[G.R. No. 161295. June 29, 2005]

JESSIE G. CHING, petitioner, vs. WILLIAM M. SALINAS, SR., WILLIAM M. SALINAS, JR.,

JOSEPHINE L. SALINAS, JENNIFER Y. SALINAS, ALONTO SOLAIMAN SALLE, JOHN

ERIC I. SALINAS, NOEL M. YABUT (Board of Directors and Officers of WILAWARE

PRODUCT CORPORATION), respondents.

This petition for review on certiorari assails the Decision[1]

and Resolution[2]

of the Court of

Appeals (CA) in CA-G.R. SP No. 70411 affirming the January 3, 2002 and February 14, 2002

Orders[3]

of the Regional Trial Court (RTC) of Manila, Branch 1, which quashed and set aside Search

Warrant Nos. 01-2401 and 01-2402 granted in favor of petitioner Jessie G. Ching.

Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing Co., the maker

and manufacturer of a Utility Model, described as Leaf Spring Eye Bushing for Automobile made up

of plastic.

On September 4, 2001, Ching and Joseph Yu were issued by the National Library Certificates

of Copyright Registration and Deposit of the said work described therein as Leaf Spring Eye Bushing

for Automobile.[4]

On September 20, 2001, Ching requested the National Bureau of Investigation (NBI) for

police/investigative assistance for the apprehension and prosecution of illegal manufacturers,

producers and/or distributors of the works.[5]

After due investigation, the NBI filed applications for search warrants in the RTC of Manila

against William Salinas, Sr. and the officers and members of the Board of Directors of Wilaware

Product Corporation. It was alleged that the respondents therein reproduced and distributed the said

models penalized under Sections 177.1 and 177.3 of Republic Act (R.A.) No. 8293. The applications

sought the seizure of the following:

a.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of

plastic polypropylene;

b.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of

polyvinyl chloride plastic;

c.) Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride

plastic;

d.) Undetermined quantity of Dies and jigs, patterns and flasks used in the

manufacture/fabrication of items a to d;

e.) Evidences of sale which include delivery receipts, invoices and official receipts.[6]

The RTC granted the application and issued Search Warrant Nos. 01-2401 and 01-2402 for the

seizure of the aforecited articles.[7]

In the inventory submitted by the NBI agent, it appears that the

following articles/items were seized based on the search warrants:

Leaf Spring eye bushing

a) Plastic Polypropylene

- C190 27 }

- C240 rear 40 }

- C240 front 41 } BAG 1

b) Polyvinyl Chloride Plastic

- C190 13 }

c) Vehicle bearing cushion

- center bearing cushion 11 }

Budder for C190 mold 8 }

Diesel Mold

a) Mold for spring eye bushing rear 1 set

b) Mold for spring eye bushing front 1 set

c) Mold for spring eye bushing for C190 1 set

d) Mold for C240 rear 1 piece of the

set

e) Mold for spring eye bushing for L300 2 sets

f) Mold for leaf spring eye bushing C190

with metal 1 set

g) Mold for vehicle bearing cushion 1 set[8]

The respondents filed a motion to quash the search warrants on the following grounds:

2. The copyright registrations were issued in violation of the Intellectual Property Code on the ground

that:

a) the subject matter of the registrations are not artistic or literary;

b) the subject matter of the registrations are spare parts of automobiles meaning there

(sic) are original parts that they are designed to replace. Hence, they are not

original.[9]

The respondents averred that the works covered by the certificates issued by the National

Library are not artistic in nature; they are considered automotive spare parts and pertain to

technology. They aver that the models are not original, and as such are the proper subject of a

patent, not copyright.[10]

In opposing the motion, the petitioner averred that the court which issued the search warrants

was not the proper forum in which to articulate the issue of the validity of the copyrights issued to

him. Citing the ruling of the Court in Malaloan v. Court of Appeals,[11]

the petitioner stated that a

search warrant is merely a judicial process designed by the Rules of Court in anticipation of a

criminal case. Until his copyright was nullified in a proper proceeding, he enjoys rights of a registered

owner/holder thereof.

On January 3, 2002, the trial court issued an Order[12]

granting the motion, and quashed the

search warrant on its finding that there was no probable cause for its issuance. The court ruled that

the work covered by the certificates issued to the petitioner pertained to solutions to technical

problems, not literary and artistic as provided in Article 172 of the Intellectual Property Code.

His motion for reconsideration of the order having been denied by the trial courts Order of

February 14, 2002, the petitioner filed a petition for certiorari in the CA, contending that the RTC had

no jurisdiction to delve into and resolve the validity of the copyright certificates issued to him by the

National Library. He insisted that his works are covered by Sections 172.1 and 172.2 of the

Intellectual Property Code. The petitioner averred that the copyright certificates are prima

facie evidence of its validity, citing the ruling of the United States Court of Appeals in Wildlife

Express Corporation v. Carol Wright Sales, Inc.[13]

The petitioner asserted that the respondents

failed to adduce evidence to support their motion to quash the search warrants. The petitioner noted

that respondent William Salinas, Jr. was not being honest, as he was able to secure a similar

copyright registration of a similar product from the National Library on January 14, 2002.

On September 26, 2003, the CA rendered judgment dismissing the petition on its finding that

the RTC did not commit any grave abuse of its discretion in issuing the assailed order, to wit:

It is settled that preliminarily, there must be a finding that a specific offense must have been

committed to justify the issuance of a search warrant. In a number of cases decided by the Supreme

Court, the same is explicitly provided, thus:

The probable cause must be in connection with one specific offense, and the judge must, before

issuing the warrant, personally examine in the form of searching questions and answers, in writing

and under oath, the complainant and any witness he may produce, on facts personally known to

them and attach to the record their sworn statements together with any affidavit submitted.

In the determination of probable cause, the court must necessarily resolve whether or not an offense

exists to justify the issuance or quashal of the search warrant.

In the instant case, the petitioner is praying for the reinstatement of the search warrants issued, but

subsequently quashed, for the offense of Violation of Class Designation of Copyrightable Works

under Section 177.1 in relation to Section 177.3 of Republic Act 8293, when the objects subject of

the same, are patently not copyrightable.

It is worthy to state that the works protected under the Law on Copyright are: literary or artistic works

(Sec. 172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and Vehicle Bearing

Cushion fall on neither classification. Accordingly, if, in the first place, the item subject of the petition

is not entitled to be protected by the law on copyright, how can there be any violation?[14]

The petitioners motion for reconsideration of the said decision suffered the same fate. The

petitioner forthwith filed the present petition for review on certiorari, contending that the revocation of

his copyright certificates should be raised in a direct action and not in a search warrant proceeding.

The petitioner posits that even assuming ex argumenti that the trial court may resolve the

validity of his copyright in a proceeding to quash a search warrant for allegedly infringing items, the

RTC committed a grave abuse of its discretion when it declared that his works are not copyrightable

in the first place. He claims that R.A. No. 8293, otherwise known as the Intellectual Property Code of

the Philippines, which took effect on January 1, 1998, provides in no uncertain terms that copyright

protection automatically attaches to a work by the sole fact of its creation, irrespective of its mode or

form of expression, as well as of its content, quality or purpose.[15]

The law gives a non-inclusive

definition of work as referring to original intellectual creations in the literary and artistic domain

protected from the moment of their creation; and includes original ornamental designs or models for

articles of manufacture, whether or not registrable as an industrial design and other works of applied

art under Section 172.1(h) of R.A. No. 8293.

As such, the petitioner insists, notwithstanding the classification of the works as either literary

and/or artistic, the said law, likewise, encompasses works which may have a bearing on the utility

aspect to which the petitioners utility designs were classified. Moreover, according to the petitioner,

what the Copyright Law protects is the authors intellectual creation, regardless of whether it is one

with utilitarian functions or incorporated in a useful article produced on an industrial scale.

The petitioner also maintains that the law does not provide that the intended use or use in

industry of an article eligible for patent bars or invalidates its registration under the Law on

Copyright. The test of protection for the aesthetic is not beauty and utility, but art for the copyright

and invention of original and ornamental design for design patents.[16]

In like manner, the fact that his

utility designs or models for articles of manufacture have been expressed in the field of automotive

parts, or based on something already in the public domain does not automatically remove them from

the protection of the Law on Copyright.[17]

The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives the same

presumption to an affidavit executed by an author who claims copyright ownership of his work.

The petitioner adds that a finding of probable cause to justify the issuance of a search warrant

means merely a reasonable suspicion of the commission of the offense. It is not equivalent to

absolute certainty or a finding of actual and positive cause.[18]

He assists that the determination of

probable cause does not concern the issue of whether or not the alleged work is copyrightable. He

maintains that to justify a finding of probable cause in the issuance of a search warrant, it is enough

that there exists a reasonable suspicion of the commission of the offense.

The petitioner contends that he has in his favor the benefit of the presumption that his copyright

is valid; hence, the burden of overturning this presumption is on the alleged infringers, the

respondents herein. But this burden cannot be carried in a hearing on a proceeding to quash the

search warrants, as the issue therein is whether there was probable cause for the issuance of the

search warrant. The petitioner concludes that the issue of probable cause should be resolved

without invalidating his copyright.

In their comment on the petition, the respondents aver that the work of the petitioner is

essentially a technical solution to the problem of wear and tear in automobiles, the substitution of

materials, i.e., from rubber to plastic matter of polyvinyl chloride, an oil resistant soft texture plastic

material strong enough to endure pressure brought about by the vibration of the counter bearing and

thus brings bushings. Such work, the respondents assert, is the subject of copyright under Section

172.1 of R.A. No. 8293. The respondents posit that a technical solution in any field of human activity

which is novel may be the subject of a patent, and not of a copyright. They insist that the certificates

issued by the National Library are only certifications that, at a point in time, a certain work was

deposited in the said office. Furthermore, the registration of copyrights does not provide for

automatic protection. Citing Section 218.2(b) of R.A. No. 8293, the respondents aver that no

copyright is said to exist if a party categorically questions its existence and legality. Moreover, under

Section 2, Rule 7 of the Implementing Rules of R.A. No. 8293, the registration and deposit of work is

not conclusive as to copyright outlay or the time of copyright or the right of the copyright owner. The

respondents maintain that a copyright exists only when the work is covered by the protection of R.A.

No. 8293.

The petition has no merit.

The RTC had jurisdiction to delve into and resolve the issue whether the petitioners utility

models are copyrightable and, if so, whether he is the owner of a copyright over the said models. It

bears stressing that upon the filing of the application for search warrant, the RTC was duty-bound to

determine whether probable cause existed, in accordance with Section 4, Rule 126 of the Rules of

Criminal Procedure:

SEC. 4. Requisite for issuing search warrant. A search warrant shall not issue but 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.

In Solid Triangle Sales Corporation v. The Sheriff of RTC QC, Br. 93,[19]

the Court held that in

the determination of probable cause, the court must necessarily resolve whether or not an offense

exists to justify the issuance of a search warrant or the quashal of one already issued by the court.

Indeed, probable cause is deemed to exist only where facts and circumstances exist which could

lead a reasonably cautious and prudent man to believe that an offense has been committed or is

being committed. Besides, in Section 3, Rule 126 of the Rules of Criminal Procedure, a search

warrant may be issued for the search and seizure of personal property (a) subject of the offense; (b)

stolen or embezzled and other proceeds or fruits of the offense; or (c) used or intended to be used

as the means of committing an offense.

The RTC is mandated under the Constitution and Rules of Criminal Procedure to determine

probable cause. The court cannot abdicate its constitutional obligation by refusing to determine

whether an offense has been committed.[20]

The absence of probable cause will cause the outright

nullification of the search warrant.[21]

For the RTC to determine whether the crime for infringement under R.A. No. 8293 as alleged in

an application is committed, the petitioner-applicant was burdened to prove that (a) respondents

Jessie Ching and Joseph Yu were the owners of copyrighted material; and (b) the copyrighted

material was being copied and distributed by the respondents. Thus, the ownership of a valid

copyright is essential.[22]

Ownership of copyrighted material is shown by proof of originality and copyrightability. By

originality is meant that the material was not copied, and evidences at least minimal creativity; that it

was independently created by the author and that it possesses at least same minimal degree of

creativity.[23]

Copying is shown by proof of access to copyrighted material and substantial similarity

between the two works.[24]

The applicant must thus demonstrate the existence and the validity of his

copyright because in the absence of copyright protection, even original creation may be freely

copied.[25]

By requesting the NBI to investigate and, if feasible, file an application for a search warrant for

infringement under R.A. No. 8293 against the respondents, the petitioner thereby authorized the

RTC (in resolving the application), to delve into and determine the validity of the copyright which he

claimed he had over the utility models. The petitioner cannot seek relief from the RTC based on his

claim that he was the copyright owner over the utility models and, at the same time, repudiate the

courts jurisdiction to ascertain the validity of his claim without running afoul to the doctrine of

estoppel.

To discharge his burden, the applicant may present the certificate of registration covering the

work or, in its absence, other evidence.[26]

A copyright certificate providesprima facie evidence of

originality which is one element of copyright validity. It constitutes prima facie evidence of both

validity and ownership[27]

and the validity of the facts stated in the certificate.[28]

The 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.[29]

Indeed, Section 218.2 of R.A. No. 8293 provides:

218.2. In an action under this Chapter:

(a) Copyright shall be presumed to subsist in the work or other subject matter to which the action

relates if the defendant does not put in issue the question whether copyright subsists in the work or

other subject matter; and

(b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be the

owner of the copyright if he claims to be the owner of the copyright and the defendant does not put

in issue the question of his ownership.

A certificate of registration creates no rebuttable presumption of copyright validity where other

evidence in the record casts doubt on the question. In such a case, validity will not be presumed.[30]

To discharge his burden of probable cause for the issuance of a search warrant for violation of

R.A. No. 8293, the petitioner-applicant submitted to the RTC Certificate of Copyright Registration

Nos. 2001-197 and 2001-204 dated September 3, 2001 and September 4, 2001, respectively,

issued by the National Library covering work identified as Leaf Spring Eye Bushing for Automobile

and Vehicle Bearing Cushion both classified under Section 172.1(h) of R.A. No. 8293, to wit:

SEC. 172. Literary and Artistic Works. 172.1. Literary and artistic works, hereinafter referred to as

works, are original intellectual creations in the literary and artistic domain protected from the moment

of their creation and shall include in particular:

...

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as

an industrial design, and other works of applied art.

Related to the provision is Section 171.10, which provides that a work of applied art is an artistic

creation with utilitarian functions or incorporated in a useful article, whether made by hand or

produced on an industrial scale.

But, as gleaned from the specifications appended to the application for a copyright certificate

filed by the petitioner, the said Leaf Spring Eye Bushing for Automobile is merely a utility model

described as comprising a generally cylindrical body having a co-axial bore that is centrally located

and provided with a perpendicular flange on one of its ends and a cylindrical metal jacket

surrounding the peripheral walls of said body, with the bushing made of plastic that is either polyvinyl

chloride or polypropylene.[31]

Likewise, the Vehicle Bearing Cushion is illustrated as a bearing

cushion comprising a generally semi-circular body having a central hole to secure a conventional

bearing and a plurality of ridges provided therefore, with said cushion bearing being made of the

same plastic materials.[32]

Plainly, these are not literary or artistic works. They are not intellectual

creations in the literary and artistic domain, or works of applied art. They are certainly not

ornamental designs or one having decorative quality or value.

It bears stressing that the focus of copyright is the usefulness of the artistic design, and not its

marketability. The central inquiry is whether the article is a work of art.[33]

Works for applied art

include all original pictorials, graphics, and sculptural works that are intended to be or have been

embodied in useful article regardless of factors such as mass production, commercial exploitation,

and the potential availability of design patent protection.[34]

As gleaned from the description of the models and their objectives, these articles are useful

articles which are defined as one having an intrinsic utilitarian function that is not merely to portray

the appearance of the article or to convey information. Indeed, while works of applied art, original

intellectual, literary and artistic works are copyrightable, useful articles and works of industrial design

are not.[35]

A useful article may be copyrightable 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.

We agree with the contention of the petitioner (citing Section 171.10 of R.A. No. 8293), that the

authors intellectual creation, regardless of whether it is a creation with utilitarian functions or

incorporated in a useful article produced on an industrial scale, is protected by copyright law.

However, the law refers to a work of applied art which is an artistic creation. It bears stressing that

there is no copyright protection for works of applied art or industrial design which have aesthetic or

artistic features that cannot be identified separately from the utilitarian aspects of the

article.[36]

Functional components of useful articles, no matter how artistically designed, have

generally been denied copyright protection unless they are separable from the useful article.[37]

In this case, the petitioners models are not works of applied art, nor artistic works. They are

utility models, useful articles, albeit with no artistic design or value. Thus, the petitioner described the

utility model as follows:

LEAF SPRING EYE BUSHING FOR AUTOMOBILE

Known bushings inserted to leaf-spring eye to hold leaf-springs of automobile are made of hard

rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent

pressure would eventually wore (sic) out that would cause the wobbling of the leaf spring.

The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for

automobile that is made up of plastic.

Another object of this utility model is to provide a leaf-spring eye bushing for automobiles made of

polyvinyl chloride, an oil resistant soft texture plastic or polypropylene, a hard plastic, yet both

causes cushion to the leaf spring, yet strong enough to endure pressure brought about by the up

and down movement of said leaf spring.

Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a

much longer life span than the rubber bushings.

Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a

very simple construction and can be made using simple and ordinary molding equipment.

A further object of this utility model is to provide a leaf-spring eye bushing for automobile that is

supplied with a metal jacket to reinforce the plastic eye bushing when in engaged with the steel

material of the leaf spring.

These and other objects and advantages will come to view and be understood upon a reading of the

detailed description when taken in conjunction with the accompanying drawings.

Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present utility

model;

Figure 2 is a sectional view taken along line 2-2 of Fig. 1;

Figure 3 is a longitudinal sectional view of another embodiment of this utility model;

Figure 4 is a perspective view of a third embodiment; and

Figure 5 is a sectional view thereof.

Referring now to the several views of the drawings wherein like reference numerals designated

same parts throughout, there is shown a utility model for a leaf-spring eye bushing for automobile

generally designated as reference numeral 10.

Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial bore 12

centrally provided thereof.

As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular flange

13 on one of its ends and a cylindrical metal jacket 14 surrounding the peripheral walls 15 of said

body 11. When said leaf-spring bushing 10 is installed, the metal jacket 14 acts with the leaf-spring

eye (not shown), which is also made of steel or cast steel. In effect, the bushing 10 will not be

directly in contact with steel, but rather the metal jacket, making the life of the bushing 10 longer than

those without the metal jacket.

In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil resistant

soft texture plastic or a hard polypropylene plastic, both are capable to endure the pressure applied

thereto, and, in effect, would lengthen the life and replacement therefor.

Figure 3, on the other hand, shows the walls 16 of the co-axial bore 12 of said bushing 10 is

insertably provided with a steel tube 17 to reinforce the inner portion thereof. This steel tube 17

accommodates or engages with the leaf-spring bolt (not shown) connecting the leaf spring and the

automobiles chassis.

Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and

cylindrical as to its construction. Said another embodiment is also made of polypropylene or

polyvinyl chloride plastic material. The steel tube 17 and metal jacket 14 may also be applied to this

embodiment as an option thereof.[38]

VEHICLE BEARING CUSHION

Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of hard

rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent

pressure would eventually be worn out that would cause the wobbling of the center bearing.

The primary object of this utility model therefore is to provide a vehicle-bearing cushion that is made

up of plastic.

Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl chloride,

an oil resistant soft texture plastic material which causes cushion to the propellers center bearing,

yet strong enough to endure pressure brought about by the vibration of the center bearing.

Yet, an object of this utility model is to provide a vehicle-bearing cushion that has a much longer life

span than rubber bushings.

Still an object of this utility model is to provide a vehicle bearing cushion that has a very simple

construction and can be made using simple and ordinary molding equipment.

These and other objects and advantages will come to view and be understood upon a reading of the

detailed description when taken in conjunction with the accompanying drawings.

Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and

Figure 2 is a sectional view thereof.

Referring now to the several views of the drawing, wherein like reference numeral designate same

parts throughout, there is shown a utility model for a vehicle-bearing cushion generally designated

as reference numeral 10.

Said bearing cushion 10 comprises of a generally semi-circular body 11, having central hole 12 to

house a conventional bearing (not shown). As shown in Figure 1, said body 11 is provided with a

plurality of ridges 13 which serves reinforcing means thereof.

The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical resistant

plastic material which is strong, durable and capable of enduring severe pressure from the center

bearing brought about by the rotating movement of the propeller shaft of the vehicle.[39]

A utility model is a technical solution to a problem in any field of human activity which is new

and industrially applicable. It may be, or may relate to, a product, or process, or an improvement of

any of the aforesaid.[40]

Essentially, a utility model refers to an invention in the mechanical field. This

is the reason why its object is sometimes described as a device or useful object.[41]

A utility model

varies from an invention, for which a patent for invention is, likewise, available, on at least three

aspects: first, the requisite of inventive step[42]

in a patent for invention is not required; second, the

maximum term of protection is only seven years[43]

compared to a patent which is twenty

years,[44]

both reckoned from the date of the application; and third, the provisions on utility model

dispense with its substantive examination[45]

and prefer for a less complicated system.

Being plain automotive spare parts that must conform to the original structural design of the

components they seek to replace, the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not

ornamental. They lack the decorative quality or value that must characterize authentic works of

applied art. They are not even artistic creations with incidental utilitarian functions or works

incorporated in a useful article. In actuality, the personal properties described in the search warrants

are mechanical works, the principal function of which is utility sans any aesthetic embellishment.

Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing Cushion as included

in the catch-all phrase other literary, scholarly, scientific and artistic works in Section 172.1(a) of R.A.

No. 8293. Applying the principle of ejusdem generis which states that where a statute describes

things of a particular class or kind accompanied by words of a generic character, the generic word

will usually be limited to things of a similar nature with those particularly enumerated, unless there be

something in the context of the state which would repel such inference,[46]

the Leaf Spring Eye

Bushing and Vehicle Bearing Cushion are not copyrightable, being not of the same kind and nature

as the works enumerated in Section 172 of R.A. No. 8293.

No copyright granted by law can be said to arise in favor of the petitioner despite the issuance

of the certificates of copyright registration and the deposit of the Leaf Spring Eye Bushing and

Vehicle Bearing Cushion. Indeed, in Joaquin, Jr. v. Drilon[47]

and Pearl & Dean (Phil.), Incorporated

v. Shoemart, Incorporated,[48]

the Court ruled that:

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 it. 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. Accordingly, it

can cover only the works falling within the statutory enumeration or description.

That the works of the petitioner may be the proper subject of a patent does not entitle him to the

issuance of a search warrant for violation of copyright laws. In Kho v. Court of Appeals[49]

and Pearl

& Dean (Phil.), Incorporated v. Shoemart, Incorporated,[50]

the Court ruled that these copyright and

patent rights are completely distinct and separate from one another, and the protection afforded by

one cannot be used interchangeably to cover items or works that exclusively pertain to the others.

The Court expounded further, thus:

Trademark, copyright and patents are different intellectual property rights that cannot be

interchanged with one another. A trademark is 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. In relation thereto, a trade name means the name or designation identifying or

distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic

works which are original intellectual creations in the literary and artistic domain protected from the

moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of

a problem in any field of human activity which is new, involves an inventive step and is industrially

applicable.

The petitioner cannot find solace in the ruling of the United States Supreme Court in Mazer v.

Stein[51]

to buttress his petition. In that case, the artifacts involved in that case were statuettes of

dancing male and female figures made of semi-vitreous china. The controversy therein centered on

the fact that although copyrighted as works of art, the statuettes were intended for use and used as

bases for table lamps, with electric wiring, sockets and lampshades attached. The issue raised was

whether the statuettes were copyright protected in the United States, considering that the copyright

applicant intended primarily to use them as lamp bases to be made and sold in quantity, and carried

such intentions into effect. At that time, the Copyright Office interpreted the 1909 Copyright Act to

cover works of artistic craftsmanship insofar as their form, but not the utilitarian aspects, were

concerned. After reviewing the history and intent of the US Congress on its copyright legislation and

the interpretation of the copyright office, the US Supreme Court declared that the statuettes were

held copyrightable works of art or models or designs for works of art. The High Court ruled that:

Works of art (Class G) (a) In General. This class includes works of artistic craftsmanship, in so far as

their form but not their mechanical or utilitarian aspects are concerned, such as artistic jewelry,

enamels, glassware, and tapestries, as well as all works belonging to the fine arts, such as

paintings, drawings and sculpture.

So we have a contemporaneous and long-continued construction of the statutes by the agency

charged to administer them that would allow the registration of such a statuette as is in question

here.[52]

The High Court went on to state that [t]he dichotomy of protection for the aesthetic is not beauty

and utility but art for the copyright and the invention of original and ornamental design for design

patents. Significantly, the copyright office promulgated a rule to implement Mazer to wit:

[I]f the sole intrinsic function of an article is its utility, the fact that the work is unique and attractively

shaped will not qualify it as a work of art.

In this case, the bushing and cushion are not works of art. They are, as the petitioner himself

admitted, utility models which may be the subject of a patent.

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit.

The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 70411 are

AFFIRMED. Search Warrant Nos. 01-2401 and 01-2402 issued on October 15, 2001 are

ANNULLED AND SET ASIDE. Costs against the petitioner.

SO ORDERED.

G.R. No. 184850 October 20, 2010

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners, versus SHEN DAR

ELECTRICITY AND MACHINERY CO., LTD., Respondent.

The Case

This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21,

2008 Decision[1]

and the October 6, 2008 Resolution[2]

rendered by the Court of Appeals (CA) in CA-

G.R. SP No. 99356 entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales, Inc.

and Engracio Yap.

The assailed decision reversed the Decision dated May 25, 2007[3]

issued by the Director General of

the Intellectual Property Office (IPO) in Inter Partes Case No. 14-2004-00084. The IPO Director

General upheld Certificate of Registration (COR) No. 4-1999-005393 issued by the IPO for the

trademark VESPA in favor of petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered the

cancellation of COR No. 4-1997-121492, also for the trademark VESPA, issued in favor of

respondent Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar). The Decision of the IPO

Director General, in effect, affirmed the Decision dated May 29, 2006[4]

issued by the Director of the

Bureau of Legal Affairs (BLA) of the IPO.

The Facts

EYIS is a domestic corporation engaged in the production, distribution and sale of air

compressors and other industrial tools and equipment.[5]

Petitioner Engracio Yap is the Chairman of

the Board of Directors of EYIS.[6]

Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of

air compressors.[7]

Both companies claimed to have the right to register the trademark VESPA for air

compressors.

From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales

contracts. In the Sales Contract dated April 20, 2002,[8]

for example, Shen Dar would supply EYIS in

one (1) year with 24 to 30 units of 40-ft. containers worth of air compressors identified in the

Packing/Weight Lists simply as SD-23, SD-29, SD-31, SD-32, SD-39, SD-67 and SD-68. In the

corresponding Bill of Ladings, the items were described merely as air compressors.[9]

There is no

documentary evidence to show that such air compressors were marked VESPA.

On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492 with the

IPO for the mark VESPA, Chinese Characters and Device for use on air compressors and welding

machines.[10]

On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393, also for the

mark VESPA, for use on air compressors.[11]

On January 18, 2004, the IPO issued COR No. 4-1999-

005393 in favor of EYIS.[12]

Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-

1997-121492.[13]

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS COR

with the BLA.[14]

In the Petition, Shen Dar primarily argued that the issuance of the COR in favor of

EYIS violated Section 123.1 paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise

known as the Intellectual Property Code (IP Code), having first filed an application for the

mark. Shen Dar further alleged that EYIS was a mere distributor of air compressors bearing the

mark VESPA which it imported from Shen Dar. Shen Dar also argued that it had prior and exclusive

right to the use and registration of the mark VESPA in the Philippinesunder the provisions of the

Paris Convention.[15]

In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark

VESPA being the sole assembler and fabricator of air compressors since the early 1990s. They

further alleged that the air compressors that Shen Dar allegedly supplied them bore the mark SD for

Shen Dar and not VESPA. Moreover, EYIS argued that Shen Dar, not being the owner of the mark,

could not seek protection from the provisions of the Paris Convention or the IP Code.[16]

Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor of EYIS

and against Shen Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition for Cancellation is, as it is

hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for

the mark VESPA granted in the name of E.Y. Industrial Sales, Inc. on 9 January

2007 is hereby upheld.

Let the filewrapper of VESPA subject matter of this case be forwarded to the

Administrative, Financial and Human Resource Development Services Bureau for

issuance and appropriate action in accordance with this DECISION and a copy

thereof furnished to the Bureau of Trademarks for information and update of its

records.

SO ORDERED.[17]

Shen Dar appealed the decision of the BLA Director to the Director General of the IPO. In

the appeal, Shen Dar raised the following issues:

1. Whether the BLA Director erred in ruling that Shen Dar failed to present evidence;

2. Whether the registration of EYIS application was proper considering that Shen Dar

was the first to file an application for the mark; and

3. Whether the BLA Director correctly ruled that EYIS is the true owner of the mark.[18]

Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the COR

issued in favor of EYIS while cancelling the COR of Shen Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the appeal is DENIED. Certificate of

Registration No. 4-1999-005393 for the mark VESPA for air compressor issued in

favor of Appellee is hereby upheld. Consequently, Certificate of Registration No. 4-

1997-121492 for the mark VESPA, Chinese Characters & Device for goods air

compressor and spot welding machine issued in favor of Appellant is hereby ordered

cancelled.

Let a copy of this Decision as well as the records of this case be furnished

and returned to the Director of Bureau of Legal Affairs for appropriate action. Further,

let also the Directors of the Bureau of Trademarks, the Administrative, Financial and

Human Resources Development Services Bureau, and the Documentation,

Information and Technology Transfer Bureau be furnished a copy of this Decision for

information, guidance, and records purposes.[19]

Shen Dar appealed the above decision of the IPO Director General to the CA where Shen

Dar raised the following issues:

1. Whether Shen Dar is guilty of forum shopping;

2. Whether the first-to-file rule applies to the instant case;

3. Whether Shen Dar presented evidence of actual use;

4. Whether EYIS is the true owner of the mark VESPA;

5. Whether the IPO Director General erred in cancelling Shen Dars COR No. 4-1997-

121492 without a petition for cancellation; and

6. Whether Shen Dar sustained damages.[20]

In the assailed decision, the CA reversed the IPO Director General and ruled in favor of

Shen Dar. The dispositive portion states:

WHEREFORE, premises considered, the petition is GRANTED.

Consequently, the assailed decision of the Director General of the Intellectual

Property Office dated May 25, 2007 is hereby REVERSED and SET ASIDE. In lieu

thereof, a new one is entered: a) ordering the cancellation of Certificate of

Registration No. 4-1999-005393 issued on January 19, 2004 for the trademark

VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering the restoration of the validity

of Certificate of Registration No. 4-1997-121492 for the trademark VESPA in favor of

Shen Dar Electricity and Machinery Co., Ltd. No pronouncement as to costs.

SO ORDERED.[21]

In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not formally offer

its evidence before the BLA, such evidence was properly attached to the Petition for Cancellation.

As such, Shen Dars evidence may be properly considered. The CA also enunciated that the IPO

failed to properly apply the provisions of Sec. 123.1(d) of RA 8293, which prohibits the registration of

a trademark in favor of a party when there is an earlier filed application for the same mark. The CA

further ruled that Shen Dar should be considered to have prior use of the mark based on the

statements made by the parties in their respective Declarations of Actual Use. The CA added that

EYIS is a mere importer of the air compressors with the mark VESPA as may be gleaned from its

receipts which indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be

considered an owner of the mark.[22]

EYIS filed a motion for reconsideration of the assailed decision which the CA denied in the

assailed resolution.

Hence, the instant appeal.

Issues

EYIS and Yap raise the following issues in their petition:

A. Whether the Director General of the IPO correctly upheld the rights of

Petitioners over the trademark VESPA.

B. Whether the Director General of the IPO can, under the circumstances,

order the cancellation of Respondents certificate of registration for VESPA,

which has been fraudulently obtained and erroneously issued.

C. Whether the Honorable Court of Appeals was justified in reversing the

findings of fact of the IPO, which affirm the rights of Petitioner EYIS over the

trademark VESPA and when such findings are supported by the evidence on

record.

D. Whether this Honorable Court may review questions of fact considering

that the findings of the Court of Appeals and the IPO are in conflict and the

conclusions of the appellee court are contradicted by the evidence on

record.[23]

The Ruling of the Court

The appeal is meritorious.

First Issue:

Whether this Court may review the questions of fact presented

Petitioners raise the factual issue of who the true owner of the mark is. As a general rule, this

Court is not a trier of facts. However, such rule is subject to exceptions.

In New City Builders, Inc. v. National Labor Relations Commission,[24]

the Court ruled that:

We are very much aware that the rule to the effect that this Court is not a trier

of facts admits of exceptions. As we have stated in Insular Life Assurance Company,

Ltd. vs. CA:

[i]t is a settled rule that in the exercise of the Supreme Courts power of

review, the Court is not a trier of facts and does not normally undertake the

re-examination of the evidence presented by the contending parties during

the trial of the case considering that the findings of facts of the CA are

conclusive and binding on the Court. However, the Court had recognized

several exceptions to this rule, to wit: (1) when the findings are grounded

entirely on speculation, surmises or conjectures; (2) when the inference

made is manifestly mistaken, absurd or impossible; (3) when there is grave

abuse of discretion; (4) when the judgment is based on a misapprehension of

facts; (5) when the findings of facts are conflicting; (6) when in making its

findings the Court of Appeals went beyond the issues of the case, or its

findings are contrary to the admissions of both the appellant and the

appellee; (7) when the findings are contrary to the trial court; (8) when

the findings are conclusions without citation of specific evidence on which

they are based; (9) when the facts set forth in the petition as well as in the

petitioners main and reply briefs are not disputed by the respondent; (10)

when the findings of fact are premised on the supposed absence of evidence

and contradicted by the evidence on record; and (11) when the Court of

Appeals manifestly overlooked certain relevant facts not disputed by the

parties, which, if properly considered, would justify a different conclusion.

(Emphasis supplied.)

In the instant case, the records will show that the IPO and the CA made differing conclusions

on the issue of ownership based on the evidence presented by the parties. Hence, this issue may be

the subject of this Courts review.

Second Issue:

Whether evidence presented before the BLA must be formally offered

Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce evidence in

support of its allegations as required under Office Order No. 79, Series of 2005, Amendments to the

Regulations on Inter Partes Proceedings, having failed to formally offer its evidence during the

proceedings before it. The BLA ruled:

At the outset, we note petitioners failure to adduce any evidence in support of

its allegations in the Petition for Cancellation. Petitioner did not file nor submit its

marked evidence as required in this Bureaus Order No. 2006-157 dated 25 January

2006 in compliance with Office Order No. 79, Series of 2005, Amendments to the

Regulations on Inter Partes Proceedings.[25]

x x x

In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No. 03, Series

of 2005, which states:

Section 2.4. In all cases, failure to file the documentary evidences in

accordance with Sections 7 and 8 of the rules on summary proceedings shall be

construed as a waiver on the part of the parties. In such a case, the original petition,

opposition, answer and the supporting documents therein shall constitute the entire

evidence for the parties subject to applicable rules.

The CA concluded that Shen Dar needed not formally offer its evidence but merely needed

to attach its evidence to its position paper with the proper markings,[26]

which it did in this case.

The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall establish

the procedure for the application for the registration of a trademark, as well as the opposition to it:

Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall

have the following functions:

x x x x

10.3. The Director General may by Regulations establish the procedure to

govern the implementation of this Section.

Thus, the Director General issued Office Order No. 79, Series of 2005 amending the

regulations on Inter Partes Proceedings, Sec. 12.1 of which provides:

Section 12. Evidence for the Parties

12.1. The verified petition or opposition, reply if any, duly marked affidavits of

the witnesses, and the documents submitted, shall constitute the entire evidence for

the petitioner or opposer. The verified answer, rejoinder if any, and the duly marked

affidavits and documents submitted shall constitute the evidence for the respondent.

Affidavits, documents and other evidence not submitted and duly marked in

accordance with the preceding sections shall not be admitted as evidence.

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and 9 which,

in turn, provide:

Section 7. Filing of Petition or Opposition

7.1. The petition or opposition, together with the affidavits of witnesses and

originals of the documents and other requirements, shall be filed with the Bureau,

provided, that in case of public documents, certified copies shall be allowed in lieu of

the originals. The Bureau shall check if the petition or opposition is in due form as

provided in the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5,

Section 3; Rule 6, Section 9; Rule 7, Sections 3 and 5; Rule 8, Sections 3 and 4. For

petition for cancellation of layout design (topography) of integrated circuits, Rule 3,

Section 3 applies as to the form and requirements. The affidavits, documents and

other evidence shall be marked consecutively as Exhibits beginning with the letter A.

Section 8. Answer

8.1. Within three (3) working days from receipt of the petition or opposition,

the Bureau shall issue an order for the respondent to file an answer together with the

affidavits of witnesses and originals of documents, and at the same time shall notify

all parties required to be notified in the IP Code and these Regulations, provided, that

in case of public documents, certified true copies may be submitted in lieu of the

originals. The affidavits and documents shall be marked consecutively as Exhibits

beginning with the number 1.

Section 9. Petition or Opposition and Answer must be verified Subject to

Rules 7 and 8 of these regulations, the petition or opposition and the answer must be

verified. Otherwise, the same shall not be considered as having been filed.

In other words, as long as the petition is verified and the pieces of evidence consisting of the

affidavits of the witnesses and the original of other documentary evidence are attached to the

petition and properly marked in accordance with Secs. 7.1 and 8.1 abovementioned, these shall be

considered as the evidence of the petitioner. There is no requirement under the abovementioned

rules that the evidence of the parties must be formally offered to the BLA.

In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations

on Inter Partes Proceedings, the BLA is not bound by technical rules of procedure. The evidence

attached to the petition may, therefore, be properly considered in the resolution of the case.

Third Issue:

Whether the IPO Director General can

validly cancel Shen Dars Certificate of Registration

In his Decision, the IPO Director General stated that, despite the fact that the instant case

was for the cancellation of the COR issued in favor of EYIS, the interests of justice dictate, and in

view of its findings, that the COR of Shen Dar must be cancelled. The Director General explained:

Accordingly, while the instant case involves a petition to cancel the

registration of the Appellees trademark VESPA, the interest of justice requires that

Certificate of Registration No. 4-1997-121492 be cancelled. While the normal course

of proceedings should have been the filing of a petition for cancellation of Certificate

of Registration No. 4-1997-121492, that would involve critical facts and issues that

have already been resolved in this case. To allow the Applicant to still maintain in the

Trademark Registry Certificate of Registration No. 4-1997-121492 would nullify the

exclusive rights of Appellee as the true and registered owner of the mark VESPA and

defeat the purpose of the trademark registration system.[27]

Shen Dar challenges the propriety of such cancellation on the ground that there was no

petition for cancellation as required under Sec. 151 of RA 8293.

Office Order No. 79, Series of 2005, provides under its Sec. 5 that:

Section 5. Rules of Procedure to be followed in the conduct of hearing of

Inter Partes cases.The rules of procedure herein contained primarily apply in the

conduct of hearing of Inter Partes cases. The Rules of Court may be applied

suppletorily. The Bureau shall not be bound by strict technical rules of

procedure and evidence but may adopt, in the absence of any applicable rule

herein, such mode of proceedings which is consistent with the requirements of

fair play and conducive to the just, speedy and inexpensive disposition of

cases, and which will give the Bureau the greatest possibility to focus on the

contentious issues before it. (Emphasis supplied.)

The above rule reflects the oft-repeated legal principle that quasi-judicial and administrative

bodies are not bound by technical rules of procedure. Such principle, however, is tempered by

fundamental evidentiary rules, including due process. Thus, we ruled in Aya-ay, Sr. v. Arpaphil

Shipping Corp.:[28]

That administrative quasi-judicial bodies like the NLRC are not bound by

technical rules of procedure in the adjudication of cases does not mean that the

basic rules on proving allegations should be entirely dispensed with. A party alleging

a critical fact must still support his allegation with substantial evidence. Any decision

based on unsubstantiated allegation cannot stand as it will offend due process.

x x x The liberality of procedure in administrative actions is subject to

limitations imposed by basic requirements of due process. As this Court said in Ang

Tibay v. CIR, the provision for flexibility in administrative procedure does not go so

far as to justify orders without a basis in evidence having rational probative

value. More specifically, as held in Uichico v. NLRC:

It is true that administrative and quasi-judicial bodies like the NLRC are

not bound by the technical rules of procedure in the adjudication of

cases. However, this procedural rule should not be construed as a license to

disregard certain fundamental evidentiary rules.

This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis:[29]

While it is true that administrative or quasi-judicial bodies like the NLRC are

not bound by the technical rules of procedure in the adjudication of cases, this

procedural rule should not be construed as a license to disregard certain

fundamental evidentiary rules. The evidence presented must at least have a

modicum of admissibility for it to have probative value. Not only must there be some

evidence to support a finding or conclusion, but the evidence must be

substantial. Substantial evidence is more than a mere scintilla. It means such

relevant evidence as a reasonable mind might accept as adequate to support a

conclusion. Thus, even though technical rules of evidence are not strictly complied

with before the LA and the NLRC, their decision must be based on evidence that

must, at the very least, be substantial.

The fact that no petition for cancellation was filed against the COR issued to Shen Dar does

not preclude the cancellation of Shen Dars COR. It must be emphasized that, during the hearing for

the cancellation of EYIS COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the

true owner of the mark VESPA and, thus, entitled to have it registered. Shen Dar had more than

sufficient opportunity to present its evidence and argue its case, and it did. It was given its day in

court and its right to due process was respected. The IPO Director Generals disregard of the

procedure for the cancellation of a registered mark was a valid exercise of his discretion.

Fourth Issue:

Whether the factual findings of the IPO are binding on the CA

Next, petitioners challenge the CAs reversal of the factual findings of the BLA that Shen Dar

and not EYIS is the prior user and, therefore, true owner of the mark. In arguing its position,

petitioners cite numerous rulings of this Court where it was enunciated that the factual findings of

administrative bodies are given great weight if not conclusive upon the courts when supported by

substantial evidence.

We agree with petitioners that the general rule in this jurisdiction is that the factual findings of

administrative bodies deserve utmost respect when supported by evidence. However, such general

rule is subject to exceptions.

In Fuentes v. Court of Appeals,[30]

the Court established the rule of conclusiveness of factual

findings of the CA as follows:

Jurisprudence teaches us that (a)s a rule, the jurisdiction of this Court in

cases brought to it from the Court of Appeals x x x is limited to the review and

revision of errors of law allegedly committed by the appellate court, as its findings of

fact are deemed conclusive. As such this Court is not duty-bound to analyze and

weigh all over again the evidence already considered in the proceedings below. This

rule, however, is not without exceptions. The findings of fact of the Court of Appeals,

which are as a general rule deemed conclusive, may admit of review by this Court:

(1) when the factual findings of the Court of Appeals and the trial court are

contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or

conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact

is manifestly mistaken, absurd, or impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues

of the case, and such findings are contrary to the admissions of both appellant and

appellee;

(6) when the judgment of the Court of Appeals is premised on a

misapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts

which, if properly considered, will justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific

evidence on which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on the

absence of evidence but such findings are contradicted by the evidence on

record. (Emphasis supplied.)

Thereafter, in Villaflor v. Court of Appeals,[31]

this Court applied the above principle to factual

findings of quasi-judicial bodies, to wit:

Proceeding by analogy, the exceptions to the rule on conclusiveness of

factual findings of the Court of Appeals, enumerated in Fuentes vs. Court of

Appeals, can also be applied to those of quasi-judicial bodies x x x. (Emphasis

supplied.)

Here, the CA identified certain material facts that were allegedly overlooked by the BLA and

the IPO Director General which it opined, when correctly appreciated, would alter the result of the

case. An examination of the IPO Decisions, however, would show that no such evidence was

overlooked.

First, as to the date of first use of the mark by the parties, the CA stated:

To begin with, when respondents-appellees filed its application for

registration of the VESPA trademark on July 28, 1999, they stated under oath, as

found in their DECLARATION OF ACTUAL USE, that their first use of the mark was

on December 22, 1998. On the other hand, [Shen Dar] in its application dated June

09, 1997 stated, likewise under oath in their DECLARATION OF ACTUAL USE, that

its first use of the mark was in June 1996. This cannot be made any clearer. [Shen

Dar] was not only the first to file an application for registration but likewise first to use

said registrable mark.[32]

Evidently, the CA anchors its finding that Shen Dar was the first to use the mark on the

statements of the parties in their respective Declarations of Actual Use.Such conclusion is premature

at best. While a Declaration of Actual Use is a notarized document, hence, a public document, it is

not conclusive as to the fact of first use of a mark. The declaration must be accompanied by proof of

actual use as of the date claimed. In a declaration of actual use, the applicant must, therefore,

present evidence of such actual use.

The BLA ruled on the same issue, as follows:

More importantly, the private respondents prior adoption and continuous use

of the mark VESPA on air compressors is bolstered by numerous documentary

evidence consisting of sales invoices issued in the name of E.Y. Industrial and Bill of

Lading (Exhibits 4 to 375). Sales Invoice No. 12075 dated March 27, 1995 antedates

petitioners date of first use on January 1, 1997 indicated in its trademark application

filed on June 9, 1997 as well as the date of first use in June of 1996 as indicated in

the Declaration of Actual Use submitted on December 3, 2001 (Exhibit 385). The use

by respondent registrant in the concept of owner is shown by commercial

documents, sales invoices unambiguously describing the goods as VESPA air

compressors. Private respondents have sold the air compressors bearing the VESPA

to various locations in the Philippines, as far as Mindanaoand the Visayas since the

early 1990s. We carefully inspected the evidence consisting of three hundred

seventy-one (371) invoices and shipment documents which show that VESPA air

compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu

City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City, to name a

few. There is no doubt that it is through private respondents efforts that the mark

VESPA used on air compressors has gained business goodwill and reputation in the

Philippines for which it has validly acquired trademark rights. Respondent E.Y.

Industrials right has been preserved until the passage of RA 8293 which entitles it to

register the same.[33]

Comparatively, the BLAs findings were founded upon the evidence presented by the

parties. An example of such evidence is Invoice No. 12075 dated March 29, 1995[34]

where EYIS

sold four units of VESPA air compressors to Veteran Paint Trade Center. Shen Dar failed to rebut

such evidence. The truth, as supported by the evidence on record, is that EYIS was first to use the

mark.

Moreover, the discrepancy in the date provided in the Declaration of Actual Use filed by EYIS

and the proof submitted was appropriately considered by the BLA, ruling as follows:

On the contrary, respondent EY Industrial was able to prove the use of the

mark VESPA on the concept of an owner as early as 1991. Although Respondent

E.Y. indicated in its trademark application that its first use was in December 22,

1998, it was able to prove by clear and positive evidence of use prior to such date.

In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23

November 1966, the High Court clarified: Where an applicant for registration of a

trademark states under oath the date of his earliest use, and later on he wishes to

carry back his first date of use to an earlier date, he then takes on the greater burden

of presenting clear and convincing evidence of adoption and use as of that earlier

date. (B.R. Baker Co. vs. Lebrow Bros., 150 F. 2d 580.)[35]

The CA further found that EYIS is not a manufacturer of air compressors but merely imports

and sells them as a wholesaler and retailer. The CA reasoned:

Conversely, a careful perusal of appellees own submitted receipts

shows that it is not manufacturer but an importer, wholesaler and retailer. This

fact is corroborated by the testimony of a former employee of

appellees. Admittedly too, appellees are importing air compressors from [Shen Dar]

from 1997 to 2004. These matters, lend credence to [Shen Dars] claim that the

letters SD followed by a number inscribed in the air compressor is only to describe its

type, manufacturer business name and capacity. The VESPA mark is in the sticker

which is attached to the air compressors. The ruling of the Supreme Court, in the

case of UNNO Commercial Enterprises, Inc. vs. General Milling Corporation et al., is

quite enlightening, thus We quote:

The term owner does not include the importer of the goods bearing

the trademark, trade name, service mark, or other mark of ownership, unless

such importer is actually the owner thereof in the country from which the

goods are imported. Thus, this Court, has on several occasions ruled that

where the applicants alleged ownership is not shown in any notarial

document and the applicant appears to be merely an importer or distributor of

the merchandise covered by said trademark, its application cannot be

granted.[36]

This is a non sequitur. It does not follow. The fact that EYIS described itself in its sales

invoice as an importer, wholesaler and retailer does not preclude its being a manufacturer. Sec. 237

of the National Internal Revenue Code states:

Section 237. Issuance of Receipts or Sales or Commercial Invoices.All

persons subject to an internal revenue tax shall, for each sale and transfer of

merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more,

issue duly registered receipts or sale or commercial invoices, prepared at least in

duplicate, showing the date of transaction, quantity, unit cost and description

of merchandise or nature of service: Provided, however, That where the receipt is

issued to cover payment made as rentals, commissions, compensation or fees,

receipts or invoices shall be issued which shall show the name, business style, if

any, and address of the purchaser, customer or client.

The original of each receipt or invoice shall be issued to the purchaser,

customer or client at the time the transaction is effected, who, if engaged in business

or in the exercise of profession, shall keep and preserve the same in his place of

business for a period of three (3) years from the close of the taxable year in which

such invoice or receipt was issued, while the duplicate shall be kept and preserved

by the issuer, also in his place of business, for a like period.

The Commissioner may, in meritorious cases, exempt any person subject to

an internal revenue tax from compliance with the provisions of this

Section. (Emphasis supplied.)

Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the Bureau of

Internal Revenue defined a Sales Invoice and identified its required information as follows:

Sales Invoices (SI)/Cash Invoice (CI) is written account of goods sold or

services rendered and the prices charged therefor used in the ordinary course of

business evidencing sale and transfer or agreement to sell or transfer of goods and

services. It contains the same information found in the Official Receipt.

Official Receipt (OR) is a receipt issued for the payment of services rendered

or goods sold. It contains the following information:

a. Business name and address;

b. Taxpayer Identification Number;

c. Name of printer (BIR Permit No.) with inclusive serial number of

booklets and date of issuance of receipts.

There is no requirement that a sales invoice should accurately state the nature of all the

businesses of the seller. There is no legal ground to state that EYIS declaration in its sales invoices

that it is an importer, wholesaler and retailer is restrictive and would preclude its being a

manufacturer.

From the above findings, there was no justifiable reason for the CA to disregard the factual

findings of the IPO. The rulings of the IPO Director General and the BLA Director were supported by

clear and convincing evidence. The facts cited by the CA and Shen Dar do not justify a different

conclusion from that of the IPO.Hence, the findings of the BLA Director and the IPO Director General

must be deemed as conclusive on the CA.

Fifth Issue:

Whether EYIS is the true owner of the mark VESPA

In any event, given the length of time already invested by the parties in the instant case, this

Court must write finis to the instant controversy by determining, once and for all, the true owner of

the mark VESPA based on the evidence presented.

RA 8293 espouses the first-to-file rule as stated under Sec. 123.1(d) which states:

Section 123. Registrability. - 123.1. A mark cannot be registered if it:

x x x x

(d) Is identical with a registered mark belonging to a different proprietor or a

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

(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or

cause confusion. (Emphasis supplied.)

Under this provision, the registration of a mark is prevented with the filing of an earlier

application for registration. This must not, however, be interpreted to mean that ownership should be

based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of

actual use prior to the filing of an application for registration of a mark, proof of prior and continuous

use is necessary to establish ownership of a mark. Such ownership constitutes sufficient evidence to

oppose the registration of a mark.

Sec. 134 of the IP Code provides that any person who believes that he would be damaged

by the registration of a mark x x x may file an opposition to the application. The term any person

encompasses the true owner of the markthe prior and continuous user.

Notably, the Court has ruled that the prior and continuous use of a mark may even overcome

the presumptive ownership of the registrant and be held as the owner of the mark. As aptly stated by

the Court in Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies,

Inc.:[37]

Registration, without more, does not confer upon the registrant an absolute

right to the registered mark. The certificate of registration is merely a prima

facie proof that the registrant is the owner of the registered mark or trade

name. Evidence of prior and continuous use of the mark or trade name by

another can overcome the presumptive ownership of the registrant and may

very well entitle the former to be declared owner in an appropriate case.

x x x x

Ownership of a mark or trade name may be acquired not necessarily by

registration but by adoption and use in trade or commerce. As between actual use of

a mark without registration, and registration of the mark without actual use thereof,

the former prevails over the latter. For a rule widely accepted and firmly entrenched,

because it has come down through the years, is that actual use in commerce or

business is a pre-requisite to the acquisition of the right of ownership.

x x x x

By itself, registration is not a mode of acquiring ownership. When the

applicant is not the owner of the trademark being applied for, he has no right

to apply for registration of the same. Registration merely creates a prima facie

presumption of the validity of the registration, of the registrants ownership of the

trademark and of the exclusive right to the use thereof. Such presumption, just like

the presumptive regularity in the performance of official functions, is rebuttable and

must give way to evidence to the contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the parties, is

that EYIS is the prior user of the mark. The exhaustive discussion on the matter made by the BLA

sufficiently addresses the issue:

Based on the evidence, Respondent E.Y. Industrial is a legitimate

corporation engaged in buying, importing, selling, industrial machineries and tools,

manufacturing, among others since its incorporation in 1988. (Exhibit 1). Indeed

private respondents have submitted photographs (Exhibit 376, 377, 378, 379)

showing an assembly line of its manufacturing or assembly process.

More importantly, the private respondents prior adoption and continuous use

of the mark VESPA on air compressors is bolstered by numerous documentary

evidence consisting of sales invoices issued in the name of respondent EY Industrial

and Bills of Lading. (Exhibits 4 to 375). Sales Invoice No. 12075 dated March 27,

1995 antedates petitioners date of first use in January 1, 1997 indicated in its

trademark application filed in June 9, 1997 as well as the date of first use in June of

1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001

(Exhibit 385). The use by respondent-registrant in the concept of owner is shown by

commercial documents, sales invoices unambiguously describing the goods as

VESPA air compressors. Private respondents have sold the air compressors bearing

the VESPA to various locations in thePhilippines, as far as Mindanao and the

Visayas since the early 1990s. We carefully inspected the evidence consisting of

three hundred seventy one (371) invoices and shipment documents which show that

VESPA air compressors were sold not only in Manila, but to locations such as Iloilo

City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City

to name a few. There is no doubt that it is through private respondents efforts that

the mark VESPA used on air compressors has gained business goodwill and

reputation in the Philippines for which it has validly acquired trademark rights.

Respondent EY Industrials right has been preserved until the passage of RA 8293

which entitles it to register the same. x x x[38]

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its

decision. More importantly, Shen Dar failed to present sufficient evidence to prove its own prior use

of the mark VESPA. We cite with approval the ruling of the BLA:

[Shen Dar] avers that it is the true and rightful owner of the trademark

VESPA used on air compressors. The thrust of [Shen Dars] argument is that

respondent E.Y. Industrial Sales, Inc. is a mere distributor of the VESPA air

compressors. We disagree.

This conclusion is belied by the evidence. We have gone over each and

every document attached as Annexes A, A 1-48 which consist of Bill of Lading and

Packing Weight List. Not one of these documents referred to a VESPA air

compressor. Instead, it simply describes the goods plainly as air compressors which

is type SD and not VESPA. More importantly, the earliest date reflected on the Bill of

Lading was on May 5, 1997. (Annex A-1). [Shen Dar] also attached as Annex B a

purported Sales Contract with respondent EY Industrial Sales dated April 20, 2002.

Surprisingly, nowhere in the document does it state that respondent EY Industrial

agreed to sell VESPA air compressors. The document only mentions air

compressors which if genuine merely bolsters respondent Engracio Yaps contention

that [Shen Dar] approached them if it could sell the Shen Dar or SD air compressor.

(Exhibit 386) In its position paper, [Shen Dar] merely mentions of Bill of Lading

constituting respondent as consignee in 1993 but never submitted the same for

consideration of this Bureau. The document is also not signed by [Shen Dar]. The

agreement was not even drafted in the letterhead of either [Shen Dar] nor [sic]

respondent registrant. Our only conclusion is that [Shen Dar] was not able to prove to

be the owner of the VESPA mark by appropriation. Neither was it able to prove

actual commercial use in the Philippines of the mark VESPA prior to its filing of a

trademark application in 9 June 1997.[39]

As such, EYIS must be considered as the prior and continuous user of the mark VESPA and

its true owner. Hence, EYIS is entitled to the registration of the mark in its name.

WHEREFORE, the petition is hereby GRANTED. The CAs February 21, 2008 Decision and October

6, 2008 Resolution in CA-G.R. SP No. 99356 are herebyREVERSED and SET ASIDE. The Decision

dated May 25, 2007 issued by the IPO Director General in Inter Partes Case No. 14-2004-00084

and the Decision dated May 29, 2006 of the BLA Director of the IPO are hereby REINSTATED.

No costs.

SO ORDERED.

G.R. No. 169974 April 20, 2010

SUPERIOR COMMERCIAL ENTERPRISES, INC., Petitioner, versus KUNNAN ENTERPRISES LTD.

AND SPORTS CONCEPT & DISTRIBUTOR, INC., Respondents

We review in this petition for review on certiorari[1]

the (1) decision[2]

of the Court of Appeals

(CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City,

Branch 85 (RTC),[3]

and dismissed the petitioner Superior Commercial Enterprises, Inc.s

(SUPERIOR) complaint for trademark infringement and unfair competition (with prayer for

preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports

Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution[4]

that denied

SUPERIORs subsequent motion for reconsideration. The RTC decision that the CA reversed found

the respondents liable for trademark infringement and unfair competition, and ordered them to pay

SUPERIOR P2,000,000.00 in damages,P500,000.00 as attorneys fees, and costs of the suit.

THE FACTUAL ANTECEDENTS

On February 23, 1993, SUPERIOR[5]

filed a complaint for trademark infringement and unfair

competition with preliminary injunction against KUNNAN[6]

and SPORTS CONCEPT[7]

with the RTC,

docketed as Civil Case No. Q-93014888.

In support of its complaint, SUPERIOR first claimed to be the owner of the trademarks,

trading styles, company names and business names[8]

KENNEX,[9]

KENNEX & DEVICE,[10]

PRO

KENNEX[11]

and PRO-KENNEX (disputed trademarks).[12]

Second, it also asserted its prior use of

these trademarks, presenting as evidence of ownership the Principal and Supplemental

Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it extensively sold

and advertised sporting goods and products covered by its trademark

registrations. Finally, SUPERIOR presented as evidence of its ownership of the disputed trademarks

the preambular clause of the Distributorship Agreement dated October 1, 1982 (Distributorship

Agreement) it executed with KUNNAN, which states:

Whereas, KUNNAN intends to acquire the ownership of KENNEX

trademark registered by the [sic] Superior in the Philippines. Whereas, the

[sic] Superior is desirous of having been appointed [sic] as the sole distributor by

KUNNAN in the territory of the Philippines. [Emphasis supplied.][13]

In its defense, KUNNAN disputed SUPERIORs claim of ownership and maintained

that SUPERIOR as mere distributor from October 6, 1982 until December 31, 1991 fraudulently

registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under

the name KENNEX Sports Corporation for the purpose of manufacturing and selling sportswear and

sports equipment; it commercially marketed its products in different countries, including

the Philippinessince 1972.[14]

It created and first used PRO KENNEX, derived from its original

corporate name, as a distinctive trademark for its products in 1976. KUNNAN also alleged that it

registered the PRO KENNEX trademark not only in the Philippines but also in 31 other countries,

and widely promoted the KENNEX and PRO KENNEX trademarks through worldwide

advertisements in print media and sponsorships of known tennis players.

On October 1, 1982, after the expiration of its initial distributorship agreement with another

company,[15]

KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines under a

Distributorship Agreement whose pertinent provisions state:[16]

Whereas, KUNNAN intends to acquire ownership of KENNEX trademark

registered by the Superior in the Philippines. Whereas, the Superior is desirous of

having been appointed [sic] as the sole distributor by KUNNAN in the territory

of the Philippines.

Now, therefore, the parties hereto agree as follows:

1. KUNNAN in accordance with this Agreement, will appoint the sole

distributorship right to Superior in the Philippines, and this Agreement could

be renewed with the consent of both parties upon the time of expiration.

2. The Superior, in accordance with this Agreement, shall assign the

ownership of KENNEX trademark, under the registration of Patent

Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its

ten (10) years contract of distributorship, and it is required that the ownership

of the said trademark shall be genuine, complete as a whole and without any

defects.

3. KUNNAN will guarantee to the Superior that no other third parties will be

permitted to supply the KENNEX PRODUCTS in the Philippines except only to

the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX

trademark shall be null and void.

4. If there is a necessity, the Superior will be appointed, for the protection of

interest of both parties, as the agent in the Philippines with full power to exercise

and granted the power of attorney, to pursue any case of Pirating, Infringement

and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory.

5. The Superior will be granted from [sic] KUNNANs approval before making and

selling any KENNEX products made in the Philippines and the other countries,

and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB

as the right.

6. Without KUNNANs permission, the Superior