Property Cases - 41

Western Equipment vs. ReyesGR 27897, 2 December 1927; En Banc,Johns (J)

Facts: In 1925, Western Equipment and Supply Co.applied for the issuance ofa license to engage inbusinessin the Philippines. On the otherhand, Western Electric Co. hasnever been licensed to engage inbusiness, nor has it ever engaged in business in the Philippines. Western Equipment, since the issuance of its license, engaged in the importation and sale of electrical and telephone apparatus and supplies manufactured by Western Electric. A local corporation, Electric Supply Co. Inc. has been importing the same products in the Philippines. In 1926, Electric Supplys president, Henry Herman, along with otherpersons sought to organize a corporation to be known as Western Electric Co. Inc. Western Equipment, et al. filed against Herman to prevent them from organizing said corporation. The trial court ruled in favor of Western Equipment, holding that the purpose of the incorporation of the proposed corporation is illegal or void.

Issue: Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an officer ofthe government from issuing a certificate of incorporation to Philippine residents who attempt to pirate thecorporate name ofthe foreign corporation and engage in the same business.

Held:Yes. Atrademarkacknowledgesnoterritorialboundariesofmunicipalities, statesornations,but extends to every market where the traders goods have become known and identified by the use of the mark.Rights to the use of its corporate name or trade name is a property right, a right in rem, which it may assert and protect against the whole world, in anyof the courts in theworld even in jurisdictions where it does not transact business just the same as it may protect its tangible property, real or personal, against trespass or conversion. The trial court was correct in holding that the purpose of the proposed corporation by Herman, et. al. as fraudulent and contrary to law, as it attempts to unjustly compete with the real Western Electric Co. Inc. and deceive Filipinos into thinking that the goods they propose to sell are goods of manufacture of the real Western Electric Co.

G.R. No. L-27897 December 2, 1927WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC COMPANY, INC., W. Z. SMITH and FELIX C. REYES,plaintiffs-appellees,vs.FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY HERMAN, PETER O'BRIEN, MANUEL B. DIAZ, FELIPE MAPOY and ARTEMIO ZAMORA,defendants-appellants.J. W. Ferrier for appellants.DeWitt, Perkins and Bradly for appellees.STATEMENTOctober 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following complaint against the defendants:Now come the plaintiffs in the above entitled case, by the undersigned their attorneys, and to this Honorable Court respectfully show:I. That the Western Equipment and Supply Company is a foreign corporation organized under the laws of the State of Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized under the laws of the State of New York, United States of America; and that the plaintiffs W. Z. Smith and Felix C. Reyes are both of lawful age and residents of the City of Manila, Philippine Islands.II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and Industry and as such Director is charged with the duty of issuing and denying the issuance of certificates of incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of lawful age and are residents of the City of Manila, Philippines Islands.IV. That on or about May 4, 1925, the plaintiff the Western Equipment and Supply Company applied to the defendant Director of the Bureau of Commerce and Industry for the issuance of a license to engage in business in the Philippine Islands and, accordingly, on May 20, 1926, a provisional license was by said defendant issued in its favor, which license was made permanent on August 23, 1926.V. That from and since the issuance of said provisional license of May 20,. 1926, said plaintiff Western Equipment and Supply Company has been and still is engaged in importing and selling in the Philippine Islands the electrical and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc., its offices in the City of Manila being at No. 600 Rizal Avenue, in the charge and management of the plaintiff Felix C. Reyes, its resident agent in the Philippine Islands.VI. That the electric and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc., have been sold in foreign and interstate commerce and have become well and thoroughly known to the trade in all countries of the world for the past fifty years; that at present time the greater part of all telephone equipment used in Manila and elsewhere in the Philippine Islands was manufactured by the said Western Electric Company, Inc., and sold by it in commerce between the United States and the Philippine Islands; that about three fourths of such equipment in use throughout the world are of the manufacture of said "Western Electric Company, Inc.," and bear its corporate name; and that these facts are well known to the defendant Henry Herman who for many years up to May 20, 1926, has himself been buying said products from the plaintiff Western Electric Company, Inc., and selling them in the Philippine Islands.VII. That the name `Western Electric Company, Inc., has been registered as a trade-mark under the provisions of the Act of Congress of February 20, 1905, in the office of the Commissioner of Patents, at Washington, District of Columbia, and said trade-mark remains in force to this date.VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora filed articles of incorporation with the defendant Director of the Bureau of Commerce and Industry with the intention of organizing a domestic corporation to be known as the "Western Electric Company, Inc.," for the purpose principally of manufacturing, buying, selling and generally dealing in electrical and telephone apparatus and supplies.IX. That the purpose of said defendant in attempting to incorporate under the corporate name of plaintiff Western Electric Company, Inc., is to profit and trade upon the plaintiff's business and reputation, by misleading and deceiving the public into purchasing the goods manufactured or sold by them as those of plaintiff Western Electric Company, Inc., in violation of the provisions of Act No. 666 of the Philippine Commission, particularly section 4 thereof.X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board of Directors of the Western Electric Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in business in the Philippine Islands and to accept service of summons and process in all legal proceedings against said company, and on October 21, 1926, said plaintiff W. Z. Smith filed a written application for the issuance of such license with the defendant Director of Bureau of Commerce and Industry, which application, however, has not yet been acted upon by said defendant.XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the defendant Director of the Bureau of Commerce and Industry his protest, and opposed said attempted incorporation, by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, of the `Western Electric Company, Inc.,' as a domestic corporation, upon the ground among others, that the corporate name by which said defendants desire to be known, being identical with that of the plaintiff Western Equipment and Supply Company, will deceive and mislead the public purchasing electrical and telephone apparatus and supplies. A copy of said protest is hereunto annexed, and hereby made a part hereof, marked Exhibit A.XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and Industry has announced to these plaintiffs his intention to overrule the protest of plaintiffs, and to issue to the other defendants a certificate of incorporation constituting said defendants a body politic and corporate under the name "Western Electric Company, Inc.," unless restrained by this Honorable Court.XIII. That the issuance of a certificate of incorporation in favor of said defendants under said name of "Western Electric Company, Inc.," would, under the circumstances hereinbefore stated, constitute a gross abuse of the discretionary powers conferred by law upon the defendant Director of the Bureau of Commerce and Industry.XIV. That the issuance of said certificate of incorporation would, if carried out, be in violation of plaintiff's rights and would cause them irreparable injury which could not be compensated in damages, and from which petitioner would have no appeal or any plain, speedy and adequate remedy at law, other than that herein prayed for.They prayed for a temporary injunction, pending the final decision of the court when it should be made permanent, restraining the issuance of the certificate of incorporation in favor of the defendants under the name of Western Electric Company, Inc., or the use of that name for any purpose in the exploitation and sale of electric apparatus and supplies. The preliminary writ was issued.For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, admits the allegations of paragraphs 1, 2, 3 and 4 of the complaint, and as to paragraphs 5, 6 and 7, he alleges that he has no information upon which to form a belief, and therefore denies them. He admits the allegations of paragraph 8, and denies paragraph 9. He denies the first part of paragraph 10, but admits that an application for a license to do business was filed by the Western Electric Company, Inc., as alleged. He admits paragraphs 11 and 12, and denies paragraphs 13 and 14, and further alleges that the present action is prematurely brought, in that it is an attempt to coerce his discretion, and that the mere registration of the articles of incorporation of the locally organized Western Electric Company, Inc., cannot in any way injure the plaintiffs, and prays that the complaint be dismissed.For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the allegations of paragraphs 1, 2, 3, 4 and 5 of the complaint, and deny paragraph 7, but allege that on October 15, 1926, the articles of incorporation in question were presented to the Director of the Bureau of Commerce and Industry for registration. They deny paragraphs 9 and 10, except as to the filing of the application. They admit the allegations made in paragraph 11, but alleged that W. Z. Smith was without any right or authority. Admit the allegations of paragraph 12, but deny the allegations of paragraphs 13 and 14, and allege that the Western Electric Company, Inc., has never transacted business in the Philippine Islands; that its foreign business has been turned over to the International Standard Electric Corporation; that the action is prematurely brought; and that the registration of the articles of incorporation in question cannot in any way injure plaintiffs.Wherefore, such defendants pray that the preliminary injunction be dissolved, and plaintiffs' cause of action be dismissed, with costs.The case was tried and submitted upon the following stipulated facts:Now come the parties plaintiff and defendants in the above entitled cause, by their respective undersigned attorneys, and for the purpose of this action, agree that the following facts are true:I. That the Western Equipment and Supply Company is a foreign corporation, organized under the laws of the State of Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized under the laws of the State of New York, United States of America; and that the plaintiff W. Z. Smith and Felix C. Reyes, are both of lawful age and residents of the City of Manila, Philippine Islands.II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and Industry and as such Director is charge with the duty of issuing and/or denying the issuance of certificates of incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of lawful age and all residents of the City of Manila, Philippine Islands.IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and Supply Company, through its duly authorized agent, the plaintiff, Felix C. Reyes, applied to the defendant Director of the Bureau of Commerce and Industry for the issuance of a license to engage in business in the Philippine Islands and on May 20, 1926, said defendant issued in favor of said plaintiff a provisional license for that purpose which was permanent on August 23, 1926.V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to engage in business in the Philippine Islands, and has never engaged in business therein.VI. That from and since the issuance of said provisional license of May 20, 1926, to the plaintiff, Western Equipment and Supply Company, said plaintiff has been and still is engaged in importing and selling in the Philippine Islands electrical and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc. (as well as those manufactured by other factories), said Western Equipment and Supply Company's offices in the City of Manila being at No. 600 Rizal Avenue, and at the time of the filing of the complaint herein was under the charge and management of the plaintiff, Felix C. Reyes, its then resident agent in the Philippine Islands.VII. That the electrical and telephone apparatus and supplies manufactured by the plaintiff, Western Electric Company, Inc., have been sold in foreign and interstate commerce for the past fifty years, and have acquired high trade reputation throughout the world; that at the present time the greater part of all telephone equipment used in Manila, and elsewhere in the Philippine Islands, was manufactured by the said plaintiff, Western Electric Company, Inc., and sold by it for exportation to the Philippine Islands; that such equipment, manufactured by the said Western Electric Company, Inc., and bearing its trade-mark "Western Electric" or its corporate name is generally sold and used throughout the world; that a Philippine Corporation known as the `Electric Supply Company, Inc.,' has been importing the manufactures of the plaintiff, Western Electric Company, Inc., into the Philippine Islands for the purpose of selling the same therein, and that the defendant Henry Herman, is the President and General Manager of said corporation.VIII. That the words `Western Electric' have been registered by the plaintiff, Electric Company, Inc., as a trade-mark under the provisions of the Act of Congress of February 20, 1905, in the office of the Commissioner of the Patents at Washington, District of Columbia, and said trade-mark remains in force as the property of said plaintiff to this date.IX. That the plaintiff, Western Electric Company, Inc., is advertising its manufacturers in its own name by means of advertising its manufactures in its own name by means of advertisements inserted in periodicals which circulate generally throughout the English and Spanish speaking portions of the world, and has never abandoned its corporate name or trade-mark, but, on the contrary, all of its output bears said corporate name and trade-mark, either directly upon the manufactured article or upon its container, including that sold and used in the Philippine Islands.X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora signed and filed articles of incorporation with the defendant, Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, with the intention of organizing a domestic corporation under the Philippine Corporation Law to be known as the "Western Electric Company, Inc.," for the purpose, among other things or manufacturing, buying, selling and dealing generally in electrical and telephone apparatus and supplies; that said defendants Peter O'Brien, Felipe Mapoy and Artemio Zamora are employees of the said Electrical Supply Company, of which said defendant, Henry Herman, is and has been, during the period covered by this stipulation, the president and principal stockholder; and that they, together with the said defendant Herman, signed said articles of incorporation for the incorporation of a domestic company to be known and the "Western Electric Company, Inc.," with full knowledge of the existence of the plaintiff Western Electric Company, Inc., of its corporate name, of its trade-mark, "Western Electric," and of the fact that the manufactures of said plaintiff bearing its trade-mark or corporate name are in general use in the Philippine Islands and in the United States.XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the Board of Directors of the plaintiff, Western Electric Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in business in the Philippine Islands, and to accept service of summons and process in all legal proceedings against said company, and on October 21, 1926, said plaintiff, W. Z. Smith, filed a written application for the issuance of such license with the defendant Director of the Bureau of Commerce and Industry, which application, however, has not yet been acted upon by said defendant.XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its general manager, the plaintiff W. Z. Smith. lodged with the defendant Director of the registration of the proposed corporation by the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, to be known as the Western Electric Company, Inc., as a domestic corporation under the Philippine Corporation Law. A copy of said protest, marked Exhibit A, hereunto attached and is hereby made a part of this stipulation.XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and Industry, announced his intention of overrule said protest and will, unless judicially restrained therefrom, issue to the other defendants herein a certificate of incorporation, constituting said defendants a Philippine body politic and corporate under the name of "Western Electric Company, Inc."XIV. That the defendant, Henry Herman, acting in behalf of said corporation, Electrical Supply Company, Inc., has written letters to Messrs. Fisher, DeWitt, Perkins & Brady, acting as attorneys for plaintiff, Western Electric Company, Inc., copies of which are hereunto annexed and hereby made a part hereof, marked Exhibits B, C and D.XV. That the defendants, while admitting the facts set out in paragraph VII and IX regarding the business done, merchandise sold and advertisements made throughout the world by the plaintiff Western Electric Company, Inc., insist and maintain that said allegations of fact are immaterial and irrelevant to the issues in the present case, contending that such issued should be determined upon the facts as they exist in the Philippine Islands alone.To which were attached Exhibits A, B, C and D.The lower court rendered judgment for the plaintiffs as prayed for in their complaint, and made the temporary injunction permanent, from which the defendants appeal and assign the following errors:The lower court erred:(1) When it granted the writ of preliminary injunction (pages 9 and 10, record; 12 to 14, B. of E.).(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a right to bring the present suit in courts of the Philippine Islands, wherein it is unregistered and unlicensed, as was done in the decision upon the petition for a preliminary injunction (pages 97 to 115 record), and in repeating such holding in the final decision herein (pages 51 and 52, B. of E.), as well as in basing such holding upon the decision of this Honorable Supreme Court in Marshall-Wells Co.vs. Henry W. Elser & Co. (46 Phil., 70.)(3) When it found that the plaintiff, the Western Electric Co., Inc., has any such standing in the Philippine Islands or before the courts thereof as to authorize it to maintain an action therein under the present case.(4) When it found that the other plaintiffs herein have any rights in the present controversy or any legal standing therein.lawphi1.net(5) In ordering the issuance of a permanent injunction restraining the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, from issuing a certificate of incorporation in favor of the other defendants under the name of "Western Electric Co., Inc.," or any similar name, and restraining the other defendants from using the name "Western Electric Co., Inc.," or any like name, in the manufacture of sale of electrical and telephone apparatus and supplies or as a business name or style in the Philippine Islands.(6) In finding that the purpose of the defendants, other than the defendant Fidel A. Reyes, in seeking to secure the registration of a local corporation under the name of "Western Electric Co., Inc.," was "certainly not an innocent one," thereby imputing to said defendants a fraudulent and wrongful intent.(7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.(8) In overruling and denying defendants' motion for a new trial.JOHNS,J.:The appellants say that the two questions presented are:Has a foreign corporation, which has never done business in the Philippine Islands, and which is unlicensed and unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from organizing a corporation therein bearing the same name as such foreign corporation?Has such foreign corporation a legal right to restrain an officer of the Government of the Philippine Islands, i. e., the Director of the Bureau of Commerce and Industry from exercising his discretion, and from registering a corporation so organized by residents and inhabitants of the Philippine Islands?As to the first question, the appellees say that it should be revised, so as to read as follows:Has a foreign corporation which has never done business in the Philippine Islands, and which is unlicensed and unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from organizing a corporation therein bearing the same name as such foreign corporation, when said residents and inhabitants have knowledge of the existence of such foreign corporation, having dealt with it, and sold its manufactures, and when said foreign corporation is widely and favorably known in the Philippine Islands through the use therein of its products bearing its corporate and trade name, and when the purpose of the proposed domestic corporation is to deal in precisely the same goods as those of the foreign corporation?As to the second, the appellees say that the question as propounded by the appellants is not fully and fairly stated, in that it overlooks and disregards paragraphs 12 and 13 of the stipulation of facts, and that the second question should be revised to read as follows:Has an unregistered corporation which has not transacted business in the Philippine Islands, but which has acquired a valuable goodwill and high reputation therein, through the sale, by importers, and the extensive use within the Islands of products bearing either its corporate name, or trade-mark consisting of its corporate name, a legal right to restrain an officer of the Commerce and Industry, with knowledge of those facts, from issuing a certificate of incorporation to residents of the Philippine Islands who attempt to organize a corporation for the purpose of pirating the corporate name of such foreign corporation, of engaging in the same business as such foreign corporation, and of defrauding the public into thinking that its goods are those of such foreign corporation, and of defrauding such foreign corporation and its local dealers of their legitimate trade?We agree with the revisions of both questions as made by the appellees, for the reason that they are more in accord with the stipulated facts. First, it is stipulated that the Western Electric Company, Inc., "has never engaged in business in the Philippine Islands."In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this court held:The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines, and third, that it has not obtained the proper license as provided by the statute.If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been doing business in the Philippine Islands without first obtaining a license, another and a very different question would be presented. That company is not here seeking to enforce any legal or contract rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:"Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves." And it contends that its rights to the use of its corporate and trade name:Is a property right, a rightin rem, which may assert and protect against all the world, in any of the courts of the world even in jurisdictions where it does not transact business just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and Trade-Marks and cases cited; secs. 21-22, Hopkins on Trade-Marks, Trade Names and Unfair Competition and cases cited." That point is sustained by the authorities, and is well stated in Hanover Star Milling Co.vs. Allen and Wheeler Co. (208 Fed., 513), in which they syllabus says:Since it is the trade and not the mark that is to be protect, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by the use of the mark.In Walter E. Olsen & Co.vs. Lambert (42 Phil., 633, 640), this court said:In order that competition in business should be unfair in the sense necessary to justify the granting of an injunction to restrain such competition it must appear that there has been, or is likely to be, a diversion of trade from the business of the complainant to that of the wrongdoer, or methods generally recognized as unfair; . . . In most, if not all, of the cases in which relief has hitherto been granted against unfair competition the means and methods adopted by the wrongdoer in order to divert the coveted trade from his rival have been such as were calculated to deceive and mislead the public into thinking that the goods or business of the wrongdoer are the goods or business of the rival. Diversion of trade is really the fundamental thing here, and if diversion of trade be accomplished by any means which according to accepted legal canons are unfair, the aggrieved party is entitled to relief.In Shavervs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,. 881), it is said:The contention of counsel for the appellants here is a confusion of the bases of two classes of suits, those for infringements of trade-marks, and those for unfair competition in trade. . . . In the former, title to the trade-marks is indispensable to a good cause of action; in the latter, no proprietary interest in the words, names, or means by which the fraud is perpetrated is requisite to maintain a suit to enjoin it. It is sufficient that the complainant is entitled to the custom the goodwill of a business, and that this goodwill is injured, or is about to be injured, by the palming off of the goods of another as his.The remaining question as to the jurisdiction of the courts over the defendant Reyes, as Director of the Bureau of Commerce and Industry, has been adversely decided to his contention in the case ofAsuncion vs. De Yriarte(28 Phil., 67), in which, among other things, it is said:If, therefore, the defendant erred in determining the question presented when the articles were offered for registration, then that error will be corrected by this court in this action and he will be compelled to register the articles as offered. If, however, he did not commit an error, but decided that question correctly, then, of course, his action will be affirmed to the extent that we will deny the relief prayed for.It is very apparent that the purpose and intent of Herman and his associates in seeking to incorporate under the name of Western Electric Company, Inc., was to unfairly and unjustly compete in the Philippine Islands with the Western Electric Company, Inc., in articles which are manufactured by, and bear the name of, that company, all of which is prohibited by Act No. 666, and was made known to the defendant Reyes by the letter known in the record to the defendant Reyes by the letter known in the record as Exhibit A.As appellees say:These defendant, Herman and his associates, are actually asking the Government of the Philippine Island to permit them to pirate the name of the Western Electric Company, Inc., by incorporating thereunder, so that they may deceive the people of the Philippine Islands into thinking that the goods they propose to sell are goods of the manufacture of the real Western Electric Company. It would be a gross prostitution of the powers of government to utilize those powers in such a way as to authorize such a fraud upon the people governed. It would be the grossest abuse of discretion to permit these defendants to usurp the corporate mane of the plaintiff, and to trade thereupon in these Islands, in fraud of the Philippine public and of the true owners of the name and the goodwill incidental thereto.The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for over fifty years, during which time it has established a reputation all over the world including the Philippine Islands, for the kind and quality of its manufactured articles, and it is very apparent that the whole purpose and intent of Herman and his associates in seeking to incorporate another corporation under the identical name of Western Electric Company, Inc., and for the same identical purpose as that of the plaintiff, is to trespass upon and profit by its good name and business reputation. The very fact that Herman and his associates have sought the use of that particular name for that identical purpose is conclusive evidence of the fraudulent intent with which it is done.The judgment of the lower court is affirmed, with costs. So ordered.Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand and Villa-Real, JJ., concurSterling Products Vs. Farbenfabriken Bayer

GR L-19906, 30 April 1969; En Banc, Sanchez (J).

Facts:The Bayer Cross in circle trademark was registered in Germany in 1904 to Farbenfabriken vorm.Friedr. Bayer (FFB), successor to the original Friedr.Bauyer et. Comp., and predecessor to FarbenfabrikenBayer aktiengessel craft (FB2).

The Bayer, and Bayer Cross in circle trademarks were acquired by sterlingDrug Inc. when it acquired FFBs subsidiary Bayer Co. of New York as a result of the sequestration of its assets by theUS Alien Property Custodian during World War I.Bayer products have been known in Philippines by the close of the 19thcentury.Sterling Drugs, Inc., however, ownsthe trademarks Bayer in relation to medicine.FBA attempted toregister its chemical products with the Bayer Cross in circle "trademarks.Sterling Products International and FBA seek to exclude each other from use of the trademarks in the Philippines.

The trial court sustained SPIs right to use the Bayer trademark for medicines and directedFBA to add distinctive word(s) in their mark to indicate their products come from Germany.Both appealed.

Issue:Whether SPIs ownership of the trademarks extends to products not related to medicine.

Held:

No.SPIscertificates ofregistration as to the Bayer trademarks registered in the Philippines cover medicines only.Nothing in the certificates include chemicals or insecticides.SPI thus may not claim first use of the trademarks prior to the registrations thereof on any product other than medicines.For if otherwise held, a situation may arise whereby an applicant may be tempte3d to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. Omnibus registration is not contemplated by the Trademark Law.The net result of the decision is that SPI may hold on its Bayer trademark for medicines and FBA may continue using the same trademarks for insecticide and other chemicals, notmedicine. The formula fashioned by the lower court avoids the mischief of confusion of origin, and does not visit FBA with reprobation and condemnation.A statement that its product camefrom Germany anyhow is buta statement of fact,

G.R. No. L-19906 April 30, 1969STERLING PRODUCTS INTERNATIONAL, INCORPORATED,plaintiff-appellant,vs.FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING AND TRADING CO., INC.,defendant-appellants.SANCHEZ,J.: In this, a case for trademark infringement and unfair competition, each of the principal suitors, namely, plaintiff Sterling Products International, Inc.,1and defendant Farbenfabriken Bayer Aktiengesellschaft,2seeks to exclude the other from use in the Philippines of the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI asks this Court to strike down FBA's registration of BAYER CROSS IN CIRCLE covering industrial and agricultural products insecticides and other chemicals, not medicines from the supplemental register. FBA, for its part, prays for the cancellation from the principal register of SPI's certificates of registration of the trademarks aforesaid for medicines. Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin, Aspirin for Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are being used by SPI in the Philippines only for said products Bayer Aspirin, Cafiaspirina and Bayer Aspirin for Children. On the containers (bottles or printed celophane strips, which, in turn, are placed in cardboard boxes) of Bayer Aspirin, Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and BAYER CROSS IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc.3distributes "Folidol" and other industrial and agricultural chemicals. FBA's "Folidol" (in steel or fiber drums or aluminum containers) displays a replica of SPI's trademark BAYER CROSS IN CIRCLE; on the tin cap and label of the container. The conflict apparent, suit followed. The trial court declared itself "in favor of the solution that favors division of the market rather than monopoly." But to avoid confusion, it directed defendants "to add a distinctive word, or words in their mark to indicate that their products come from Germany." The judgment below reads: IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the Court sustains plaintiff's right to use the Bayer trademark for its medicines, and defendants' right to use it for chemicals, insecticides, and other products not medicines, but the Court orders defendants to add a distinctive word or words in their mark to indicate that their products come from Germany.4 Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint and sustains defendants' right to use the BAYER trademark for their chemicals, insecticides, and other products not medicines";5and defendants, from the portions of the aforementioned decision particularly those which dismiss the counterclaim of the defendants for the cancellation of the registrations by the plaintiff of the trademarks Bayer and Bayer Cross and which allow the plaintiff "to continue using the Bayer trademarks for medicines."6 And now to the facts. The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1868, organized a drug company bearing his name Friedr Bayer et comp. at Barmen, Germany. The company was at first engaged in the manufacture and sale of chemicals. At about the year 1888 it started to manufacture pharmaceutical preparations also. A change of name from Friedr Bayer to Farbenfabriken vorm. Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was followed in 1912 by a change of principal place of business from Elberfeld to Luverkusen, Germany.7Its products came to be known outside Germany. With the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige. The time was ripe to register the trademarks. The record, however, does not clearly show when the word BAYER was registered as a trademark in Germany. The BAYER CROSS IN CIRCLE trademark was registered in Germany on January 6, 1904 No. 65777.8It was intended to be used on "medicines for human beings and animals, disinfectants preservatives, tar dyestuffs and chemical preparations for dyes and for photographic purposes."9This registered trademark consists of the BAYER CROSS encircled by the company's name Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld. When the company was merged with other German companies in 1925 to form the I.G. Farbenindustrie, the name of the former company was deleted from the trademark and what remained was the present BAYER CROSS IN CIRCLE. A new registration was effected on June 17, 1929 in Germany and for which it was issued a certificate with serial no. 404341. The trademark BAYER CROSS IN CIRCLE was registered by FFB and its subsidiaries in other parts of the world, viz, in Norway, England, Denmark, and Argentina in 1904; in Japan and the United States in 1908; in Spain in 1911; in Peru in 1913. Sometime in 1895, FFB established a subsidiary in New York, United States. It was named Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the United States and Canada. It was this subsidiary that registered the trademarks BAYER and BAYER CROSS IN CIRCLE in the United States between the years 1907-1908. Sometime in 1913, FFB organized another subsidiary The Bayer Co., Inc. of New York. This new subsidiary was authorized by FFB to negotiate for and acquire the trademarks, goodwill, assets and property of Farbenfabriken of Elberfeld Co. By an agreement dated June 12, 1913 (Exh. 106) Bayer of New York purchased for the sum of US $750,000.00 Farbenfabriken of Elberfeld Co.'s "right for the sale in the United States and Canada of the drugs, chemicals, pharmaceuticals and any and all other products and articles manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, good will and other assets and property." On April 6, 1917,10the United States declared war on Germany. Pursuant to the provisions of the Trading with the Enemy Act, the Alien Property Custodian classified The Bayer Co., Inc. of New York as an enemy-controlled corporation. Hence, the Alien Property Custodian seized its assets about the early part of 1918. Between December 1918 and January 1919, all the assets of The Bayer Co., Inc. of New York were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US $5,310,000.00. The Bayer Co., Inc. of New York then became a subsidiary of Sterling Drug, Inc. Winthrop Chemical Co., Inc. was later organized as a new subsidiary of Sterling Drug, Inc. to manufacture and sell the physicians' drugs which had been acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was evidently hampered because 'the Germans had kept manufacturing processes secret, so that the manufacture of physicians' drugs on a commercial scale became an almost insoluble problem.11 Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of the world.12 It would appear that the trademark BAYER for medicines was known in the Philippines about the close of the 19th century. This appears on page 88 of the Revista Farmaceutica de Filipinos Ao I, Numero 7, 3 de Julio de 1893. Before World War I, BAYER products entering the Philippines came from Germany. In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm. Friedrich Bayer & Co. and The Bayer Co., Inc. of New York, in reference to the trademarks BAYER and BAYER CROSS IN CIRCLE as they were applied to various products. Two agreements resolved this conflict, both executed on April 9, 1923 in London, England: one, between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB and Bayer New York (Exh. WWW). Under the terms of the agreement with Winthrop Chemical Co., Inc., FFB stipulated, amongst others: (1) not to contest anymore Winthrop's right over the trademarks BAYER and BAYER CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United States which was understood to include the Philippines under par. 16 of said agreement; and (3) to disclose all secrets of other processes relating to the manufacture of pharmaceuticals. Paragraph 26 of the FFB Bayer New York agreement reads 26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer for sale any goods other than hereunder or those they may market for Winthrop as hereinbefore provided and other than Aspirin and compounds of Aspirin which New York shall continue to market for their own account in the United States of America, Puerto Rico, the Philippines and Hawaiian Islands and the Panama Zone.13 In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This necessitated a new agreement incorporating Exh. 66 with modifications. Said new agreement was signed on November 15, 1926 between I.G. Farbenindustrie and Winthrop. On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop Chemicals Co. and The Bayer Co., of New York, two consent decrees [Exh. 68 (No. 15-363) and Exh. 69: (No. 15-364)] were promulgated by the U.S. District Court for Southern New York. Said consent decrees declared the April 9 1923, cartel agreements violative of the U.S. anti-trust laws. One reason given is that the German company, FFB (later I.G. Farbenindustrie) FBA's predecessors was excluded from the U.S. pharmaceutical market. The sentence, however, contains a saving clause, thus The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or supplements thereto are declared and adjudged to be unlawful under the Anti-Trust Laws of the United States, and the defendants Bayer and Sterling, and their respective successors an subsidiaries, or any of them, be and they are hereby enjoined and restrained from carrying out or enforcing any of the aforesaid contracts, or any supplements, amendments or modifications thereof, or from paying to I.G. Farben, its subsidiaries, successors, or assigns, any royalties or share of profits pursuant to said contracts with respect to sales following the effective date of this decree. Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.ntx x x x x x x x x Affect in any way the rights or title of the defendant Bayer, its successors, subsidiaries or assigns, in or to the name "Bayer" and the "Bayer Cross" mark or registrations thereof, or Affect or diminish any right, title or interest of said defendants, their successor subsidiaries or assigns, in or to or under any heretofore acquired and presently existing patents, patent applications, patent licenses, trade-marks, trade-names (such as the name "Bayer" and the "Bayer Cross" mark and registrations thereof), processes or formulae relating to the manufacturing, processing, use or sale of aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or impair any rights or remedies of said defendants, their successors, subsidiaries or assigns, provided by statute or convention, and by suits for damages, injunction or other remedy with respect to any such patents, patent applications, patent licenses or trademarks....14 Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware corporation, a subsidiary of Sterling Drug, Inc. of New York, was issued a license to do business in the Philippines.15The trademarks BAYER and BAYER CROSS IN CIRCLE were then registered in the Philippines under the old Trademark Law (Act 666) by The Bayer Co., Inc.; the BAYER CROSS IN CIRCLE trademark on April 18, 1939 for which it was issued Certificate of Registration No. 13081; the BAYER trademark on April 22, 1939 for which it was issued Registration Certificate No. 13089. These trademark rights were assigned to SPI on December 30, 1942 and the assignment was recorded in the Philippines Patent Office on March 5, 1947. With the passage of Republic Act 166 repealing the old Trademark Law (Act 666), SPI was issued by the Philippines Patent Office on June 18, 1948 two new certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The registration of these trademarks was only for "Medicines". Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In 1945, after World War II, I.G. Farbenindustrie AG. was decartelized by the Allied High Commission. The unit known as Farbenfabriken Bayer was transferred in 1953 to Farbenfabriken Bayer Aktiengesellschaft (FBA), one of the defendants in this case, which was organized in 1951. Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started selling FBA's products especially "Folidol" a chemical insecticide which bears the BAYER CROSS IN CIRCLE trademark.16 On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE trademark with the Philippines Patent Office for animal and plant destroying agents. The examiner's report dated December 17, 1959 stated that the subject mark appears to be similar to SPI's registered BAYER trademarks as covered by Certificates of Registration Nos. 1260-S and 1262-S. He concluded that "[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because it would cause confusion or mistake or [to] deceive purchasers."17This action of the Philippines Patent Office drew a reply from FBA. In its letter dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no question or objection to the assertion of the Examiner that the registrant's mark and that of the applicant are similar to each other. It emphasized the fact that it was seeking registration in the Supplemental Register. Its concluding statement runs thus:. Being aware of the duties and obligations of a trademark user in the Philippines and the penalties provided for in the pertinent law on tradermarks and being aware also that Supplemental Registration is not a prima facie evidence of ownership of mark but merely a recordation of the use as in fact the mark is actually being used by the applicant in the Philippines, it is respectfully urged that this [application] be given due course.18 On February 25, 1960, FBA was issued a certificate of registration in the Supplemental Register, SR-304. We now grapple with the problems raised in the separate appeals. 1. A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. This rule is spelled out in our. Trademark Law thus: SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his, exclusive use a trademark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business, or service from the merchandise, business or service of others. The ownership or possession of a trademark, trade-name, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As inserted by Section 1 of Republic Act 638) It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use."19Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that Purchasers have come to understand the mark as indicating the origin of the wares.20Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as correctly stated in the decision below, are those which cover medicines only. For, it was on said goods that the BAYER trademarks were actually used by it in the Philippines. Therefore, the certificates of registration for medicines issued by the Director of Patents upon which the protection is enjoyed are only for medicines. Nothing in those certificates recited would include chemical or insecticides. But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its registrations of the BAYER marks states that "the merchandise for which the trademark is appropriated is d. Chemicals, Medicines and Pharmaceutical Preparations." Plaintiff's position is that such statement determines the goods for which said marks had been registered. Validity does not attach to this proposition. First, the statement itself admits that "the particular description of the articles comprised in said class (d) on which the trademark is used is Medicines."21It is not used forchemicals. Then,Section 11 of the Trademark Law requires that the certificate of registration state "the particular goods . . . for which it is registered."This is controlling. Under Section 11 aforesaid, likewise to be entered in the certificate of registration is"the date of the first usein commerce or business. SPI may not claim "first use" of the trademarks prior to the registrations thereof on any product other than medicines. Besides,Section 7 of the same Trademark Act directs that upon the filing of the application and the payment of the required fee, the "Director [of Patents] shall cause an examination of the application" for registration of the trademark "to be made, and, if on such examination it shall appear that the applicantis entitled to registration,the Director . . . shall cause the mark . . . to be published in the Official Gazette." This examination, it would seem to us, is necessary in order that the Director of Patents may be satisfied that the application conforms to the requirement ofactual usein commerce of the trademark in Section 2 and 2-A of the Trademark Law; and that the statement in said application as to the "first use" thereof and "the goods. . . in connection with which the mark . . . is used" (Section 5) is true. Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. Because of this and of the fact that the Bayer trademarks were never used in the Philippines by plaintiff except for medicines Aspirin, Aspirin for Children and Cafiaspirina we find ourselves unwilling to draw a hard and fast rule which would absolutely and under all circumstances give unqualified protection to plaintiff against the use of said trademarks by all others on goods other than medicines. 2. Neither will the 1927 registration in the United States of the BAYER trademark for insecticides serve plaintiff any. The United States is not the Philippines. Registration in the United States is not registration in the Philippines. At the time of the United States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks owned by persons domiciled in the United States. What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement. There is nothing new in what we now say. Plaintiff itself concedes22that the principle of territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or territoriality."23 Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the same or different products. 3. A question basic in the field of trademarks and unfair competition is the extent to which a registrant of a trademark covering one product may invoke the right to protection against the use by other(s) of the same trademark to identify merchandise different from those for which the trademark has been appropriated. Plaintiff's trenchant claim is that it should not be turned away because its case comes within the protection of theconfusion of originrule. Callmann notes two types of confusion. The first is theconfusion 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 theconfusion 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."24 A judicial test giving the scope of the rule of confusion of origin isAng vs. Teodoro(December 14, 1942), 74 Phil. 50. Briefly, the facts of the just cited case are as follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, had continuously used "Ang Tibay" both as trademark and as tradename in the manufacture and sale of slippers, shoes and indoor baseballs since 1910. He formally registered it as a trademark on September 29, 1915 and as a tradename on January 3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April 11, 1932 and established a factory for the manufacture of said articles in 1937. Suit was lodged by Teodoro against Ang to cancel the latter's registration of the trademark "Ang Tibay" and to perpetually enjoin her from using the said trademark on goods manufactured and sold by her. The judgment of the trial court absolved defendant (Ana L. Ang) from the complaint with costs against the plaintiff. The Court of Appeals reversed. On appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there said: "In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user.Although two noncompeting articlesmay be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trademarks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trademark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the vauable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trademark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trademark or trade-name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud.25 The thoughts expressed in Ang Tibay command respect Conduct of business should conform to ethical business standards. Unfairness is proscribed. The invocation of equity is bottomed upon the injunction that no one should "reap where he has not sown."26 Nonetheless, "[i]t has been emphasized that each case presents a unique problem which must be answered by weighing the conflicting interests of the litigants."27With this in mind, we are convinced that the case before us is not to be analogized with Ang Tibay. The factual setting is different. His Honor, Judge Magno S. Gatmaitan (now Associate Justice of the Court of Appeals), the trial judge, so found. He reached a conclusion likewise different. And the reasons, so well stated by His Honor, are these:1st). It was not plaintiff's predecessor but defendant's namely Farbenfabriken or Bayer Germany that first introduced the medical products into the Philippine market and household with the Bayer mark half a century ago; this is what the Court gathers from the testimony of Frederick Umbreit and this is the implication even of Exhs. 48, 49, 66 and as already shown a few pages back;282nd). There is thus reason plausible enough for defendant' plea that as Sterling was not the "originator" of the Bayer mark, the rule in Ang vs. Teodoro, supra, is not applicable; and this is correct notwithstanding Exhs. 106 and 63 and even giving unto these documents full force and virtue, because purchase of the assets of Elberfeld, defendants' previous affiliate in New York, by Bayer of New York, even if that were to be held to include purchase of the Bayer mark, did not make the purchaser Bayer of New York the originator of the mark; especially since Bayer of New York was only another subsidiary of Bayer Germany or Farbenfabriken which was the real originator;3rd). The Court is also impelled to believe that the evidence establishes that among the common people of the Philippines the "Bayer" medicines come from Germany; this the Court deduces from the testimony of witness Florisa Pestano who only reproduced the belief of her grandmother; the Court might as well say that plaintiff itself has not discouraged that belief because the drug and its literature that came from the plaintiff and its affiliate would show that it represented its medicines to have come from defendant29and were manufactured in Germany with that Bayer mark; thus Exh. 7030which is the price list of 1928 of Botica de Sta. Cruz on page 6 indicates that Winthrop Chemical Company of New York, plaintiff's subsidiary was a distributor of I.G. Farbenindustrie, A.G. Leverkusen Germany; Exh. 8031which is a medical diary published by Winthrop for 1934 on page 148 manifested that the journal, "Practical Therapeutics" was published by I.G. Farbenindustrie Aktiengesellachaft for Winthrop Chemical Company, Inc.; "with particular reference to the pharmacological products, sera and vaccines originated and prepared in the laboratories of the I.G. Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are prospectuses for the medicines, Mitigal, Afridol, Aspirins, Novalgina and My-Salvarsan32showed that these products were manufactured for Winthrop by I.G. Farbenindustrie; and then Exh. 81 the Revista Boie of 1928 would show that Winthrop represented itself as the distributor of the products of Bayer of Germany otherwise known as I.G. Farbenindustrie, "segun la alta calidad de la marca original";33the Court being also impelled to add in this connection that it has to take judicial notice of a belief of long standing common among the people in the Philippines that German products are of very high quality and it is only natural for a distributor or a retailer to take advantage of that, and as it is not debated that "Bayer" is a German surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply memorandum wherein it is said that this surname is a "pretty common one among members of the Germany race") it is all so very easy to associate the Bayer trademark with products that come from Germany and to believe that they are of high quality;4th). The rationale of the doctrine in Ang vs. Teodoro, supra being that: The Courts have come to realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such unfair trading can cause injury or damage to the first user of a given trade mark, first, by prevention of the natural expansion of his business, and second, by having his business reputation confused with and put at the mercy of the second user. 74 Phil. 55-56; and the Court having found out that the 'first user' was Bayer Germany and it was this that had built up the Bayer mark and plaintiff apparently having itself encouraged that belief even after it had acquired the Bayer mark in America, thru forced sale, of defendant's subsidiary there in 1918, Exhs. 79, 80, 81, to apply the Ang Tibay rule in the manner advocated by Sterling would, the Court fears, produce the reverse result and the consequence would be not equity but injustice.34 It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer trademark has diluted the rationally of its exclusionary claim. Not that the free ride in the name of defendant's German predecessor was sporadic. It is continuing. Proof of this is the label on the box used by plaintiff (Exhibit U) in the distribution of Bayer Aspirin. This box bears prominently on the front part the legend "Genuine" in red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE, and the second, to BAYER Aspirin. At the back thereof in big letters are the words "BAYER ASPIRIN", followed in small letters "Used since 1900" and down below the small words "Mfd. in the Phil. by Winthrop Stearns, Inc. for STERLING PRODUCTS INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1) found in the box of Bayer Aspirin tablets, children's size, there is the significant statement: "GENUINE BAYER Each Children's Size Bayer Aspirin tablet is stamped with the Bayer Cross, the trademark of the genuine Bayer product. This means that your child is getting the same gentle-to-the-system Bayer Aspirin that has been used for over 50 years by millions of normal people without ill effect." With the background of prior use in the Philippines of the word BAYER by FBA's German predecessor and the prior representations that plaintiff's medicines sold in the Philippines were manufactured in Germany, the facts just recited hammer on the mind of the public that the Aspirin. Cafiaspirina and Aspirin for Children being marketed for plaintiff in the Philippines come from the same source the German source and in use since 1900. That this view is far from far-fetched, is illustrated by the testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz:Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a company in Germany named Bayer?A. Yes, sir.Q. Since when have you heard of this pharmaceutical company in Germany with the name Bayer, since when have you heard of that?A. I have always taken the name Bayer as associated with Winthrop & Stearns.Q. But, you said a while ago....Witness..... Yes .....x x x x x x x x xQ. ... that you have heard of a pharmaceutical company with the name of Bayer in Germany?A. Yes, sir.Q. Do you know if this Winthrop & Stearns you mentioned has ever been connected with Bayer Company of Germany?A. I have always understood that they were distributing drugs of Bayer & Company.35 4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored teaching that he who comes into equity must do so with clean hands.36Plaintiff cannot now say that the present worth of its BAYER trademarks it owes solely to its own efforts; it is not insulated from the charge that as it marketed its medicines it did so with an eye to the goodwill as to quality that defendants' predecessor had established. There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first user thereof in the Philippines. The trademarks do not necessarily link plaintiff with the public. Plaintiff must show injury; it has not. On the contrary, representations as to the place of manufacture of plaintiff's medicines were untrue, misleading. Plaintiff could still be tagged with the same deception "which (it) complains of in the defendant(s)."37Appropriate it is to recall here our observation in the Ang Tibay opinion, viz: "On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own."38 Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus forfeited its right to protection from the use of the same trademarks by defendants for products different therefrom insecticides and other chemicals. 5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from the Principal Register, claiming right thereto for said use. Said trademarks had been registered since 1939 by plaintiff's predecessor. The Bayer Co., Inc. Defendants' claim is stale; it suffers from the defect of non-use.39While it is conceded that FBA's predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, no definite evidence there is that defendants or their professors traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its objection. Lack of protest thereto connoted acquiescence. And this; notwithstanding the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the marks; but it was much later, i.e., in 1958 and on chemicals and insecticides not on medicines. FBA only bestirred itself and challenged plaintiff's right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit.40 The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for medicines. And defendants may continue using the same trademarks for insecticides and other chemicals, not medicines. 6. Defendants balk at the ruling below which directs them "to add a distinctive word or words in their mark to indicate that their products come from Germany."41 We are left under no doubt as to the reasonableness of the formula thus fashioned. It avoids the mischief of confusion of origin defendant FBA's product would not be mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to defendants. The order does not visit defendant FBA with reprobation or condemnation. Rather, said defendant would be enhancing the value of and would be sponsoring its own products. Anyway, a statement that its products come from Germany is but a statement of fact. FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. So ordered.Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.Castro, J., is on leave.

La Chemise Lacoste vs. FernandezGR 63796-97, 21 May1984; First Division, Gutierrez Jr. (J)

Facts:La chemise Lacoste is aFrench corporation and the actual owner of the trademarks Lacoste,Chemise Lacoste, Crocodile Device and a composite mark consisting of the word Lacoste and are presentation of a crocodile/alligator, used on clothing'sand other goods sold in many parts of the world and which has been marketed in the Philippines (notably by Rustans) since 1964.

In 1975 and 1977, Hemandas Q. Co. was issued certificate of registration for the trademark Chemise Lacoste and Q Crocodile Device "both in the supplemental and Principal Registry.In 1980, La Chemise Lacoste SA filed for the registration of the Crocodiledevice andLacoste.

Games andGarments (Gobindram Hemandas,assignee ofHemandasQ.Co.) opposed the registration ofLacoste.

In 1983, La Chemise Lacoste filed with the NBI a letter-complaint alleging acts of unfair competition committed by Hemandas and requesting the agencys assistance.

A search warrant was issued by the trial court.Various goods and articles were seized upon the execution of the warrants.

Hemandas filed motiontoquash the warrants, which the court granted.The search warrants were recalled, and the goods ordered to bereturned.La Chemise Lacoste filed a petition for certiorari.

Issue:Whether the proceedings before the patent office is aprejudicial question that need to beresolved before the criminal action for unfair competition may bepursued.

Held:No.The proceedings pendingbefore the Patent Office do not partake of thenature of aprejudicial questionwhich must first be definitely resolved.The case which suspends the criminal action must be a civil case, not a mereadministrative case, which is determinative of the innocence or guilt of the accused.The issue whether a trademark used is different from anothers trademark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as apreliminary matter in an administrative proceeding. Inasmuch as the goodwill and reputation of La Chemise Lacoste products date back even before 1964,Hemandas cannot be allowed to continue the trademark Lacoste for the reason that he was the first registrant in the Supplemental Register of a trademark used in international commerce.Registration in the Supplemental Register cannot be given a posture as if the registration is in the Principal Register.It must be noted that onemay be declared an unfair competitor even ifhis competing trademark is registered.La Chemise Lacoste is world renowned mark, and by virtue of the 20 November 1980 Memorandum of the Minister of Trade to the director of patents in compliance with the Paris Convention for the protection of industrial property, effectively cancels the registration of contrary claimants to the enumerated marks, which include Lacoste.------------------------------------------------------------------------------------------------------------------------------------------G.R. No. L-63796-97 May 2, 1984LA CHEMISE LACOSTE, S. A.,petitioner,vs.HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS,respondents.G.R. No. L-65659 May 2l, 1984GOBINDRAM HEMANDAS SUJANANI,petitioner,vs.HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director of Patents,respondents.Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.GUTIERREZ, JR.,J.:It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames which have established themselves in international or foreign trade.Before this Court is a petition forcertiorariwith preliminary injunction filed by La Chemise Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the seized items.The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines since 1964, The main basis of the private respondent's case isits claim of alleged prior registration.In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:xxx xxx xxx... Considering that the mark was already registered in the Supplemental Register in favor of herein applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark until after the registration is declared cancelled.Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court inHemandas v. Hon. Roberto Ongpin(G.R. No. 65659).On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operated by Hemandas.The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search found and seized various goods and articles described in the warrants.Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same subject matter and between the same parties would be premature.The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People should prosecution follow in court.The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)The petitioner anchors the present petition on the following issues:Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits; and(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of the Philippine Patent Office?Respondent, on the other hand, centers his arguments on the following issues:ITHE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.IITHE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.Hemandas argues in his comment on the petition forcertiorarithat the petitioner being a foreign corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case ofLeviton Industries v. Salvador(114 SCRA 420) to support his contention TheLevitoncase, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:Sec. 21 A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the complaint;Provided, That the country of which the said foreign corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines.We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded.In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code. TheLevitoncase is not applicable.Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable ruling is the case ofMentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans.The argument has no merit.The Mentholatumcase is distinct from and inapplicable to the case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair competition."In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner.The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1(g) of said rules and regulations defines "doing business" as one" which includes,inter alia:(1) ... A foreign firm which does business through middlemen acting on their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its account, and not in the name or for the account of a principal Thus, where a foreign firm is represented by a person or local company which does not act in its name but in the name of the foreign firm the latter is doing business in the Philippines.xxx xxx xxxApplying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the name or for the account of the petitioner.But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, inWestern Equipment and Supply Co. v. Reyes(51 Phil. 115), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.We further held:xxx xxx xxx... That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.' And it contends that its rights to the use of its corporate and trade name:Is a property right, a rightin rem,which it may assert and protect against all the world, in any of the courts of the world-even in jurisdictions where it does not transact business-just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and cases cited.' That point is sustained by the authorities, and is well stated inHanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513). in which the syllabus says:Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and Identified by the use of the mark.Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our courts. InEast Board Navigation Ltd, v. Ysmael and Co., Inc.(102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. InGeneral Garments Corp. v. Director of Patents(41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign