in the
same manner as other property rights.

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 who 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.

The essential elements of an action for unfair competition are: (1)

confusing similarity in the general appearance of the goods, and (2) intent to
deceive the public and defraud a competitor. 14 Unfair competition is always a
question of fact. 15 At this point, it bears to stress that findings of fact of the
highly technical agency — the IPO — which has the expertise in this field,
should have been given great weight by the Court of Appeals. 16 TAIaHE

a) Confusing similarity

As to the first element, the confusing similarity may or may not result
from similarity in the marks, but may result from other external factors in the
packaging or presentation of the goods. 17 Likelihood of confusion of goods
or business is a relative concept, to be determined only according to peculiar
circumstances of each case. 18
 The marks under scrutiny in this case are hereby reproduced for
easy reference:

It can easily be observed that both have the same spelling and are
pronounced the same. Although respondent has a different logo, it was
always used together with its trade name. It bears to emphasize that, initially,
respondent's trade name had separate words that read "Paper One, Inc."
under its original Articles of Incorporation. This was later on revised to make
it one word, and now reads "Paperone, Inc." 19

At first glance, respondent may be correct that there would be no

confusion as to the presentation or packaging of its products since it is not
using its corporate name as a trademark of its goods/products. There is an
apparent dissimilarity of presentation of the trademark PAPER ONE and the
trade name and logo of Paperone, Inc. Nevertheless, a careful scrutiny of the
mark shows that the use of PAPERONE by respondent would likely cause
confusion or deceive the ordinary purchaser, exercising ordinary care, into
believing that the goods bearing the mark are products of one and the same
enterprise.

Relative to the issue on confusion of marks and trade names,

jurisprudence has noted two types of confusion, viz.: (1) confusion of goods
(product confusion), where the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the
other; and (2) confusion of business (source or origin confusion), where,
although the goods of the parties are different, the product, the mark of which
registration is applied for by one party, is such as might reasonably be
assumed to originate with the registrant of an earlier product; and the public
would then be deceived either into that belief or into the belief that there is
some connection between the two parties, though inexistent. 20 Thus, while
there is confusion of goods when the products are competing, confusion of
business exists when the products are non-competing but related enough to
produce confusion of affiliation. 21
cDHAES

This case falls under the second type of confusion. Although we see
a noticeable difference on how the trade name of respondent is being used
in its products as compared to the trademark of petitioner, there could likely
be confusion as to the origin of the products. Thus, a consumer might
conclude that PAPER ONE products are manufactured by or are products of
Paperone, Inc. Additionally, although respondent claims that its products are
not the same as petitioner's, the goods of the parties are obviously related as
they are both kinds of paper products.
 The BLA Director aptly ruled that "[t]o permit respondent to continue
using the same or identical Paperone in its corporate name although not
[used] as label for its paper products, but the same line of business, that of
manufacturing goods such as PAPER PRODUCTS, therefore their co-
existence would result in confusion as to source of goods and diversion of
sales to [r]espondent knowing that purchasers are getting products from
[petitioner] APRIL with the use of the corporate name Paper One, Inc. or
Paperone, Inc. by herein [r]espondent." 22

The matter of prior right over PAPERONE, again, is a matter of

factual determination; therefore, we give credence to the findings of the IPO,
who has the expertise in this matter, being supported by substantial
evidence. The Court has consistently recognized the specialized functions of
the administrative agencies — in this case, the IPO. Berris Agricultural Co.,
Inc. v. Abyadang 23 states, thus:

The determination of priority of use of a mark is a

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

xxx xxx xxx

Verily, the protection of trademarks as intellectual

property is intended not only to preserve the goodwill and
reputation of the business established on the goods bearing the
mark through actual use over a period of time, but also to
safeguard the public as consumers against confusion on these
goods. On this matter of particular concern, administrative
agencies, such as the IPO, by reason of their special
knowledge and expertise over matters falling under their
jurisdiction, are in a better position to pass judgment
thereon. Thus, their findings of fact in that regard are
generally accorded great respect, if not finality by the
courts, as long as they are supported by substantial
evidence, even if such evidence might not be overwhelming
or even preponderant. It is not the task of the appellate court
 to weigh once more the evidence submitted before the
administrative body and to substitute its own judgment for
that of the administrative agency in respect to sufficiency of
evidence. 24 (Emphasis supplied)

The BLA Director found, as affirmed by the IPO Director General,

that it was petitioner who has priority rights over PAPER ONE, thus:
One essential factor that has led this Office to tilt the
scales of justice in favor of Complainant is the latter's
establishment of prior use of the word PaperOne for paper
products in the Philippines. Records will show that there was
prior use and adoption by Complainant of the word "PaperOne."
PaperOne was filed for trademark registration on 22 March 1999
(Exhibit "D", Complainant) in the name of Complainant Asia
Pacific Resources International Holdings, Ltd. and matured into
registration on 10 February 2003. Respondent's corporate or
trade name is Paper One, Inc. which existed and was duly
registered with the Securities and Exchange Commission on 31
March 2001 (Exhibit "11", Respondent). If anyone files a suit and
can prove priority of adoption, he can assert his right to the
exclusive use of a corporate name with freedom from
infringement by similarity (Philips Export B.V., et al. vs. CA, G.R.
No. 96161). Respondent was incorporated in March 2001 by
virtue of SEC Registration No. A200104788 (Exhibit "11",
Complainant) and was registered two (2) years thereafter as
business name with the Department of Trade and Industry under
DTI Business Name Registration No. 00068456 (Exhibit "13",
Respondent). Complainant Asia Pacific Resources International
Holdings, Ltd., APRIL for brevity, presented evidence of its use of
the label PaperOne on paper products in the Philippines earlier
than the date of its trademark application in 1999 when its
marketing and promotion agent JND International Corporation
("JND" for brevity) licensed one of its clients, National Paper
Products & Printing Corporation ("NAPPCO" for brevity) to
import, sell and distribute Complainant's APRIL paper products in
1998 (par. 3, Exhibit "AA", Complainant). To support this
declaration are documents evidencing transactions of NAPPCO
with Complainant APRIL with the earliest documented
transaction on 22 January 1999 (Exhibit "G", Complainant)
bearing [I]nvoice [N]o. LCA9812133. ASEcHI
 [The] fact of earlier use was not disputed by the
Respondent. In point of fact, Respondent already knew of
Complainant's APRIL existence prior to Respondent's
incorporation as Paper One, Inc. in 2001. Most of the
incorporators of National Paper Products & Printing
Corporation or NAPPCO for brevity (Exhibits "H" and "H-A"
to "H-H", Complainant) which in late 1990s transacted with
Complainant APRIL through Invoice No. LCA9812133 dated
22 January 1999, the earliest invoice noted (Exhibit "G",
Complainant) are likewise incorporators of Paper One, Inc.
(Exhibit "11", Respondent) namely Tan Tian Siong, Chong
Ping Tat, Thelma J. Uy, Conchita Francisco, Sy Siong Sun,
to name a few. Also, NAPPCO, through Complainant's
marketing and promotion agent JND International
Corporation, or JND for brevity (Exhibit "AA", Complainant)
expressed interest in a letter dated 19 January 2000 to work
with JND and APRIL, as its exclusive distributor and we
quote "to become your exclusive distributor of 'Paper One'
Multi Purpose Copy Paper" (Exhibit "AA-1-d", Complainant).
Worth mentioning at this point is the jurisprudence pronounced in
the case of Converse Rubber Corporation vs. Universal Rubber
Products, Inc. and Tiburcio S. Evalle (G.R. No. L-27906, Jan. 18,
1987) where the court said:

Knowing therefore that the word "CONVERSE"' belongs to and is

being used by petitioner, and is in fact the
dominant word in petitioner's corporate name,
respondent has no right to appropriate the
same for use on its products which are similar
to those being produced by petitioner. 25
(Emphasis supplied)

b) intent to deceive the public and defraud a competitor

The element of intent to deceive and to defraud may be inferred

from the similarity of the appearance of the goods 26 as offered for sale to the
 public. 27 Contrary to the ruling of the CA, actual fraudulent intent need not be
shown. 28 Factual circumstances were established showing that respondent
adopted PAPERONE in its trade name even with the prior knowledge of the
existence of PAPER ONE as a trademark of petitioner. As in all other cases
of colorable imitations, the unanswered riddle is why, of the millions of terms
and combinations of letters available, respondent had to choose those so
closely similar to another's trademark if there was no intent to take
advantage of the goodwill generated by the other mark. 29

With regard to the issue on damages, we likewise agree with the

IPO that the actual damages prayed for cannot be granted because
petitioner has not presented sufficient evidence to prove the amount claimed
and the basis to measure actual damages.

WHEREFORE, the petition is GRANTED. The November 28, 2013

Decision and the July 9, 2014 Resolution of the Court of Appeals in CA G.R.
SP Nos. 122288 and 122535 are REVERSED and SET ASIDE. Accordingly,
the November 10, 2011 Decision of the Intellectual Property Office Director
General finding respondent liable for unfair competition is hereby
REINSTATED. ITAaHc

SO ORDERED.

Peralta, J.C. Reyes, Jr. and Hernando, JJ., concur.

Leonen, J., see separate concurring opinion.

(Asia Pacific Resources International Holdings, Ltd. v. Paperone, Inc., G.R.

|||

Nos. 213365-66, [December 10, 2018])

THIRD DIVISION

[G.R. Nos. 211820-21. June 6, 2018.]

KENSONIC, INC., petitioner, vs. UNI-LINE MULTI-RESOURCES,

INC., (PHIL.), respondent.

[G.R. Nos. 211834-35. June 6, 2018.]

UNI-LINE MULTI-RESOURCES, INC., petitioner, vs. KENSONIC,

INC., respondent.
 DECISION

BERSAMIN, J : p

The case concerns the cancellation of the registration of the trademark

SAKURA for the goods of Uni-Line Multi Resources, Inc. (Phils.) (Uni-Line)
being sought by Kensonic, Inc. (Kensonic) on the ground that the latter had
prior use and registration of the SAKURA mark.

The Case

Under consideration are the consolidated appeals urging the review

and reversal of the decision promulgated on July 30, 2013 1 and the amended
decision promulgated on March 19, 2014, 2 whereby the Court of Appeals
(CA) affirmed the decision rendered on June 11, 2012 by the Director General
of the Intellectual Property Office (IPO) upholding the cancellation of the
application of Uni-Line for the registration of the SAKURA mark for goods
falling under Class 09 of the Nice International Classification of Goods (Nice
Classification), and allowing the registration of Uni-Line's SAKURA mark
registration for goods falling under Class 07 and Class 11 of the Nice
Classification. 3

Antecedents

The CA summarized the following factual and procedural

antecedents, viz.:
On June 15, 1999, Uni-Line filed an application for the
registration of the mark "SAKURA" for amplifier, speaker, cassette,
cassette disk, video cassette disk, car stereo, television, digital video
disk, mini component, tape deck, compact disk charger, VHS, and tape
rewinder falling under Class 9 of the Nice International Classification of
Goods. Kensonic opposed Uni-Line's application which was docketed
as IPC No. 14-2004-00160 (IPC 1). The Director of the Bureau of
Legal Affairs (BLA) rendered Decision No. 2005-01 dated November
29, 2005 finding that Kensonic was the first to adopt and use the mark
SAKURA since 1994 and thus rejecting Uni-Line's application. On
January 19, 2006, said Decision became final and executory.
While IPC Case 1 was pending, Uni-Line filed an application
and was issued a certificate of registration for the mark "SAKURA &
FLOWER DESIGN" for use on recordable compact disk (CD-R)
computer, computer parts and accessories falling under Class 9. On
September 7, 2006, Kensonic filed a petition for cancellation docketed
as IPC No. 14-2006-00183 (IPC 2) of Uni-Line's registration. In
Decision No. 08-113 dated August 7, 2008, the BLA Director held that
Uni-Line's goods are related to Kensonic's goods and that the latter
was the first user of the mark SAKURA used on products under Class
9. The BLA Director thus cancelled Uni-Line's certificate of registration.
Uni-Line moved for reconsideration of the BLA Director's Decision
which is pending resolution to date.
On June 6, 2002, Uni-Line filed an application for the
registration of the trademark SAKURA for use on the following:

Nice
Goods
Classification

Washing machines, high pressure Class 07

washers, vacuum cleaners, floor
polishers, blender, electric mixer,
electrical juicer

Television sets, stereo components, Class 09

DVD/VCD players, voltage regulators,
portable generators, switch breakers,
fuse

Refrigerators, air conditioners, oven Class 11

toaster, turbo broiler, rice cooker,
microwave oven, coffee maker,
sandwich/waffle maker, electric stove,
electric fan, hot & cold water
dispenser, airpot, electric griller and
electric hot pot

Uni-Line's application was thereafter published, and there being

no opposition thereto, Certificate of Registration No. 4-2002-004572 for
the mark SAKURA effective March 18, 2006 was issued.
On September 7, 2006, Kensonic filed with the BLA a Petition
for Cancellation of Uni-Line's Certificate of Registration alleging that in
October 1994, it introduced the marketing of SAKURA products in the
Philippines and that it owned said SAKURA products and was the first
to use, introduce and distribute said products. Kensonic also alleged
that in IPC 1, it opposed Uni-Line's application to register SAKURA and
was already sustained by the Director General, which Decision is now
final and executory. Kensonic further alleged that it is the owner of a
copyright for SAKURA and that since 1994, has maintained and
established a good name and goodwill over the SAKURA products.
 Kensonic filed its Supplemental Petition for Cancellation and its
Reply to Uni-Line's Answer. Uni-Line filed its Rejoinder thereto. 4

Decision of the
Bureau of Legal Affairs (BLA), IPO

After due proceedings, the BLA issued Decision No. 2008-149 dated
August 11, 2008, 5 whereby it ruled in favor of Kensonic and against Uni-Line,
and directed the cancellation of Registration No. 4-2002-004572 of the latter's
SAKURA mark. It observed that an examination of the SAKURA mark of
Kensonic and that of Uni-Line revealed that the marks were confusingly
similar with each other; that the goods sought to be covered by the SAKURA
registration of Uni-Line were related to the goods of Kensonic, thereby
necessitating the cancellation of the registration of Uni-Line's mark; and that
considering that Kensonic had used the SAKURA mark as early as 1994 in
Class 09 goods (namely: amplifiers, speakers, cassette disks, video cassette
disks, car stereos, televisions, digital video disks, mini components, tape
decks, compact disk chargers, VHS and tape rewinders), Kensonic had
acquired ownership of the SAKURA mark, and should be legally protected
thereon. The dispositive portion reads:
WHEREFORE, premises considered, the Verified Petition for
Cancellation is hereby GRANTED. Accordingly, Certificate of
Registration No. 4-2002-004572 issued on 18 March 2006 for the
trademark "SAKURA" in the name of Uni-Line Multi Resources, Inc.
Phils., is hereby ordered CANCELLED.
Let the file wrapper of this case be forwarded to the Bureau of
Trademark (BOT) for appropriate action in accordance with this
Decision.
SO ORDERED. 6

Decision of the Director General, IPO

On appeal, 7 the Director General of the IPO modified the decision of

the BLR by upholding Uni-Line's registration of the SAKURA mark as to goods
classified as Class 07 and Class 11, thereby effectively reversing the BLR, but
affirmed the BLR as regards the treatment of the SAKURA mark that covered
the goods falling under Class 09. The Director General clarified that the marks
of Uni-Line and Kensonic were similar if not identical; that considering that
Inter Partes Case No. 14-2004-00160 (IPC 1) already effectively ruled that the
products registered by Uni-Line were goods related to those covered by the
registration of Kensonic, the registration of Uni-Line insofar as those products
sought to be registered under Class 09 were concerned (i.e., television sets,
stereo components, DVD/VCD players, voltage regulators, portable
generators, switch breakers, fuse) was correctly cancelled; that the
registration of products of Uni-Line falling under Class 07 and Class 11 should
not be cancelled because the products were different from the goods
registered under Class 09 in the name of Kensonic; that there should be
evidence showing how the continued registration of the SAKURA mark of Uni-
Line would cause damage to Kensonic; and that the goods covered by the
SAKURA registration of Uni-Line and the SAKURA registration of Kensonic
should be distinguished because:
In addition, the ordinary purchaser must be thought of, as
having, and credited with, at least a modicum of intelligence. It does
not defy common sense to assert that a purchaser would be cognizant
of the product he is buying. As a general rule, an ordinary buyer does
not exercise as much prudence in buying an article for which he pays a
few centavos as he does in purchasing a more valuable thing.
Expensive and valuable items are normally bought only after
deliberate, comparative and analytical investigation.
In this instance, the products of the Appellants under Classes 7
and 11 are home appliances which are not the ordinary everyday
goods the public buys and consumes. These products are not
inexpensive items and a purchaser would ordinarily examine carefully
the features and characteristics of the same. It is, therefore, farfetched
that the purchasing public would be misled or be deceived as to the
source or origin of the products. Furthermore, there is nothing in the
records that indicate any plans by the Appellee to enter into business
transactions or to the manufacture and distribution of goods similar to
the products of the Appellants under Classes 7 and 11." 8
The Director General of the IPO decreed as follows:
Wherefore, premises considered, the appeal is hereby
dismissed in so far as the cancellation of the Appellant's Cert. of Reg.
No. 4-2002-004572 for goods enumerated and falling under Class 9 is
concerned. However, the appeal is hereby granted in so far as the
cancellation of Cert. of Reg. No. 4-2002-004572 for goods enumerated
and falling under Classes 7 and 11 is concerned.
Accordingly, Cert. of Reg. No. 4-2002-004572 issued in favor of
the Appellant for the mark SAKURA is hereby amended. The
registration of goods enumerated under Class 9, namely television
sets, stereo components, DVD/VCD players, voltage regulators,
portable generators, switch breakers, fuse is hereby cancelled.
Let a copy of this Decision as well as the records of this case be
furnished and returned to the Director of the Bureau of Legal Affairs for
appropriate action. Further, let also the Director of the Bureau of
 Trademarks and the library of Documentation, Information and
Technology Transfer Bureau be furnished a copy of this Decision for
information, guidance, and records purposes.
SO ORDERED. 9

Judgment of the CA

Both parties appealed to the CA, which promulgated its decision on July
30, 2013 dismissing the appeal of Kensonic (C.A.-G.R. SP No. 125420) and
granting Uni-Line's appeals (C.A.-G.R. SP No. 125424). The CA upheld
Kensonic's ownership of the SAKURA mark based on its showing of its use of
the mark since 1994, but ruled that despite the identical marks of Kensonic
and Uni-Line, Kensonic's goods under Class 09 were different from or
unrelated to Uni-Line's goods under Class 07 and Class 11. It observed that
the protection of the law regarding the SAKURA mark could only extend to
television sets, stereo components, DVD and VCD players but not to Uni-
Line's voltage regulators, portable generators, switch breakers and fuses due
to such goods being unrelated to Kensonic's goods; that Kensonic's
registration only covered electronic audio-video products, not electrical home
appliances; and that the similarity of the marks would not confuse the public
because the products were different and unrelated. It ruled:
WHEREFORE, the Petition filed by Kensonic, Inc., in C.A.-G.R.
SP No. 125420 is DENIED and the Petition filed by Uni-Line Multi
Resources, Inc. (Phils.) is GRANTED.
Accordingly, the Decision dated June 11, 2012 of Director
General Ricardo R. Blancaflor of the Intellectual Property Office
is MODIFIED such that Uni-Line's Appeal insofar as the cancellation of
its Certificate of Registration No. 4-2002-004572 for goods enumerated
and falling under Class 9 is GRANTED but DELETING therefrom the
goods television sets, stereo components, DVD players and VCD
players. The Decision dated June 11, 2012 of the Director General is
hereby UPHELD insofar as it granted Uni-Line's Appeal on the
cancellation of its Certificate of Registration No. 4-2002-004572 for
goods enumerated and falling under Class 7 and Class 11.
SO ORDERED. 10
Kensonic sought partial reconsideration, submitting that voltage
regulators, portable generators, switch breakers and fuse were closely related
to its products; that maintaining the two SAKURA marks would cause
confusion as to the source of the goods; and that Uni-Line's goods falling
under Class 07 and Class 11 were closely related to its goods falling under
Class 09.
 In the assailed amended decision promulgated on March 19,
2014, 11 the CA sided with Kensonic, and reverted to the ruling by the Director
General of IPO cancelling the registration of the SAKURA mark covering all
the goods of Uni-Line falling under Class 09 on the basis that all the goods
belonged to the general class of goods. The CA decreed:
WHEREFORE, the Motion for Partial Reconsideration filed by
Kensonic, Inc. is PARTIALLY GRANTED. Uni-Line is prohibited from
using the mark SAKURA for goods falling under Class 9, but is allowed
to use the mark SAKURA for goods falling under Classes 7 and 11.
Thus, the DENIAL of Uni-Line's Appeal insofar as the cancellation of its
Certificate of Registration No. 4-2002-004572 for goods enumerated
and falling under Class 9 is UPHELD. The Decision dated June 11,
2012 of the Director General is AFFIRMED in toto.
SO ORDERED. 12

Issues

Hence, this appeal by both parties.

Kensonic (G.R. Nos. 211820-21) insists that the CA erred in not
considering that Uni-Line's goods under Class 07 and Class 11 were related
to its goods falling under Class 09; and that all the agencies below were
unanimous in declaring that the marks were identical, and, as such, the use of
the SAKURA marks would lead to confusion about the source of the goods.
Uni-Line (G.R. Nos. 211834-35) contends that the SAKURA mark could
not be appropriated because it simply referred to cherry blossom in Japanese
and was thus a generic name that was not copyrightable; that it was grave
error for the IPO and the CA to rule that Kensonic owned the mark; and that
voltage regulators, portable generators, switch breakers and fuse were
unrelated to Kensonic's products because Uni-Line's products were not
electronic.
The following issues are, therefore, to be resolved:
(1) Is the SAKURA mark capable of appropriation?
(2) Are Kensonic's goods falling under Class 09 related to Uni-Line's
goods falling under Class 07 and Class 11?; and
(3) Are Uni-Line's goods falling under Class 9, namely: voltage
regulators, portable generators, switch breakers and fuses,
related to Kensonic's goods falling under Class 9?

Ruling of the Court

 The appeal of Kensonic in G.R. Nos. 211820-21 is dismissed but the
petition in G.R. Nos. 211834-35 is partially granted.

I.

The SAKURA mark can be appropriated

Uni-Line's opposition to Kensonic's ownership of the SAKURA mark

insists that the SAKURA mark is not copyrightable for being generic. Such
insistence is unacceptable.
To be noted is that the controversy revolves around the SAKURA mark
which is not a copyright. The distinction is significant. A mark is any visible
sign capable of distinguishing the goods (trademark) or services (service
mark) of an enterprise, and includes a stamped or marked container of
goods. 13 In contrast, a copyright is the right to literary property as recognized
and sanctioned by positive law; it is an intangible, incorporeal right granted by
statute to the author or originator of certain literary or artistic productions,
whereby he or she is invested, for a specific period, with the sole and
exclusive privilege of multiplying copies of the same and publishing and
selling them. 14Obviously, the SAKURA mark is not an artistic or literary work
but a sign used to distinguish the goods or services of one enterprise from
those of another.
An examination of the pertinent laws also reveals that Uni-Line
mistakenly argues that the SAKURA mark was not capable of registration for
being generic.
Section 123 (h) of the Intellectual Property Code prohibits the
registration of a trademark that consists exclusively of signs that are generic
for the goods or services that they seek to identify. It is clear from the law
itself, therefore, that what is prohibited is not having a generic mark but having
such generic mark being identifiable to the good or service. In Asia Brewery,
Inc. v. Court of Appeals, 15 the Court ruled that there was no infringement of
San Miguel Brewery's Pale Pilsen trademark because Pale Pilsen could not
be appropriated. The Court explained:
The fact that the words pale pilsen are part of ABI's trademark
does not constitute an infringement of SMC's trademark: SAN MIGUEL
PALE PILSEN, for "pale pilsen" are generic words descriptive of the
color ("pale"), of a type of beer ("pilsen"), which is a light bohemian
beer with a strong hops flavor that originated in the City of Pilsen in
Czechoslovakia and became famous in the Middle Ages. (Webster's
Third New International Dictionary of the English Language,
Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C
Merriam Co., c) 1976, page 1716.) "Pilsen" is a "primarily
geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No.
166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable
and not appropriable by any beer manufacturer. The Trademark Law
provides:
"Sec. 4. . . . The owner of trade-mark, trade-name or
service-mark used to distinguish his goods, business or
services from the goods, business or services of others
shall have the right to register the same [on the principal
register], unless it:
xxx xxx xxx
"(e) Consists of a mark or trade-name which, when
applied to or used in connection with the goods, business
or services of the applicant is merely descriptive or
deceptively misdescriptive of them, or when applied to or
used in connection with the goods, business or services
of the applicant is primarily geographically descriptive or
deceptively misdescriptive of them, or is primarily merely
a surname." (Emphasis supplied.)
The words "pale pilsen" may not be appropriated by SMC for its
exclusive use even if they are part of its registered trademark: SAN
MIGUEL PALE PILSEN, any more than such descriptive words as
"evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes"
and "cooking oil" may be appropriated by any single manufacturer of
these food products, for no other reason than that he was the first to
use them in his registered trademark. In Masso Hermanos, S.A. vs.
Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer
in shoes cannot register "Leather Shoes" as his trademark because
that would be merely descriptive and it would be unjust to deprive other
dealers in leather shoes of the right to use the same words with
reference to their merchandise. No one may appropriate generic or
descriptive words. They belong to the public domain (Ong Ai Gui vs.
Director of Patents, 96 Phil. 673, 676 [1955]):
"A word or a combination of words which is merely
descriptive of an article of trade, or of its composition,
characteristics, or qualities, cannot be appropriated and
protected as a trademark to the exclusion of its use by
others . . . inasmuch as all persons have an equal right to
produce and vend similar articles, they also have the
right to describe them properly and to use any
appropriate language or words for that purpose, and no
person can appropriate to himself exclusively any word or
expression, properly descriptive of the article, its
 qualities, ingredients or characteristics, and thus limit
other persons in the use of language appropriate to the
description of their manufactures, the right to the use of
such language being common to all. This rule excluding
descriptive terms has also been held to apply to trade-
names. As to whether words employed fall within this
prohibition, it is said that the true test is not whether they
are exhaustively descriptive of the article designated, but
whether in themselves, and as they are commonly used
by those who understand their meaning, they are
reasonably indicative and descriptive of the thing
intended. If they are thus descriptive, and not arbitrary,
they cannot be appropriated from general use and
become the exclusive property of anyone. (52 Am. Jur.
542-543.)
". . . Others may use the same or similar descriptive word
in connection with their own wares, provided they take
proper steps to prevent the public being deceived.
(Richmond Remedies Co. vs. Dr. Miles Medical Co., 16
E. [2d] 598.)
". . . A descriptive word may be admittedly distinctive,
especially if the user is the first creator of the article. It
will, however, be denied protection, not because it lacks
distinctiveness, but rather because others are equally
entitled to its use. (2 Callman, Unfair Competition and
Trademarks, pp. 869-870.)"
This, however, is not the situation herein. Although SAKURA refers to
the Japanese flowering cherry 16 and is, therefore, of a generic nature, such
mark did not identify Kensonic's goods unlike the mark in Asia Brewery, Inc. v.
Court of Appeals. Kensonic's DVD or VCD players and other products
could not be identified with cherry blossoms. Hence, the mark can be
appropriated.
Kensonic's prior use of the mark since 1994 made it the owner of the
mark, and its ownership cannot anymore be challenged at this stage of the
proceedings. Seeking the review of Kensonic's ownership would entail the
examination of facts already settled by the lower tribunals. Uni-Line's
challenge to the ownership of the SAKURA mark should stop here because
the Court cannot act on a factual matter in this appeal by petition for review
on certiorari, which is limited to the consideration of questions of law. Section
1, Rule 45 of the Rules of Court specifically so provides:
Section 1. Filing of petition with Supreme Court. — A party
desiring to appeal by certiorari from a judgment or final order or
resolution of the Court of Appeals, the Sandiganbayan, the Court of
 Tax Appeals, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition may include an application for a
writ of preliminary injunction or other provisional remedies and shall
raise only questions of law which must be distinctly set forth. The
petitioner may seek the same provisional remedies by verified motion
filed in the same action or proceeding at any time during its pendency.
The distinction between a question of law and a question of fact is well
defined. According to Tongonan Holdings and Development Corporation v.
Escaño, Jr.: 17
A question of law arises when there is doubt as to what the law
is on a certain state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts. For a question
to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of
them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the
issue invites a review of the evidence presented, the question posed is
one of fact. Thus, the test of whether a question is one of law or of fact
is not the appellation given to such question by the party raising the
same; rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which case, it is
a question of law; otherwise it is a question of fact.
It is timely to remind, too, that the Court is not a trier of facts. Hence,
the factual findings of the quasi-judicial body like the IPO, especially when
affirmed by the CA, are binding on the Court. 18 Jurisprudence has laid down
certain exceptions to the rule of bindingness, 19 but, alas, Uni-Line did not
discharge its burden to show how its urging for a review of the factual findings
came within any of the exceptions.

II.

Uni-Line's goods classified under Class 07

and Class 11 were not related to Kensonic's
goods registered under Class 09

The CA did not err in allowing the registration of Uni-Line's products

falling under Class 07 and Class 11, for, indeed, those products — as found
by the lower tribunals — were unrelated to the goods of Kensonic registered
under Class 09.
 Still, Kensonic contends that the goods of Uni-Line classified under
Class 07 and Class 11 were covered by the prohibition from registration for
being within the normal potential expansion of Kensonic.
The contention is unwarranted.
The prohibition under Section 123 of the Intellectual Property
Code extends to goods that are related to the registered goods, not to goods
that the registrant may produce in the future. To allow the expansion of
coverage is to prevent future registrants of goods from securing a trademark
on the basis of mere possibilities and conjectures that may or may not occur
at all. Surely, the right to a trademark should not be made to depend on mere
possibilities and conjectures.
In Mighty Corporation v. E. & J. Gallo Winery, 20 the Court has identified
the different factors by which to determine whether or not goods are related to
each other for purposes of registration:
Non-competing goods may be those which, though they are not
in actual competition, are so related to each other that it can
reasonably be assumed that they originate from one manufacturer, in
which case, confusion of business can arise out of the use of similar
marks. They may also be those which, being entirely unrelated, cannot
be assumed to have a common source; hence, there is no confusion of
business, even though similar marks are used. Thus, there is no
trademark infringement if the public does not expect the plaintiff to
make or sell the same class of goods as those made or sold by the
defendant.
In resolving whether goods are related, several factors come
into play:
(a) the business (and its location) to which the goods belong
(b) the class of product to which the goods belong
(c) the product's quality, quantity, or size, including the nature of
the package, wrapper or container
(d) the nature and cost of the articles
(e) the descriptive properties, physical attributes or essential
characteristics with reference to their form, composition,
texture or quality
(f) the purpose of the goods
(g) whether the article is bought for immediate consumption, that
is, day-to-day household items
(h) the fields of manufacture
(i) the conditions under which the article is usually purchased and
 (j) the channels of trade through which the goods flow, how they
are distributed, marketed, displayed and sold. (Citations
omitted)
An examinations of the foregoing factors reveals that the goods of Uni-
Line were not related to the goods of Kensonic by virtue of their differences in
class, the descriptive attributes, the purposes and the conditions of the goods.

III.

The goods of Kensonic were also

unrelated to the goods of Uni-Line
although both belonged to Class 9

Uni-Line posits that its goods under Class 9 were unrelated to the
goods of Kensonic; and that the CA's holding of the goods being related by
virtue of their belonging to the same class was unacceptable.
In Taiwan Kolin Corporation, Ltd. v. Kolin Electronics, Co., Inc., 21 the
Court has opined that the mere fact that goods belonged to the same class
does not necessarily mean that they are related; and that the factors listed
in Mighty Corporation v. E. & J. Gallo Winery should be taken into
consideration, to wit:
As mentioned, the classification of the products under the NCL
is merely part and parcel of the factors to be considered in ascertaining
whether they goods are related. It is not sufficient to state that the
goods involved herein are electronic products under Class 9 in order to
establish relatedness between the goods, for this only accounts for one
of many considerations enumerated in Mighty Corporation. x x x
Clearly then, it was erroneous for respondent to assume over
the CA to conclude that all electronic products are related and that the
coverage of one electronic product necessarily precludes the
registration of a similar mark over another. In this digital age wherein
electronic products have not only diversified by leaps and bounds, and
are geared towards interoperability, it is difficult to assert readily, as
respondent simplistically did, that all devices that require plugging into
sockets are necessarily related goods.
It bears to stress at this point that the list of products included in
Class 9 can be sub-categorized into five (5) classifications, namely: (1)
apparatus and instruments for scientific or research purposes, (2)
information technology and audiovisual equipment, (3) apparatus and
devices for controlling the distribution and use of electricity, (4) optical
apparatus and instruments, and (5) safety equipment. From this sub-
 classification, it becomes apparent that petitioner's products, i.e.,
televisions and DVD players, belong to audiovisual equipment, while
that of respondent, consisting of automatic voltage regulator,
converter, recharger stereo booster, AC-DC regulated power supply,
step-down transformer, and PA amplified AC-DC, generally fall under
devices for controlling the distribution and use of electricity.
Based on the foregoing pronouncement in Taiwan Kolin Corporation,
Ltd. v. Kolin Electronics, Co., Inc., there are other sub-classifications present
even if the goods are classified under Class 09. For one, Kensonic's goods
belonged to the information technology and audiovisual equipment sub-class,
but Uni-Line's goods pertained to the apparatus and devices for controlling the
distribution of electricity sub-class. Also, the Class 09 goods of Kensonic were
final products but Uni-Line's Class 09 products were spare parts. In view of
these distinctions, the Court agrees with Uni-Line that its Class 09 goods were
unrelated to the Class 09 goods of Kensonic.
WHEREFORE, the Court DENIES the petition for review on certiorari in
G.R. Nos. 211820-21; PARTIALLY GRANTS the petition for review
on certiorari in G.R. Nos. 211834-35; REVERSES and SETS ASIDE the
amended decision promulgated on March 19, 2014; PARTIALLY
REINSTATES the decision promulgated on July 30, 2013 insofar as it allowed
the registration by Uni-Line Multi-Resources, Inc. under the SAKURA mark of
its voltage regulators, portable generators, switch breakers and fuses;
and ORDERS Kensonic, Inc. to pay the costs of suit.
SO ORDERED.
Velasco, Jr., Leonen, Martires and Gesmundo, JJ., concur.
(Kensonic, Inc. v. Uni-Line Multi-Resources, Inc. (Phil.), G.R. Nos. 211820-21 &
|||

211834-35, [June 6, 2018])

SECOND DIVISION

[G.R. No. 217781. June 20, 2018.]

SAN MIGUEL PURE FOODS COMPANY,

INC., petitioner, vs. FOODSPHERE, INC., respondent.

[G.R. No. 217788. June 20, 2018.]

 FOODSPHERE, INC., petitioner, vs. SAN MIGUEL PURE FOODS
COMPANY, INC., respondent.

DECISION

PERALTA, J : p

Before the Court are the consolidated cases of G.R. No. 217781 and
G.R. No. 217788. On the one hand, San Miguel Pure Foods Company,
Inc. (SMPFCI) in G.R. No. 217781, filed a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, questioning the
Resolution 1 dated April 8, 2015 of the Court of Appeals (CA), Former
Fourteenth Division, in CA-G.R. SP No. 131945, but only insofar as the same
resolved to delete from the body of its Decision 2 dated September 24, 2014
the award of exemplary damages. On the other hand, in G.R. No. 217788,
Foodsphere, Inc., via a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, seeks to reverse and set aside the same September 24,
2014 Decision and April 8, 2015 Resolution of the CA declaring it guilty of
unfair competition and holding it liable for damages.
The antecedent facts are as follows:
The parties herein are both engaged in the business of the
manufacture, sale, and distribution of food products, with SMPFCI owning the
trademark "PUREFOODS FIESTA HAM" while Foodsphere, Inc.
products (Foodsphere) bear the "CDO" brand. On November 4, 2010,
SMPFCI filed a Complaint 3 for trademark infringement and unfair competition
with prayer for preliminary injunction and temporary restraining order against
Foodsphere before the Bureau of Legal Affairs (BLA) of the Intellectual
Property Office (IPO)pursuant to Sections 155 and 168 of Republic Act (R.A.)
No. 8293, otherwise known as the Intellectual Property Code (IP Code), for
using, in commerce, a colorable imitation of its registered trademark in
connection with the sale, offering for sale, and advertising of goods that are
confusingly similar to that of its registered trademark. 4
In its complaint, SMPFCI alleged that its "FIESTA" ham, first introduced
in 1980, has been sold in countless supermarkets in the country with an
average annual sales of P10,791,537.25 and is, therefore, a popular fixture in
dining tables during the Christmas season. Its registered "FIESTA" mark has
acquired goodwill to mean sumptuous ham of great taste, superior quality,
and food safety, and its trade dress "FIESTA" combined with a figure of a
partly sliced ham served on a plate with fruits on the side had likewise earned
goodwill. Notwithstanding such tremendous goodwill already earned by its
mark, SMPFCI continues to invest considerable resources to promote the
FIESTA ham, amounting to no less than P3,678,407.95. 5
Sometime in 2006, however, Foodsphere introduced its "PISTA" ham
and aggressively promoted it in 2007, claiming the same to be the real
premium ham. In 2008, SMPFCI launched its "Dapat ganito ka-espesyal"
campaign, utilizing the promotional material showing a picture of a whole
meat ham served on a plate with fresh fruits on the side. The ham is being
sliced with a knife and the other portion, held in place by a serving fork. But in
the same year, Foodsphere launched its "Christmas Ham with Taste"
campaign featuring a similar picture. Moreover, in 2009, Foodsphere
launched its "Make Christmas even more special" campaign, directly copying
SMPFCI's "Dapat ganito ka-espesyal" campaign. Also in 2009, Foodsphere
introduced its paper ham bag which looked significantly similar to SMPFCI's
own paper ham bag and its trade dress and its use of the word "PISTA" in its
packages were confusingly similar to SMPFCI's "FIESTA" mark. 6
Thus, according to SMPFCI, the striking similarities between the marks
and products of Foodsphere with those of SMPFCI warrant its claim of
trademark infringement on the ground of likelihood of confusion as to origin,
and being the owner of "FIESTA," it has the right to prevent Foodsphere from
the unauthorized use of a deceptively similar mark. The word "PISTA" in
Foodsphere's mark means "fiesta," "feast," or "festival" and connotes the
same meaning or commercial impression to the buying public of SMPFCI's
"FIESTA" trademark. Moreover, "FIESTA" and "PISTA" are similarly
pronounced, have the same number of syllables, share common consonants
and vowels, and have the same general appearance in their respective
product packages. In addition, the "FIESTA" and "PISTA" marks are used in
the same product which are distributed and marketed in the same channels of
trade under similar conditions, and even placed in the same freezer and/or
displayed in the same section of supermarkets. Foodsphere's use, therefore,
of the "PISTA" mark will mislead the public into believing that its goods
originated from, or are licensed or sponsored by SMPFCI, or that Foodsphere
is associated with SMPFCI, or its affiliate. The use of the "PISTA" trademark
would not only result in likelihood of confusion, but in actual confusion. 7
Apart from trademark infringement, SMPFCI further alleged that
Foodsphere is likewise guilty of unfair competition. This is because there is
confusing similarity in the general appearance of the goods of the parties and
intent on the part of Foodsphere, to deceive the public and defraud SMPFCI.
According to SMPFCI, there is confusing similarity because the display panel
of both products have a picture of a partly sliced ham served on a plate of
fruits, while the back panel features other ham varieties offered, both
"FIESTA" and "PISTA" are printed in white bold stylized font, and the product
packaging for both "FIESTA" and "PISTA" consists of box-typed paper bags
made of cardboard materials with cut-out holes on the middle top portion for
use as handles and predominantly red in color with a background design of
Christmas balls, stars, snowflakes, and ornate scroll. Moreover, Foodsphere's
intent to deceive the public is seen from its continued use of the word "PISTA"
for its ham products and its adoption of packaging with a strong resemblance
of SMPFCI's "FIESTA" ham packaging. For SMPFCI, this is deliberately
carried out for the purpose of capitalizing on the valuable goodwill of its
trademark and causing not only confusion of goods but also confusion as to
the source of the ham product. Consequently, SMPFCI claimed to have failed
to realize income of at least P27,668,538.38 and P899,294.77 per month in
estimated actual damages representing foregone income in sales. Thus, it is
entitled to actual damages and attorney's fees. 8
For its part, Foodsphere denied the charges of trademark infringement
and countered that the marks "PISTA" and "PUREFOODS FIESTA HAM" are
not confusingly similar and are, in fact, visually and aurally distinct from each
other. This is because PISTA is always used in conjunction with its house
mark "CDO" and that "PUREFOODS FIESTA HAM" bears the housemark
"PUREFOODS," rendering confusion impossible. Moreover, Foodsphere
maintained that SMPFCI does not have a monopoly on the mark "FIESTA" for
the IPO database shows that there are two (2) other registrations for
"FIESTA," namely "FIESTA TROPICALE" and "HAPPY FIESTA." Also, there
are other products in supermarkets that bear the mark "FIESTA" such as
"ARO FIESTA HAM," "ROYAL FIESTA," and "PUREGOLD FIESTA HAM,"
but SMPFCI has done nothing against those manufacturers, making it guilty
of estoppel in pais, and is, therefore, estopped from claiming that the use of
other manufacturers of the mark "FIESTA" will result in confusion and/or
damage to itself. Even assuming that the marks are confusingly similar,
Foodsphere asserted that it is SMPFCI who is guilty of infringement vis-à-
vis its registered trademark "HOLIDAY," a translation and word bearing the
same meaning as "FIESTA." Foodsphere has been using its "HOLIDAY"
trademark since 1970 and had registered the same in 1986, while SMPFCI
registered its "FIESTA" trademark only in 2007. In fact, Foodsphere noted that
it has been using "PISTA" since 2006 which is earlier than SMPFCI's filing for
registration of "FIESTA" in 2007. In addition, Foodsphere asseverated that
SMPFCI cannot appropriate for itself images of traditional utensils and
garnishing of ham in its advertisements. Confusion between the marks,
moreover, is rendered impossible because the products are sold in booths
manned by different "promodisers." Also, hams are expensive products and
their purchasers are well-informed not only as to their features but also as to
the manufacturers thereof. 9
Furthermore, Foodsphere similarly denied the allegation that it is guilty
of unfair competition or passing off its product as that of SMPFCI. As
mentioned, the "PISTA" and "FIESTA" labels are substantially different in the
manner of presentation, carrying their respective house marks. Moreover, its
paper ham bags are labeled with their respective house marks and are given
to consumers only after purchase, hence, they do not factor in when the
choice of ham is being made. Also, Foodsphere claims to have been using
the red color for its boxes and it was SMPFCI, by its own admission, that
switched colors from green to red in 2009 for its own ham bags. 10
On July 17, 2012, the BLA, through its Director, rendered its
Decision 11 dismissing SMPFCI's complaint for lack of merit. First, the BLA
held that there could be no trademark infringement because Foodsphere
began using the "PISTA" mark in 2006 and even filed a trademark application
therefor in the same year, while SMPFCI's application for trademark
registration for "FIESTA" was filed and approved only in 2007. SMPFCI, thus,
had no cause of action. Second, SMPFCI's complaint was filed beyond the
four (4)-year prescriptive period prescribed under the Rules and Regulations
on Administrative Complaints for Violation of Law Involving Intellectual
Property Rights. Third, the BLA found the testimonies and surveys adduced in
evidence by SMPFCI to be self-serving. Fourth, comparing the competing
marks would not lead to confusion, much less deception of the public. Finally,
the BLA ruled that SMPFCI failed to convincingly prove the presence of the
elements of unfair competition. 12
On September 10, 2013, however, the Office of the Director General
partially granted SMPFCI's appeal, affirming the BLA's ruling on the absence
of trademark infringement but finding Foodsphere liable for unfair
competition. 13 The Director General held that one can see the obvious
differences in the marks of the parties. SMPFCI's mark is a composite mark
where its house mark, namely "PUREFOODS," is clearly indicated and is
followed by the phrase "FIESTA HAM" written in stylized font whereas
Foodsphere's mark is the word "PISTA" written also in stylized font. Applying
the 'Dominancy Test' and the 'Holistic Test' show that Foodsphere cannot be
held liable for trademark infringement due to the fact that the marks are not
visually or aurally similar and that the glaring differences in the presentation of
these marks will prevent any likely confusion, mistake, or deception to the
purchasing public. Moreover, "PISTA" was duly registered in the IPO,
strengthening the position that "PISTA" is not an infringement of
"PUREFOODS FIESTA HAM" for a certificate of registration of a mark
is prima facie evidence of the validity of the registration, the registrant's
ownership of the mark, and of the registrant's exclusive right to use the
same. 14 On the other hand, the Director General found Foodsphere to be
guilty of unfair competition for it gave its "PISTA" ham the general appearance
that would likely influence purchasers to believe that it is similar with
SMPFCI's "FIESTA" ham. Moreover, its intention to deceive is inferred from
the similarity of the goods as packed and offered for sale. Thus, the Director
General ordered Foodsphere to pay nominal damages in the amount of
P100,000.00 and attorney's fees in the amount of P300,000.00 and to cease
and desist from using the labels, signs, prints, packages, wrappers,
receptacles, and materials used in committing unfair competition, as well as
the seizure and disposal thereof. 15
Both SMPFCI and Foodsphere filed their appeals before the CA via
Petitions for Review dated October 8, 2013 16 and October 29,
2013, 17 respectively. SMPFCI sought a reconsideration of the Director
General's finding that Foodsphere is not guilty of trademark infringement while
Foodsphere faulted said Director General for declaring it guilty of unfair
competition.
On March 6, 2014, the CA, Eleventh Division, denied SMPFCI's petition
and affirmed the ruling of the Director General on the absence of trademark
infringement. According to the appellate court, Foodsphere was merely
exercising, in good faith, its right to use its duly registered trademark "PISTA"
in the lawful pursuit of its business. 18 Thereafter, in a Decision dated
September 24, 2014, the CA Fourteenth Division likewise denied
Foodsphere's petition, affirming the Director General's finding that
Foodsphere was guilty of unfair competition. The CA held that the elements
thereof are present herein. Consequently, it ordered Foodsphere to pay
SMPFCI nominal and exemplary damages as well as attorney' fees. 19 In a
Resolution dated April 8, 2015, however, the CA clarified its September 24,
2014 Decision and resolved to delete the award of exemplary damages for
SMPFCI never prayed for the same. 20
In a Resolution 21 dated June 13, 2016, the Court, in G.R. No. 215475,
denied SMPFCI's Petition for Review on Certiorari for failure to sufficiently
show that the CA, in its Decision and Resolution, dated March 6, 2014 and
November 13, 2014, respectively, finding that Foodsphere is not liable for
trademark infringement, and committed any reversible error in the challenged
decision and resolution as to warrant the exercise of the Court's discretionary
appellate jurisdiction. The Court also found that the issues raised by SMPFCI
are factual in nature.
Meanwhile, on June 8, 2015, both SMPFCI and Foodsphere filed the
instant Petitions for Review on Certiorari docketed as G.R. Nos. 217781 and
217788, respectively. In G.R. No. 217781, SMPFCI invoked the following
argument:
I.
THE HONORABLE COURT OF APPEALS ERRED IN RESOLVING
THAT THE AWARD OF EXEMPLARY DAMAGES BE DELETED
FROM THE BODY OF ITS DECISION DATED 24 SEPTEMBER 2014
 WHEN SMPFCI'S ENTITLEMENT THERETO IS CLEARLY
SUPPORTED NOT ONLY BY PLEADINGS AND EVIDENCE ON
RECORD, BUT ALSO BY THE HONORABLE COURT OF APPEALS'
OWN RATIOCINATIONS FOUND IN THE BODY OF ITS DECISION.
Conversely, G.R. No. 217788, Foodsphere raised the following
argument:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN EXCESS OF OR AMOUNTING TO LACK OF
JURISDICTION WHEN IT ISSUED THE ASSAILED DECISION AND
RESOLUTION BEING NOT IN ACCORDANCE WITH LAW OR WITH
APPLICABLE DECISIONS OF THE HONORABLE COURT WHEN IT
DECLARED THAT FOODSPHERE WAS GUILTY OF UNFAIR
COMPETITION.
In G.R. No. 217781, SMPFCI clarifies that it assails the April 8, 2015
Resolution of the CA, not on its finding that Foodsphere was guilty of unfair
competition, but only insofar as it deleted its award of exemplary damages in
its September 24, 2014 Decision. According to SMPFCI, it was a mere
mistake that the said Decision failed to state the amount of exemplary
damages and that its dispositive portion failed to award said exemplary
damages, merely stating that "the petition is DENIED, and the Decision x x x
of the Director General is AFFIRMED." 22 SMPFCI asserts that where there is
a conflict between the dispositive portion and the body of the decision, the
dispositive portion controls. But where the inevitable conclusion from the body
of the decision is so clear as to show that there was a mistake in the
dispositive portion, the body of the decision will prevail. 23 Here, when the CA
held that "as for exemplary damages, the award thereof was warranted," it is
beyond cavil that SMPFCI is entitled thereto.
Moreover, SMPFCI maintains that the CA ruling that it never prayed for
exemplary damages in the proceedings, its prayer for damages being limited
only to actual damages and attorney's fees, is utterly false for it specifically
prayed for the same in several pleadings it filed before the BLA and the Office
of the Director General. Even assuming that it indeed failed to pray for
exemplary damages, SMPFCI alleges that it was still erroneous for the CA to
delete the award of the same. It is well settled that a court may grant relief to
a party, even if said party did not pray for it in his pleadings for a prayer for
"other remedies just and equitable under the premises" is broad enough to
justify the extension of a remedy different from that requested. Thus, in view
of the foregoing, coupled with the factual circumstances of the case leading to
the conclusion that Foodsphere is guilty of unfair competition, SMPFCI
essentially prays that the Court: (1) issue a permanent injunction against
Foodsphere to prevent it from infringing the rights of SMPFCI by seizing all
products violative of SMPFCI's IP rights and by forfeiting all properties used in
the infringing acts; (2) order Foodsphere to pay SMPFCI the amount of
P27,668,538.38, representing lost income of SMPFCI, P899,294.77 per
month in estimated actual damages, or moderate or temperate damages; (3)
order Foodsphere to pay attorney's fees in the amount of P300,000.00; and
(4) order Foodsphere to pay exemplary damages in the amount of
P300,000.00. 24
In G.R. No. 217788, Foodsphere denied the allegations of unfair
competition, denying SMPFCI's claim that the confusing similarity between the
respective packaging of the parties' products began in 2009 when
Foodsphere changed its packaging from a paper box to a paper ham bag,
significantly similar to SMPFCI's paper ham bag. According to Foodsphere,
while the packages were both in the form of bags, their respective trademarks
were boldly printed thereon. Moreover, even prior to SMPFCI's use of the
questioned ham bags in 2009, Foodsphere had already been adopting the
image of partly-sliced hams laced with fruits and red color on its
packages. 25 In addition, Foodsphere alleged that any similarity in the general
appearance of the packaging does not, by itself, constitute unfair competition.
This is because first, packaging is not the exclusive ownership of SMPFCI
which does not have a patent or trademark protection therefor. Second, the
mere fact of being the first user does not bestow vested right to use the
packaging to the exclusion of everyone else. Third, the circumstance that the
manufacturer has printed its name all over the packaging negates fraudulent
intent to palm off its goods as another's product. Fourth, SMPFCI cannot
claim that it has exclusive right or monopoly to use the colors red and green in
its packaging or the image of partly sliced hams. Fifth, similarity in the
packaging does not necessarily constitute "confusing" similarity. Sixth, the
circumstances under which the competing products are sold negates the
likelihood of confusion for consumers are more discerning on the Christmas
ham they will purchase, which is not any ordinary, low priced
product. Seventh, SMPFCI failed to prove likelihood of confusion or intent to
deceive on the part of Foodsphere. Finally, Foodsphere maintained that there
was no basis for the CA to award nominal damages and attorney's fees in
view of the absence of any violation of SMPFCI's right. 26
The petitions are devoid of merit.
With respect to G.R. No. 217781, the Court finds no reason to reverse
the April 8, 2015 Resolution of the CA insofar as it resolved to delete from the
body of its September 24, 2014 Decision the award of exemplary damages.
SMPFCI said so itself, when there is a conflict between the dispositive portion
or fallo of a decision and the opinion of the court contained in the text or body
of the judgment, the former prevails over the latter. This rule rests on the
theory that the fallo is the final order, while the opinion in the body is merely a
statement ordering nothing. Thus, an order of execution is based on the
disposition, not on the body, of the Decision. 27 Contrary to SMPFCI's
assertion, moreover, the Court finds inapplicable the exception to the
foregoing rule which states that the body of the decision will prevail in
instances where the inevitable conclusion from the body of the decision is so
clear as to show that there was a mistake in the dispositive portion.
A cursory perusal of the challenged September 24, 2014 Decision
reveals that the mistake lies not in the fallo or dispositive portion but in the
body thereof, the pertinent portions of which provide:
Having been found guilty of unfair competition, Foodsphere was
correctly ordered to pay nominal damages of P100,000.00. Under
Article 2221 of the Civil Code, nominal damages are recoverable in
order to vindicate or recognize the rights of the plaintiff which have
been violated or invaded by the defendant. x x x
As for SMPFCI's claim for lost profit or unrealized income of
more than P27 Million, its failure to properly substantiate the same left
the Office of the Director General without any basis to award it.
As for exemplary damages, the award thereof was warranted on
the strength of In-N-Out Burger, Inc. v. Sehwani, for correction or
example for public good, such as the enhancement of the protection
accorded to intellectual property and the prevention of similar acts of
unfair competition. The award of attorney's fees must likewise be
upheld as SMPFCI was compelled to engage the services of counsel
to protect its rights. 28
As can be gleaned from above, the intention of the CA was merely to
affirm the findings of the Director General insofar as the award of damages
was concerned. This was shown in its statements such as "Foodsphere was
correctly ordered to pay nominal damages," "its failure to properly
substantiate the same left the Office of the Director General without any basis
to award it," "as for exemplary damages, the award thereof was warranted,"
and "the award of attorney's fees must likewise be upheld." This was also
shown when the CA clearly disposed as follows: "ACCORDINGLY, the
petition is DENIED, and the Decision dated September 10, 2013 of the Office
of the Director General, AFFIRMED." 29 It can, therefore, be derived, from the
wording of the CA Decision, that it merely intended to adopt the resolution of
the Director General on the award of damages. Consequently, since nowhere
in the affirmed Decision did the Director General award exemplary damages
to SMPFCI, for what was awarded was only nominal damages and attorney's
fees, it follows then that the CA likewise did not intend on awarding the same
to SMPFCI. Thus, what controls herein is the fallo.
Besides, it bears stressing that SMPFCI failed to prove its entitlement to
exemplary damages. Article 2233 of the Civil Code provides that exemplary
damages cannot be recovered as a matter of right; the court will decide
whether or not they should be adjudicated while Article 2234 thereof provides
that while the amount of the exemplary damages need not be proven, the
plaintiff must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not
exemplary damages should be awarded.
Thus, the Court has held, time and again, that exemplary damages may
be awarded for as long as the following requisites are present: (1) they may
be imposed, by way of example, only in addition, among others, to
compensatory damages, only after the claimant's right to them has been
established, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded
to the claimant; (2) the claimant must first establish his right to moral,
temperate, liquidated or compensatory damages; and (3) the act must be
accompanied by bad faith or done in a wanton, fraudulent, oppressive or
malevolent manner. 30
Here, SMPFCI particularly failed to prove its right to moral, temperate,
liquidated or compensatory damages. In its complaint, SMPFCI prayed that
Foodsphere be ordered to pay P27,668,538.38 representing income it would
have made if not for the infringement and P899,294.77 per month in
estimated actual damages, representing foregone income in sales for the
continuous use of the "PISTA" mark in connection with the selling, offering for
sale and distribution of its ham product during the pendency of the
case. 31 But as the Director General aptly found, SMPFCI neither adduced
sufficient evidence to prove its claim of foregone income or sales nor
presented evidence to show the profit or sales. Thus, in view of such failure to
prove its right to compensatory damages, as well as to moral and temperate
damages, the CA correctly resolved to delete from the body of its September
24, 2014 Decision the award of exemplary damages.
As regards G.R. No. 217788, the Court likewise affirms the ruling of the
CA, which in turn, affirmed the findings of the Director General.
Section 168 of the IP Code provides that:
Section 168. Unfair Competition, Rights, Regulation and
Remedies. — 168.1. A person who has identified in the mind of the
public the goods he manufactures or deals in, his business or services
from those of others, whether or not a registered mark is employed,
has a property right in the goodwill of the said goods, business or
services so identified, which will be protected in the same manner as
other property rights.
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 who 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 the goods, business or services of another.
168.4. The remedies provided by Sections 156, 157 and 161
shall apply mutatis mutandis. (Sec. 29, R.A. No. 166a)
Time and again, the Court has held that unfair competition consists of
the passing off (or palming off) or attempting to pass off upon the public of the
goods or business of one person as the goods or business of another with the
end and probable effect of deceiving the public. Passing off (or palming off)
takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his
merchandise under the impression that they are buying that of his
competitors. In other words, the defendant gives his goods the general
appearance of the goods of his competitor with the intention of deceiving the
public that the goods are those of his competitor. 32 The "true test," therefore,
of unfair competition has thus been "whether the acts of the defendant have
the intent of deceiving or are calculated to deceive the ordinary buyer making
his purchases under the ordinary conditions of the particular trade to which
the controversy relates." 33
Thus, the essential elements of an action for unfair competition are: (1)
confusing similarity in the general appearance of the goods; and (2) intent to
deceive the public and defraud a competitor. The confusing similarity may or
may not result from similarity in the marks, but may result from other external
factors in the packaging or presentation of the goods. The intent to deceive
and defraud may be inferred from the similarity of the appearance of the
goods as offered for sale to the public. Actual fraudulent intent need not be
shown. 34
In the instant case, the Court finds no error with the findings of the CA
and Director General insofar as the presence of the foregoing elements is
concerned. First of all, there exists a substantial and confusing similarity in the
packaging of Foodsphere's product with that of SMPFCI, which, as the
records reveal, was change by Foodsphere from a paper box to a paper ham
bag that is significantly similar to SMPFCI's paper ham bag. As duly noted by
the Director General and the CA, both packages use paper ham bags as the
container for the hams, both paper ham bags use the color as the main
colors, and both have the layout design appearing on the bags consisting of a
partly sliced ham and fruits on the front and other ham varieties offered at the
back. Thus, Foodsphere's packaging in its entirety, and not merely its "PISTA"
mark thereon, renders the general appearance thereof confusingly similar with
the packaging of SMPFCI's ham, that would likely influence purchasers to
believe that these products are similar, if not the same, as those of SMPFCI.
Second of all, Foodsphere's intent to deceive the public, to defraud its
competitor, and to ride on the goodwill of SMPFCI's products is evidenced by
the fact that not only did Foodsphere switch from its old box packaging to the
same paper ham bag packaging as that used by SMPFCI, it also used the
same layout design printed on the same. As the Director General observed,
why, of the millions of terms and combinations of letters, designs, and
packaging available, Foodsphere had to choose those so closely similar to
SMPFCI's if there was no intent to pass off upon the public the ham of
SMPFCI as its own with the end and probable effect of deceiving the public.
At this juncture, it is worthy to note that unfair competition is always a
question of fact. There is no inflexible rule that can be laid down as to what
will constitute the same, each case being, in the measure, a law unto itself.
Thus, the question to be determined is whether or not, as a matter of fact, the
name or mark used by the defendant has previously come to indicate and
designate plaintiff's goods, or, to state it in another way, whether defendant,
as a matter of fact, is, by his conduct, passing off defendant's goods as
 plaintiff's goods or his business as plaintiff's business. 35 As such, the Court is
of the opinion that the case records readily supports the findings of fact made
by the Director General as to Foodsphere's commission of unfair competition.
Settled is the rule that factual findings of administrative agencies are generally
accorded respect and even finality by this Court, if such findings are
supported by substantial evidence, as it is presumed that these agencies
have the knowledge and expertise over matters under their
jurisdiction, 36 more so when these findings are affirmed by the Court of
Appeals. 37
WHEREFORE, premises considered, the instant petitions in G.R.
Nos. 217781 and 217788 are DENIED. The assailed Decision dated
September 24, 2014 and Resolution dated April 8, 2015 of the Court of
Appeals in CA-G.R. SP No. 131945 are hereby AFFIRMED.
SO ORDERED.
Carpio, Perlas-Bernabe, Caguioa and Reyes, Jr., JJ., concur.
(San Miguel Pure Foods Co., Inc. v. Foodsphere, Inc., G.R. Nos. 217781 &
|||

217788, [June 20, 2018])

THIRD DIVISION
[G.R. No. 209843. March 25, 2015.]
TAIWAN KOLIN CORPORATION, LTD., petitioner, vs. KOLIN ELECTRONICS
CO., INC., respondent.
DECISION
VELASCO, JR., J : p

Nature of the Case

Before the Court is a petition for review under Rule 45 of the Rules of
Court interposed by petitioner Taiwan Kolin Corporation, Ltd. (Taiwan Kolin),
assailing the April 30, 2013 Decision 1 of the Court of Appeals (CA) in CA-G.R.
SP No. 122565 and its subsequent November 6, 2013 Resolution. 2 The assailed
issuances effectively denied petitioner's trademark application for the use of
"KOLIN" on its television and DVD players.
The Facts
On February 29, 1996, Taiwan Kolin filed with the Intellectual Property
Office (IPO), then Bureau of Patents, Trademarks, and Technology Transfer, a
trademark application, docketed as Application No. 4-1996-106310, for the use of
"KOLIN" on a combination of goods, including colored televisions, refrigerators,
window-type and split-type air conditioners, electric fans and water dispensers.
Said goods allegedly fall under Classes 9, 11, and 21 of the Nice Classification
(NCL).
Application No. 4-1996-106310 would eventually be considered
abandoned for Taiwan Kolin's failure to respond to IPO's Paper No. 5 requiring it
to elect one class of good for its coverage. However, the same application was
subsequently revived through Application Serial No. 4-2002-011002, 3 with
petitioner electing Class 9 as the subject of its application, particularly: television
sets, cassette recorder, VCD Amplifiers, camcorders and other audio/video
electronic equipment, flat iron, vacuum cleaners, cordless handsets,
videophones, facsimile machines, teleprinters, cellular phones and automatic
goods vending machine. The application would in time be duly published. 4
On July 13, 2006, respondent Kolin Electronics Co., Inc. (Kolin
Electronics) opposed petitioner's revived application, docketed as Inter Partes
Case No. 14-2006-00096. As argued, the mark Taiwan Kolin seeks to register is
identical, if not confusingly similar, with its "KOLIN" mark registered on November
23, 2003, covering the following products under Class 9 of the NCL: automatic
voltage regulator, converter, recharger, stereo booster, AC-DC regulated power
supply, step-down transformer, and PA amplified AC-DC. 5
To digress a bit, Kolin Electronics' "KOLIN" registration was, as it turns
out, the subject of a prior legal dispute between the parties in Inter Partes Case
No. 14-1998-00050 before the IPO. In the said case, Kolin Electronics' own
application was opposed by Taiwan Kolin, being, as Taiwan Kolin claimed, the
prior registrant and user of the "KOLIN" trademark, having registered the same in
Taipei, Taiwan on December 1, 1988. The Bureau of Legal Affairs of the IPO
(BLA-IPO), however, did not accord priority right to Taiwan Kolin's Taipei
registration absent evidence to prove that it has already used the said mark in
the Philippines as early as 1988. On appeal, the IPO Director General affirmed
the BLA-IPO's Decision. Taiwan Kolin elevated the case to the CA, but without
injunctive relief, Kolin Electronics was able to register the "KOLIN" trademark on
November 23, 2003 for its products. 6 Subsequently, the CA, on July 31, 2006,
affirmed 7 the Decision of the Director General.
In answer to respondent's opposition in Inter Partes Case No. 14-2006-
00096, petitioner argued that it should be accorded the benefits of a foreign-
registered mark under Secs. 3. and 131.1 of Republic Act No. 8293, otherwise
known as the Intellectual Property Code of the Philippines (IP Code); 8 that it has
already registered the "KOLIN" mark in the People's Republic of China, Malaysia
and Vietnam, all of which are parties to the Paris Convention for the Protection of
Industrial Property (Paris Convention) and the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS); and that benefits accorded to a
well-known mark should be accorded to petitioner. 9
Ruling of the BLA-IPO
By Decision 10 dated August 16, 2007, the BLA-IPO denied petitioner's
application disposing as follows:
In view of all the foregoing, the instant Opposition is as, it
is hereby SUSTAINED. Accordingly, application bearing Serial No.
4-1996-106310 for the mark "KOLIN" filed in the name of TAIWAN
KOLIN., LTD. on February 29, 1996 for goods falling under Class
 09 of the International Classification of Goods such as cassette
recorder, VCD, woofer, amplifiers, camcorders and other
audio/video electronic equipment, flat iron, vacuum cleaners,
cordless handsets, videophones, facsimile machines, teleprinters,
cellular phones, automatic goods vending machines and other
electronic equipment is hereby REJECTED. HETDAC

Let the file wrapper of "KOLIN", subject of this case be

forwarded to the Bureau of Trademarks (BOT) for appropriate
action in accordance with this Decision.

SO ORDERED.
Citing Sec. 123 (d) of the IP Code, 11 the BLA-IPO held that a mark
cannot be registered if it is identical with a registered mark belonging to a
different proprietor in respect of the same or closely-related goods. Accordingly,
respondent, as the registered owner of the mark "KOLIN" for goods falling under
Class 9 of the NCL, should then be protected against anyone who impinges on
its right, including petitioner who seeks to register an identical mark to be used
on goods also belonging to Class 9 of the NCL. 12 The BLA-IPO also noted that
there was proof of actual confusion in the form of consumers writing numerous e-
mails to respondent asking for information, service, and complaints about
petitioner's products. 13
Petitioner moved for reconsideration but the same was denied on
January 26, 2009 for lack of merit. 14 Thus, petitioner appealed the above
Decision to the Office of the Director General of the IPO.
Ruling of the IPO Director General
On November 23, 2011, the IPO Director General rendered a Decision 15
reversing that of the BLA-IPO in the following wise:
Wherefore, premises considered, the appeal is hereby
GRANTED. The Appellant's Trademark Application No. 4-1996-
106310 is hereby GIVEN DUE COURSE subject to the use
limitation or restriction for the goods "television and DVD player".
Let a copy of this Decision as well as the trademark application and
records be furnished and returned to the Director of the Bureau of
Legal Affairs for appropriate action. Further, let the Director of the
Bureau of Trademarks and the library of the Documentation,
Information and Technology Transfer Bureau be furnished a copy
of this Decision for information, guidance, and records purposes.
 SO ORDERED.

In so ruling, the IPO Director General ratiocinated that product

classification alone cannot serve as the decisive factor in the resolution of
whether or not the goods are related and that emphasis should be on the
similarity of the products involved and not on the arbitrary classification or
general description of their properties or characteristics. As held, the mere fact
that one person has adopted and used a particular trademark for his goods does
not prevent the adoption and use of the same trademark by others on articles of
a different description. 16
Aggrieved, respondent elevated the case to the CA.
Ruling of the Court of Appeals
In its assailed Decision, the CA found for Kolin Electronics, on the
strength of the following premises: (a) the mark sought to be registered by
Taiwan Kolin is confusingly similar to the one already registered in favor of Kolin
Electronics; (b) there are no other designs, special shape or easily identifiable
earmarks that would differentiate the products of both competing companies; 17
and (c) the intertwined use of television sets with amplifier, booster and voltage
regulator bolstered the fact that televisions can be considered as within the
normal expansion of Kolin Electronics, 18 and is thereby deemed covered by its
trademark as explicitly protected under Sec. 138 19 of the IP Code. 20 Resultantly,
the CA granted respondent's appeal thusly:
WHEREFORE, the appeal is GRANTED. The November 23, 2011 Decision of the
Director General of the Intellectual Property Office in Inter Partes Case No. 14-2006-
0096 is REVERSED and SET ASIDE. The September 17, 2007 Decision of the Bureau
of Legal Affairs of the same office is REINSTATED.
SO ORDERED.
Petitioner moved for reconsideration only to be denied by the CA through
its equally assailed November 6, 2013 Resolution. Hence, the instant recourse.
The Issue
The primordial issue to be resolved boils down to whether or not
petitioner is entitled to its trademark registration of "KOLIN" over its specific
goods of television sets and DVD players. Petitioner postulates, in the main, that
its goods are not closely related to those of Kolin Electronics. On the other hand,
respondent hinges its case on the CA's findings that its and petitioner's products
are closely-related. Thus, granting petitioner's application for trademark
registration, according to respondent, would cause confusion as to the public.
The Court's Ruling

The petition is impressed with merit.

 Identical marks may be registered for
products from the same classification

To bolster its opposition against petitioner's application to register

trademark "KOLIN," respondent maintains that the element of mark identity
argues against approval of such application, quoting the BLA IPO's ruling in this
regard: 21 IcSEAH

Indubitably, Respondent-Applicant's [herein petitioner]

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

The argument is specious.

The parties admit that their respective sets of goods belong to Class 9 of
the NCL, which includes the following: 22
Class 9
Scientific, nautical, surveying, photographic,
cinematographic, optical, weighing, measuring, signalling, checking
(supervision), life-saving and teaching apparatus and instruments;
apparatus and instruments for conducting, switching, transforming,
accumulating, regulating or controlling electricity; apparatus for
recording, transmission or reproduction of sound or images;
magnetic data carriers, recording discs; compact discs, DVDs and
other digital recording media; mechanisms for coin-operated
apparatus; cash registers, calculating machines, data processing
equipment, computers; computer software; fire-extinguishing
apparatus.

But mere uniformity in categorization, by itself, does not automatically

preclude the registration of what appears to be an identical mark, if that be the
case. In fact, this Court, in a long line of cases, has held that such circumstance
does not necessarily result in any trademark infringement. The survey of
jurisprudence cited in Mighty Corporation v. E. & J Gallo Winery 23 is enlightening
on this point:
(a) in Acoje Mining Co., Inc. vs. Director of Patents, 24 we ordered the approval
of Acoje Mining's application for registration of the
trademark LOTUS for its soy sauce even though
Philippine Refining Company had prior registration and
 use of such identical mark for its edible oil which, like soy
sauce, also belonged to Class 47;

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

(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun
Liong, 26 we dismissed Hickok's petition to cancel private
respondent's HICKOK trademark registration for its
Marikina shoes as against petitioner's earlier registration
of the same trademark for handkerchiefs, briefs, belts and
wallets.

Verily, whether or not the products covered by the trademark sought to

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

The CA erred in denying petitioner's

registration application

Respondent next parlays the idea of relation between products as a

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

(a) In Arce & Sons, Inc. vs. Selecta Biscuit Company, 30 biscuits were held
related to milk because they were both food products;

(b) In Chua Che vs. Phil. Patents Office, 31 soap and perfume, lipstick and nail
polish are held to be similarly related because they are
common household items;

(c) In Ang vs. Teodoro, 32 the trademark "Ang Tibay" for shoes and slippers
was disallowed to be used for shirts and pants because
they belong to the same general class of goods; and

(d) In Khe vs. Lever Bros. Co., 33 soap and pomade, although non-competitive,
were held to be similar or belong to the same class, since
both are toilet articles.

Respondent avers that Kolin Electronics' and Taiwan Kolin's products

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

Significantly, Kolin Electronics' goods (automatic voltage

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

In sum, the intertwined use, the same classification of the products as class 9
under the NICE Agreement, and the fact that they generally flow through the same
channel of trade clearly establish that Taiwan Kolin's television sets and DVD
players are closely related to Kolin Electronics' goods. As correctly pointed out by
the BLA-IPO, allowing Taiwan Kolin's registration would only confuse consumers
as to the origin of the products they intend to purchase. Accordingly, protection should
be afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark. 37
(emphasis added)
The CA's approach and reasoning to arrive at the assailed holding that
the approval of petitioner's application is likely to cause confusion or deceive fail
to persuade.

a. The products covered by

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

In resolving one of the pivotal issues in this case — whether or not the
products of the parties involved are related — the doctrine in Mighty Corporation
is authoritative. There, the Court held that the goods should be tested against
several factors before arriving at a sound conclusion on the question of
relatedness. Among these are:
(a) the business (and its location) to which the goods belong;
(b) the class of product to which the goods belong;

(c) the product's quality, quantity, or size, including the nature of the package,
wrapper or container;

(d) the nature and cost of the articles;

(e) the descriptive properties, physical attributes or essential characteristics

with reference to their form, composition, texture or
quality;

(f) the purpose of the goods;

(g) whether the article is bought for immediate consumption, that is, day-to-day
household items;

(h) the fields of manufacture;

(i) the conditions under which the article is usually purchased; and

(j) the channels of trade through which the goods flow, how they are
distributed, marketed, displayed and sold. 39

As mentioned, the classification of the products under the NCL is merely

part and parcel of the factors to be considered in ascertaining whether the goods
are related. It is not sufficient to state that the goods involved herein are
electronic products under Class 9 in order to establish relatedness between the
goods, for this only accounts for one of many considerations enumerated in
Mighty Corporation. In this case, credence is accorded to petitioner's assertions
that: 40
a. Taiwan Kolin's goods are classified as home appliances as opposed
to Kolin Electronics' goods which are power supply
and audio equipment accessories;

b. Taiwan Kolin's television sets and DVD players perform distinct

function and purpose from Kolin Electronics' power
supply and audio equipment; and

c. Taiwan Kolin sells and distributes its various home appliance products
on wholesale and to accredited dealers, whereas
Kolin Electronics' goods are sold and flow through
electrical and hardware stores.

Clearly then, it was erroneous for respondent to assume over the CA to

conclude that all electronic products are related and that the coverage of one
electronic product necessarily precludes the registration of a similar mark over
another. In this digital age wherein electronic products have not only diversified
by leaps and bounds, and are geared towards interoperability, it is difficult to
assert readily, as respondent simplistically did, that all devices that require
plugging into sockets are necessarily related goods.
It bears to stress at this point that the list of products included in Class 9
41 can be sub-categorized into five (5) classifications, namely: (1) apparatus and
instruments for scientific or research purposes, (2) information technology and
audiovisual equipment, (3) apparatus and devices for controlling the distribution
and use of electricity, (4) optical apparatus and instruments, and (5) safety
equipment. 42 From this sub-classification, it becomes apparent that petitioner's
products, i.e., televisions and DVD players, belong to audiovisual equipment,
while that of respondent, consisting of automatic voltage regulator, converter,
recharger, stereo booster, AC-DC regulated power supply, step-down
transformer, and PA amplified AC-DC, generally fall under devices for controlling
the distribution and use of electricity.

b. The ordinarily intelligent

buyer is not likely to be
confused
In trademark cases, particularly in ascertaining whether one trademark is
confusingly similar to another, no rigid set rules can plausible be formulated.
Each case must be decided on its merits, with due regard to the goods or
services involved, the usual purchaser's character and attitude, among others. In
such cases, even more than in any other litigation, precedent must be studied in
the light of the facts of a particular case. That is the reason why in trademark
cases, jurisprudential precedents should be applied only to a case if they are
specifically in point. 43
For a clearer perspective and as matter of record, the following image on
the left 44 is the trademark applied for by petitioner, while the image juxtaposed to
its right 45 is the trademark registered by respondent:

While both competing marks refer to the word "KOLIN" written in upper
case letters and in bold font, the Court at once notes the distinct visual and aural
differences between them: Kolin Electronics' mark is italicized and colored black
while that of Taiwan Kolin is white in pantone red color background. The differing
features between the two, though they may appear minimal, are sufficient to
distinguish one brand from the other.
It cannot be stressed enough that the products involved in the case at
bar are, generally speaking, various kinds of electronic products. These are not
ordinary consumable household items, like catsup, soy sauce or soap which are
of minimal cost. 46 The products of the contending parties are relatively luxury
items not easily considered affordable. Accordingly, the casual buyer is
predisposed to be more cautious and discriminating in and would prefer to mull
over his purchase. Confusion and deception, then, is less likely. 47 As further
elucidated in Del Monte Corporation v. Court of Appeals: 48
. . . Among these, what essentially determines the
attitudes of the purchaser, specifically his inclination to be cautious,
is the cost of the goods. To be sure, a person who buys a box of
candies will not exercise as much care as one who buys an
expensive watch. As a general rule, an ordinary buyer does not
exercise as much prudence in buying an article for which he pays a
few centavos as he does in purchasing a more valuable thing.
Expensive and valuable items are normally bought only after
deliberate, comparative and analytical investigation. But mass
products, low priced articles in wide use, and matters of
everyday purchase requiring frequent replacement are bought
by the casual consumer without great care . . . . (emphasis
added)
 Respondent has made much reliance on Arce & Sons, Chua Che, Ang,
and Khe, oblivious that they involved common household items — i.e., biscuits
and milk, cosmetics, clothes, and toilet articles, respectively — whereas the
extant case involves luxury items not regularly and inexpensively purchased by
the consuming public. In accord with common empirical experience, the useful
lives of televisions and DVD players last for about five (5) years, minimum,
making replacement purchases very infrequent. The same goes true with
converters and regulators that are seldom replaced despite the acquisition of
new equipment to be plugged onto it. In addition, the amount the buyer would be
parting with cannot be deemed minimal considering that the price of televisions
or DVD players can exceed today's monthly minimum wage. In light of these
circumstances, it is then expected that the ordinary intelligent buyer would be
more discerning when it comes to deciding which electronic product they are
going to purchase, and it is this standard which this Court applies herein in
determining the likelihood of confusion should petitioner's application be granted.
TaCIDS

To be sure, the extant case is reminiscent of Emerald Garment

Manufacturing Corporation v. Court of Appeals, 49 wherein the opposing
trademarks are that of Emerald Garment Manufacturing Corporation's "Stylistic
Mr. Lee" and H.D. Lee's "LEE." In the said case, the appellate court affirmed the
decision of the Director of Patents denying Emerald Garment's application for
registration due to confusing similarity with H.D. Lee's trademark. This Court,
however, was of a different beat and ruled that there is no confusing similarity
between the marks, given that the products covered by the trademark, i.e., jeans,
were, at that time, considered pricey, typically purchased by intelligent buyers
familiar with the products and are more circumspect, and, therefore, would not
easily be deceived. As held:
Finally, in line with the foregoing discussions, more credit
should be given to the "ordinary purchaser." Cast in this particular
controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the
type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok 50 is

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

Consistent with the above ruling, this Court finds that the differences
between the two marks, subtle as they may be, are sufficient to prevent any
confusion that may ensue should petitioner's trademark application be granted.
As held in Esso Standard Eastern, Inc.: 52
Respondent court correctly ruled that considering the
general appearances of each mark as a whole, the possibility of
any confusion is unlikely. A comparison of the labels of the samples
of the goods submitted by the parties shows a great many
differences on the trademarks used. As pointed out by respondent
court in its appealed decision, "(A) witness for the plaintiff, Mr.
Buhay, admitted that the color of the 'ESSO' used by the plaintiff for
the oval design where the blue word ESSO is contained is the
distinct and unique kind of blue. In his answer to the trial court's
question, Mr. Buhay informed the court that the plaintiff never used
its trademark on any product where the combination of colors is
similar to the label of the Esso cigarettes," and "Another witness for
the plaintiff, Mr. Tengco, testified that generally, the plaintiff's
trademark comes all in either red, white, blue or any combination of
the three colors. It is to be pointed out that not even a shade of
these colors appears on the trademark of the appellant's cigarette.
The only color that the appellant uses in its trademark is green."

Even the lower court, which ruled initially for petitioner,

found that a "noticeable difference between the brand ESSO being
used by the defendants and the trademark ESSO of the plaintiff is
that the former has a rectangular background, while in that of the
plaintiff the word ESSO is enclosed in an oval background."

All told, We are convinced that petitioner's trademark registration not

only covers unrelated good, but is also incapable of deceiving the ordinary
intelligent buyer. The ordinary purchaser must be thought of as having, and
credited with, at least a modicum of intelligence to be able to see the differences
between the two trademarks in question. 53
Questions of fact may still be entertained
On a final note, the policy according factual findings of courts a quo great
respect, if not finality, is not binding where they have overlooked,
misapprehended, or misapplied any fact or circumstance of weight and
substance. 54 So it must be here; the nature of the products involved materially
affects the outcome of the instant case. A reversal of the appellate court's
Decision is then in order.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 122565,
dated April 30, 2013 and November 6, 2013, respectively, are hereby
REVERSED and SET ASIDE. Accordingly, the Decision of the Intellectual
Property Office Director General in Inter Partes Case No. 14-2006-00096, dated
November 23, 2011, is hereby REINSTATED. DCcHAa

SO ORDERED.
Peralta, Villarama, Jr., Reyes and Jardeleza, JJ., concur.

(Taiwan Kolin Corp., Ltd. v. Kolin Electronics Co., Inc., G.R. No. 209843, [March
|||

25, 2015])