ASG Law

Tag: Counterfeit Goods

  • Deceptive Imitation: Upholding Fair Competition and Protecting Businesses from Counterfeit Goods

    In Roberto Co v. Keng Huan Jerry Yeung, the Supreme Court affirmed that Roberto Co was liable for unfair competition for conspiring to sell counterfeit Greenstone Medicated Oil. The court found that Co, along with others, intentionally deceived the public by selling imitation products packaged to resemble the original, causing financial loss to the legitimate distributors. This decision reinforces the importance of protecting businesses from unfair practices like the sale of counterfeit goods, ensuring fair competition in the marketplace. The ruling highlights the judiciary’s commitment to safeguarding intellectual property rights and preventing consumer deception. This case underscores the legal consequences for those who engage in deceptive business practices that undermine legitimate businesses and mislead consumers.

    Passing Off: When Imitation Leads to Unfair Competition

    The case revolves around Greenstone Medicated Oil, a product manufactured by Greenstone Pharmaceutical in Hong Kong, owned by Keng Huan Jerry Yeung, and exclusively imported and distributed in the Philippines by Taka Trading, owned by Yeung’s wife, Emma Yeung. The respondents, Sps. Yeung, filed a complaint against Roberto Co and others for trademark infringement and unfair competition, alleging that they conspired to sell counterfeit Greenstone products. The central question is whether Co’s actions constituted unfair competition, warranting liability for damages. This case highlights the legal boundaries businesses must respect when marketing products similar to those of competitors, especially concerning potential consumer deception.

    The Sps. Yeung presented evidence that a bottle of Greenstone purchased from Royal Chinese Drug Store, owned by Ling Na Lau, was of dubious authenticity. Yeung, along with his son, discovered seven bottles of counterfeit Greenstone on display for sale. Pinky Lau, the store’s proprietor, identified Co as the source of the counterfeit items, which she referred to as “Tienchi Fong Sap Oil Greenstone.” This led to the complaint against Co, who denied supplying counterfeit items and claimed that his Greenstone stocks came exclusively from Taka Trading. The Laus, on the other hand, claimed that the items were left by an unidentified person and that Pinky was forced to sign the note implicating Co.

    The Regional Trial Court (RTC) ruled in favor of Sps. Yeung, finding Co and the Laus guilty of unfair competition. The RTC highlighted the conspiracy to sell counterfeit products, which resulted in confusion and deception among consumers. However, the RTC did not find them liable for trademark infringement due to the lack of evidence that the “Greenstone” trademark was registered at the time of the complained acts. Co and the Laus appealed the RTC’s decision.

    The Court of Appeals (CA) affirmed the RTC’s decision, emphasizing the trial court’s credibility in assessing witnesses. The CA sustained the finding of unfair competition, noting that Sps. Yeung’s evidence outweighed that of Co and the Laus. Consequently, the CA upheld the awards of damages in favor of Sps. Yeung. Co then filed a petition to the Supreme Court.

    The Supreme Court upheld the CA’s decision, emphasizing that factual findings of the lower courts are generally not reviewable under Rule 45 of the Rules of Court. It was found that both the RTC and CA adequately considered the evidence presented and correctly concluded that Co committed unfair competition.

    Unfair competition is legally defined as:

    the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. This takes place where the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.

    In this case, Co was found to have conspired with the Laus in selling counterfeit Greenstone products, packaged identically to the original. This established a fraudulent intent, leading to liability for unfair competition. The Court deemed the award of P300,000.00 as temperate damages appropriate, recognizing the pecuniary loss suffered by Sps. Yeung due to damage to goodwill. Additionally, the awards for moral and exemplary damages, attorney’s fees, and costs of suit were sustained.

    While liable for unfair competition, Co was cleared of trademark infringement. This distinction hinged on the absence of proof that the trademark “Greenstone” was registered when the acts occurred. This highlights the differences between trademark infringement and unfair competition, as detailed in Del Monte Corporation v. Court of Appeals:

    (a) the former is the unauthorized use of a trademark, whereas the latter is the passing off of one’s goods as those of another; (b) fraudulent intent is unnecessary in the former, while it is essential in the latter; and (c) in the former, prior registration of the trademark is a pre-requisite to the action, while it is not necessary in the latter.

    The case also refers to Section 6, Rule 18 of A.M. No. 10-3-10-SC, or the “Rules of Procedure for Intellectual Property Rights Cases,” which provides guidance on intent to defraud or deceive:

    SEC. 6. Intent to defraud or deceive. – In an action for unfair competition, the intent to defraud or deceive the public shall be presumed:

    a) when the defendant passes off a product as his by using imitative devices, signs or marks on the general appearance of the goods, which misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors;

    b) when the defendant makes any false statement in the course of trade to discredit the goods and business of another; or

    c) where the similarity in the appearance of the goods as packed and offered for sale is so striking.

    Moreover, Article 2224 of the Civil Code regarding temperate damages provides:

    Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

    This legal framework underscores the importance of fair competition and the protection of intellectual property rights, emphasizing the consequences of deceptive practices that undermine legitimate businesses and mislead consumers. The Supreme Court’s ruling serves as a crucial reminder for businesses to respect intellectual property rights and avoid practices that deceive consumers.

    FAQs

    What was the key issue in this case? The key issue was whether Roberto Co was liable for unfair competition for selling counterfeit Greenstone Medicated Oil. The Supreme Court ultimately affirmed his liability.
    What is unfair competition as defined by law? Unfair competition involves passing off one’s goods as those of another to deceive the public. It includes giving goods a similar appearance to a competitor’s with the intent to mislead consumers.
    What evidence was presented against Roberto Co? Evidence showed that Co supplied counterfeit Greenstone products to Royal Chinese Drug Store, which were then sold to the public. These products were packaged identically to the original.
    Why was Roberto Co not found liable for trademark infringement? Co was not found liable for trademark infringement because there was no proof that the “Greenstone” trademark was registered at the time of the complained acts. Registration is a prerequisite for trademark infringement claims.
    What damages were awarded to Sps. Yeung? Sps. Yeung were awarded P300,000.00 as temperate damages, along with moral and exemplary damages, attorney’s fees, and costs of suit. These damages were meant to compensate for the financial loss and damage to goodwill suffered.
    What is the difference between trademark infringement and unfair competition? Trademark infringement is the unauthorized use of a registered trademark, while unfair competition involves passing off one’s goods as those of another. Fraudulent intent is essential in unfair competition but not in trademark infringement.
    What does it mean to “pass off” goods? “Passing off” refers to the act of presenting one’s products as those of a competitor, misleading consumers into thinking they are buying the competitor’s goods. This often involves imitating the appearance or packaging of the original product.
    What is the significance of the Supreme Court’s decision in this case? The decision reinforces the importance of protecting businesses from unfair practices and deceptive acts that undermine fair competition. It highlights the legal consequences for those who engage in the sale of counterfeit goods.

    The Supreme Court’s decision in Roberto Co v. Keng Huan Jerry Yeung underscores the critical importance of fair competition and consumer protection in the marketplace. By holding Co liable for unfair competition, the Court reaffirmed the legal consequences for businesses that engage in deceptive practices, ensuring a level playing field for legitimate enterprises and preventing consumer deception. This case serves as a vital precedent for future disputes involving intellectual property rights and unfair trade practices, reinforcing the need for businesses to uphold ethical standards and respect the rights of their competitors.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: ROBERTO CO VS. KENG HUAN JERRY YEUNG AND EMMA YEUNG, G.R. No. 212705, September 10, 2014

  • Unfair Competition: Establishing Probable Cause for Counterfeit Goods

    The Supreme Court held that there was sufficient probable cause to indict Michael Tan a.k.a. Paul D. Tan for unfair competition due to the overwhelming evidence of counterfeit Unilever products found in his possession. This decision clarifies the standard for establishing probable cause in intellectual property cases, emphasizing that direct proof of ownership of the warehouse where counterfeit products are stored is not always necessary. The ruling reinforces the importance of considering circumstantial evidence and the totality of circumstances in determining whether a crime has been committed and whether an individual is likely responsible.

    Counterfeit Conundrum: When Circumstantial Evidence Leads to Unfair Competition

    This case began with a search warrant executed by the National Bureau of Investigation (NBI) on premises allegedly owned by Michael Tan a.k.a. Paul D. Tan, based on suspicion of possessing counterfeit shampoo products in violation of the Intellectual Property Code of the Philippines. The search yielded a significant quantity of counterfeit Unilever products. However, the Department of Justice (DOJ) dismissed the criminal complaint against Tan, citing insufficient evidence to establish his direct participation in the alleged unfair competition. The core legal question is whether the Court of Appeals (CA) erred in upholding the DOJ’s decision, specifically whether there was sufficient probable cause to indict the respondent for unfair competition despite the lack of direct evidence linking him to the warehouse where the counterfeit products were found.

    The petitioner, Unilever Philippines, Inc., argued that the sheer volume of counterfeit shampoo products seized from the respondent’s possession, coupled with other circumstantial evidence, constituted sufficient probable cause to indict him for unfair competition. The DOJ, on the other hand, maintained that the evidence was insufficient to establish the respondent’s direct, personal, or actual participation in the offense charged. The DOJ’s decision was primarily based on the fact that the petitioner failed to prove the respondent’s ownership of the warehouse where the counterfeit products were discovered.

    Building on this point, the Supreme Court emphasized that the determination of probable cause for the purpose of filing an information in court is essentially an executive function vested in the public prosecutor and, ultimately, the Secretary of Justice. The court acknowledged the wide latitude of discretion afforded to these officials in conducting preliminary investigations. However, the court also clarified that this discretion is not absolute and is subject to judicial review in cases of grave abuse of discretion. According to the Court, grave abuse of discretion implies such capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction.

    In evaluating the DOJ’s decision, the Supreme Court scrutinized the evidence presented by the petitioner. The Court noted that while the ownership of the warehouse was not conclusively established, there was still substantial evidence to suggest the respondent’s involvement in unfair competition. This evidence included the large quantity of counterfeit Unilever products found in the respondent’s office, the similarities between the genuine and counterfeit products, and allegations that the respondent’s laborers had confirmed the warehouse was operated by Probest International Trading. The court also considered the subsequent seizure of counterfeit Unilever products from another warehouse linked to the respondent.

    The Court underscored that proving ownership of the warehouse where counterfeit products are found is not critical to establishing probable cause for unfair competition. What is material is the commission of acts constituting unfair competition, the presence of all its elements, and the reasonable belief, based on evidence, that the respondent had committed it. The Supreme Court cited Lee v. KBC Bank N.V., reiterating that a preliminary investigation is not the venue for a full and exhaustive display of evidence. The presence or absence of the elements of the crime is evidentiary in nature and is a matter of defense that may be passed upon after a full-blown trial on the merits. The Court also noted that the admissibility of testimonies and evidence is better ventilated during trial proper than at the preliminary investigation level.

    The court further elaborated on the standard for determining probable cause, stating that it needs only to rest on evidence showing that, more likely than not, a crime has been committed, and there is enough reason to believe that it was committed by the accused. It need not be based on clear and convincing evidence of guilt, nor on evidence establishing absolute certainty of guilt. The court cited Metropolitan Bank & Trust Company v. Gonzales, defining probable cause as the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. The Court stated that a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged.

    In its analysis, the Supreme Court contrasted the elements required for conviction versus those sufficient for probable cause, using evidence presented in the case. The table below highlights the differences:

    Criteria Elements for Conviction Elements for Probable Cause
    Standard of Proof Proof beyond reasonable doubt Reasonable ground to believe
    Evidence Required Clear and convincing evidence Evidence showing that more likely than not, a crime has been committed
    Scope of Inquiry Full inquiry into all facts and defenses Limited to establishing a probability of guilt

    Ultimately, the Supreme Court found that the CA gravely erred in sustaining the Acting Secretary of Justice’s finding that there was no probable cause to indict the respondent for unfair competition. The Court emphasized that the dismissal of the complaint, despite ample evidence to support a finding of probable cause, constituted a grave error that warranted judicial intervention and correction.

    FAQs

    What was the key issue in this case? The key issue was whether there was sufficient probable cause to indict Michael Tan for unfair competition, despite the lack of direct evidence linking him to the warehouse containing the counterfeit goods. The court needed to determine if circumstantial evidence was enough to establish probable cause.
    What is unfair competition under Philippine law? Under the Intellectual Property Code of the Philippines, unfair competition generally involves passing off one’s goods as those of another or engaging in acts that deceive or confuse consumers. This can include manufacturing or selling counterfeit products.
    What does probable cause mean in this context? Probable cause, in this context, means a reasonable ground to believe that the crime of unfair competition has been committed and that the accused is likely responsible. It does not require absolute certainty, but rather a reasonable belief based on available evidence.
    Why did the DOJ initially dismiss the complaint? The DOJ initially dismissed the complaint due to insufficient evidence directly linking Michael Tan to the warehouse where the counterfeit goods were found. They also cited a lack of proof that he was the owner or manufacturer of the counterfeit products.
    What evidence did the Supreme Court find persuasive? The Supreme Court found persuasive the large quantity of counterfeit products in Tan’s office, the similarities between genuine and counterfeit goods, allegations that his laborers confirmed his operation of the warehouse, and the subsequent seizure of more counterfeit products.
    Is proving ownership of the warehouse necessary to establish probable cause? No, the Supreme Court clarified that proving ownership of the warehouse is not necessary. What matters is whether there is a reasonable belief, based on evidence, that the accused committed acts constituting unfair competition.
    What is the significance of this ruling? This ruling clarifies the standard for establishing probable cause in intellectual property cases, emphasizing that circumstantial evidence can be sufficient. It reinforces the importance of considering the totality of circumstances when determining if a crime has been committed.
    What was the Court’s final decision? The Supreme Court granted the petition filed by Unilever Philippines, Inc., annulling the Court of Appeals’ decision and ordering the State Prosecutor to file the appropriate information against Michael Tan for unfair competition.

    In conclusion, the Supreme Court’s decision in Unilever Philippines, Inc. v. Michael Tan underscores the importance of circumstantial evidence in establishing probable cause for unfair competition cases. This ruling emphasizes that a lack of direct evidence linking an individual to the physical location of counterfeit goods does not preclude a finding of probable cause if other substantial evidence suggests their involvement in the crime.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Unilever Philippines, Inc. vs. Michael Tan a.k.a. Paul D. Tan, G.R. No. 179367, January 29, 2014

  • Trademark Infringement: Upholding Search Warrants Based on Probable Cause in Intellectual Property Cases

    The Supreme Court affirmed the validity of search warrants issued for trademark infringement and unfair competition, emphasizing the importance of probable cause in protecting intellectual property rights. The Court found that the applications for the search warrants were properly based on violations of the Intellectual Property Code and that the respondent, as the registered trademark owner, had the right to seek assistance from law enforcement to protect her rights. This decision reinforces the legal mechanisms available to trademark owners against counterfeit goods and unfair trade practices, ensuring that intellectual property rights are duly protected under Philippine law.

    Counterfeit Soap Showdown: Did the Court of Appeals Correctly Overturn the Quashing of Search Warrants?

    This case revolves around respondent Ling Na Lau, who operates Worldwide Pharmacy and holds the registered trademark for “TOP GEL T.G. & DEVICE OF A LEAF” papaya whitening soap. Believing that counterfeit versions of her product were being sold, Lau sought assistance from the National Bureau of Investigation (NBI). NBI Agent Furing, after conducting test buys at various drugstores, including those owned by the petitioners, confirmed the presence of counterfeit soaps. Based on this evidence, Agent Furing applied for and was granted search warrants by the Regional Trial Court (RTC) for violations of the Intellectual Property Code, specifically trademark infringement and unfair competition.

    The petitioners, Century Chinese Medicine Co., et al., moved to quash the search warrants, arguing that their issuance violated the rule against forum shopping and that a prejudicial question existed in a related civil case. The RTC initially agreed with the petitioners, quashing the search warrants. However, the Court of Appeals (CA) reversed the RTC’s decision, reinstating the validity of the search warrants. The CA reasoned that the search warrants were applied for in anticipation of criminal actions and that the respondent had sufficiently demonstrated probable cause for trademark infringement and unfair competition.

    The core legal question before the Supreme Court was whether the CA erred in reversing the RTC’s quashal of the search warrants. The petitioners contended that the products seized from their stores were not the fruits of any crime, arguing that they were legitimate distributors of “TOP GEL MCA,” a product owned by a different entity. They also claimed that the RTC had incorrectly applied rules on search and seizure for civil actions, a point they argued was only raised on appeal.

    The Supreme Court upheld the CA’s decision, emphasizing that the applications for the search warrants were indeed for violations of the Intellectual Property Code, specifically Sections 155 and 168 in relation to Section 170. Section 155 of Republic Act (RA) No. 8293, penalizes trademark infringement:

    Sec 155. Remedies; Infringement. – Any person who shall, without the consent of the owner of the registered mark:

    155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

    Section 168, in relation to Section 170, penalizes unfair competition:

    Sec. 168. Unfair Competition, Rights, Regulation and Remedies. –

    x x x x

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

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

    The Court further stated that A.M. No. 02-1-06-SC, which provides for the Rules on the Issuance of the Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights, was not applicable because the search warrants were applied for in anticipation of criminal actions. The Court also highlighted NBI Agent Furing’s affidavit, which stated that “the items to be seized will be used as relevant evidence in the criminal actions that are likely to be instituted.” Therefore, Rule 126 of the Rules of Criminal Procedure was the governing law.

    Rule 126 of the Revised Rules of Court governs the issuance of search warrants, stating in Section 4:

    SEC. 4. Requisites for issuing search warrant. – A search warrant shall not issue except upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized which may be anywhere in the Philippines.

    The Supreme Court emphasized that probable cause is a core requisite for a valid search warrant, defined as “the existence of such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place to be searched.” The Court noted that the affidavits of NBI Agent Furing and his witnesses, Esmael and Lau, clearly demonstrated that they were seeking protection for the trademark “TOP GEL T.G. and DEVICE OF A LEAF,” registered to Lau under Certificate of Registration 4-2000-009881.

    While the petitioners claimed that they were distributing products owned by a different entity, with the trademark TOP GEL MCA and MCA DEVISE, the Court found that this was different from the trademark subject of the application. The Court also dismissed the argument that a prejudicial question existed in a related civil case, noting that the case had already been dismissed before the search warrants were applied for. Moreover, the Court pointed out that the Intellectual Property Office (IPO) had issued an order granting a writ of preliminary injunction against the entity that the petitioners claimed owned the TOP GEL MCA trademark. This injunction prohibited the entity from using the trademark “TOP GEL & DEVICE OF A LEAF” or any colorable imitation thereof.

    The Supreme Court addressed the petitioners’ argument that confiscating thousands of products was excessive, stating that the object of the violation was the alleged counterfeit TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap. Thus, confiscating all these articles was necessary to protect the registered owner’s rights.

    The Court also dismissed the petitioners’ contention that the CA’s ruling was based on an argument raised for the first time on appeal. It noted that the petitioners had failed to object to the argument in their brief filed with the CA. The Supreme Court determined that there was no procedural error, as both parties had fully addressed the applicability of Rule 126 in their submissions to the appellate court.

    FAQs

    What was the key issue in this case? The central issue was whether the Court of Appeals erred in reversing the Regional Trial Court’s decision to quash search warrants issued for trademark infringement and unfair competition related to counterfeit papaya whitening soap.
    Who was the respondent in this case? The respondent was Ling Na Lau, who operated Worldwide Pharmacy and held the registered trademark for “TOP GEL T.G. & DEVICE OF A LEAF” papaya whitening soap.
    What intellectual property rights were at stake? The primary intellectual property rights at stake were those associated with the trademark “TOP GEL T.G. & DEVICE OF A LEAF,” which was registered to the respondent.
    What was the role of the NBI in this case? The National Bureau of Investigation (NBI) was involved in conducting investigations and test buys to confirm the presence of counterfeit soaps, which led to the application for search warrants.
    What is probable cause, and why is it important in this case? Probable cause is the existence of facts and circumstances that would lead a reasonably prudent person to believe that an offense has been committed and that the objects sought are related to the offense. It is a crucial requirement for the valid issuance of a search warrant.
    What rule governs the issuance of search warrants for criminal actions? Rule 126 of the Revised Rules of Court governs the issuance of search warrants for criminal actions, requiring probable cause determined personally by a judge.
    Why did the Supreme Court uphold the CA’s decision? The Supreme Court upheld the CA’s decision because it found that the applications for search warrants were based on violations of the Intellectual Property Code and that the respondent had demonstrated probable cause for trademark infringement.
    What was the significance of the IPO’s prior injunction? The IPO’s prior injunction against another entity was significant because it notified the petitioners that they were prohibited from selling products bearing the trademark “TOP GEL & DEVICE OF A LEAF” or any imitation thereof.

    The Supreme Court’s decision in this case reaffirms the importance of protecting intellectual property rights through the enforcement of search warrants based on probable cause. This ruling underscores the legal remedies available to trademark owners against those who engage in trademark infringement and unfair competition, thus safeguarding legitimate businesses and consumers alike.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: CENTURY CHINESE MEDICINE CO. VS. PEOPLE, G.R. No. 188526, November 11, 2013

  • Protecting Trademarks: Penalties for Infringement and the Indeterminate Sentence Law in the Philippines

    In Juno Batistis v. People of the Philippines, the Supreme Court upheld the conviction of Juno Batistis for trademark infringement, emphasizing the importance of protecting registered trademarks and penalizing those who deceive the public with counterfeit goods. While affirming the conviction, the Court modified the imposed penalty to comply with the Indeterminate Sentence Law, ensuring a more flexible and equitable application of justice. This decision highlights the judiciary’s role in safeguarding intellectual property rights and maintaining fair trade practices in the Philippines.

    Counterfeit Brandy: How Trademark Infringement Landed Juno Batistis in Court

    The case began with the trademarked brandy, Fundador, produced by Pedro Domecq, S.A. Agents of the National Bureau of Investigation (NBI) conducted a test-buy and confirmed that Juno Batistis was manufacturing, selling, and distributing counterfeit Fundador brandy. A subsequent search of Batistis’s premises, authorized by Search Warrant No. 01-2576, uncovered a trove of items indicative of trademark infringement, including empty Fundador bottles, boxes, plastic caps, and filled bottles of the counterfeit brandy. The City Prosecutor of Manila then charged Batistis with both infringement of trademark and unfair competition. The Regional Trial Court (RTC) found Batistis guilty of both charges. However, the Court of Appeals (CA) affirmed the conviction for infringement of trademark but reversed the conviction for unfair competition due to insufficient evidence.

    Batistis appealed the CA’s decision, arguing that the only evidence against him was the self-serving testimonies of the NBI agents. He claimed he was not present during the search, and the confiscated items were not all found in his house. The Supreme Court, however, rejected these arguments, emphasizing that appeals to the Court should only raise questions of law, not questions of fact that require re-evaluation of evidence. The Court highlighted that factual findings of the lower courts, especially when affirmed by the Court of Appeals, are generally binding and not subject to re-examination unless there are extraordinary circumstances.

    The Supreme Court underscored that it is not a trier of facts and will not disturb the factual findings of the Court of Appeals (CA) unless such findings are mistaken, absurd, speculative, or conflicting. The court cited Belgica v. Belgica to differentiate questions of law from questions of fact:

    xxx [t]here exists a question of law when there is doubt on what the law applicable to a certain set of facts is. Questions of fact, on the other hand, arise when there is an issue regarding the truth or falsity of the statement of facts. Questions on whether certain pieces of evidence should be accorded probative value or whether the proofs presented by one party are clear, convincing and adequate to establish a proposition are issues of fact. Such questions are not subject to review by this Court. As a general rule, we review cases decided by the CA only if they involve questions of law raised and distinctly set forth in the petition.

    Moreover, the Court noted that factual findings, calibration of testimonies, and assessment of probative weight by the RTC are given high respect unless significant facts and circumstances were ignored or misinterpreted. In this case, the RTC and CA correctly applied the law to the facts presented.

    The Court then analyzed whether the acts of Batistis constituted infringement of trademark under Article 155 of the Intellectual Property Code:

    Section 155. Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

    155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

    155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

    The evidence presented by Harvey Tan, Operations Manager of Pedro Domecq, S.A., indicated that the seized Fundador brandy had characteristics of counterfeiting, such as a BIR seal label that did not reflect the word “tunay” under black light, a “tamper evident ring” that did not contain the word Fundador, and a flat, sharply edged print of the word Fundador on the label, unlike the raised, embossed, and finely printed genuine trademark. These findings demonstrated that Batistis attempted to deceive the public by making the counterfeit products appear genuine. By imitating the registered Fundador trademark, Batistis committed infringement of trademark as defined in Section 155 of the Intellectual Property Code.

    Lastly, the Supreme Court addressed the penalty imposed by the lower courts. Section 170 of the Intellectual Property Code provides the penalty for infringement of trademark:

    Section 170. Penalties. – Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos(P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1. (Arts. 188 and 189, Revised Penal Code).

    The CA affirmed the RTC’s decision, which imposed a penalty of two years imprisonment and a fine of P50,000.00. The Supreme Court found that this fixed penalty was contrary to the Indeterminate Sentence Law, which mandates that the penalty should be an indeterminate sentence. Section 1 of the Indeterminate Sentence Law states:

    Section 1. Hereafter, in imposing a prison sentence for an offense punished by the Revised Penal Code, or its amendments, the court shall sentence the accused to an indeterminate sentence the maximum term of which shall be that which, in view of the attending circumstances, could be properly imposed under the rules of the said Code, and the minimum which shall be within the range of the penalty next lower to that prescribed by the Code for the offense; and if the offense is punished by any other law, the court shall sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same.

    Therefore, the Supreme Court modified the penalty to imprisonment ranging from two years, as minimum, to three years, as maximum, and a fine of P50,000.00, aligning it with the requirements of the Indeterminate Sentence Law.

    FAQs

    What is trademark infringement? Trademark infringement occurs when someone uses a registered trademark, or a similar mark, without permission, in a way that is likely to cause confusion among consumers.
    What is the Indeterminate Sentence Law? The Indeterminate Sentence Law requires courts to impose a sentence with a minimum and maximum term, rather than a fixed term, to allow for parole based on the prisoner’s behavior. This law aims to promote rehabilitation and reduce the unnecessary deprivation of liberty.
    What evidence was used to convict Juno Batistis? The evidence included testimonies from NBI agents who conducted the test-buy and search, along with seized items such as counterfeit brandy bottles, boxes, and plastic caps. Expert testimony also highlighted the differences between the counterfeit and genuine Fundador products.
    Why was Batistis acquitted of unfair competition? The Court of Appeals acquitted Batistis of unfair competition because the prosecution failed to prove his guilt beyond a reasonable doubt for that specific charge. The focus shifted to the clearer evidence of trademark infringement.
    What factors did the Supreme Court consider in affirming the conviction? The Court considered the factual findings of the lower courts, the evidence of counterfeiting, and the intent to deceive the public. It emphasized that appeals to the Supreme Court should only raise questions of law.
    How did the Supreme Court modify the penalty? The Supreme Court modified the penalty to comply with the Indeterminate Sentence Law, imposing a sentence of imprisonment ranging from two years (minimum) to three years (maximum), along with a fine of P50,000.00.
    What is the significance of registering a trademark? Registering a trademark gives the owner exclusive rights to use the mark, protecting their brand identity and preventing others from profiting from their reputation. Registration also makes it easier to pursue legal action against infringers.
    What should consumers look for to avoid buying counterfeit products? Consumers should carefully examine product packaging, seals, and labels for inconsistencies or signs of tampering. Purchasing from authorized retailers and being wary of unusually low prices can also help avoid counterfeit products.

    This case underscores the Philippines’ commitment to protecting intellectual property rights and penalizing those who engage in trademark infringement. By applying the Indeterminate Sentence Law, the Supreme Court ensures a fair and just penalty that aligns with the principles of rehabilitation and proportionality. Counterfeit goods not only harm legitimate businesses but also deceive consumers, making the enforcement of trademark laws crucial for maintaining a fair and trustworthy marketplace.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Juno Batistis v. People, G.R. No. 181571, December 16, 2009

  • Copyright Infringement: Retailer’s Liability and the Limits of Due Diligence

    The Supreme Court held that a retailer selling counterfeit goods is not automatically liable for copyright infringement if they reasonably believed the goods were genuine, having acquired them from apparently authorized sources. This decision clarifies the scope of liability for retailers in intellectual property cases, emphasizing the importance of proving the retailer’s knowledge of the infringing nature of the goods. It highlights the balance between protecting intellectual property rights and ensuring fair trade practices.

    “Hello, Retailer?” Navigating Copyright Risks in the World of Counterfeit Goods

    This case arose from a complaint filed by Sanrio Company Limited, the owner of iconic characters like “Hello Kitty,” against Edgar C. Lim, doing business as Orignamura Trading. Sanrio alleged that Lim was selling counterfeit Sanrio products in his store. The central question was whether Lim, as a retailer, could be held liable for copyright infringement under the Intellectual Property Code (IPC), specifically Section 217.3, even if he claimed to have purchased the goods from authorized manufacturers. This inquiry delves into the responsibilities and potential liabilities of retailers in the complex landscape of intellectual property law.

    The facts revealed that Sanrio’s exclusive distributor, Gift Gate Incorporated (GGI), had licensed several local companies to manufacture Sanrio products. IP Manila Associates (IPMA), hired by GGI, discovered that Orignamura Trading was selling imitations of Sanrio products. A search warrant was issued, leading to the seizure of various Sanrio products from Lim’s store. Sanrio then filed a complaint against Lim for violating Section 217 of the IPC, which outlines the criminal penalties for copyright infringement. Lim defended himself by arguing that he was merely a retailer who purchased his merchandise from authorized manufacturers and distributors.

    The Task-Force on Anti-Intellectual Property Piracy (TAPP) initially dismissed the complaint, stating that Lim had bought his merchandise from legitimate sources. The TAPP resolution emphasized that Lim relied on the representations of these manufacturers and distributors that the items they sold were genuine. The Office of the Chief State Prosecutor affirmed this resolution, leading Sanrio to file a petition for certiorari in the Court of Appeals (CA). The CA dismissed the petition, citing prescription and concluding that Sanrio failed to prove that Lim knew the merchandise he sold was counterfeit. This brings us to the nuances of copyright law and the retailer’s role in preventing infringement.

    The Supreme Court (SC) addressed two key issues: first, whether the prescriptive period for the alleged violation had lapsed; and second, whether the Department of Justice (DOJ) committed grave abuse of discretion in dismissing the complaint. The SC clarified that the filing of the complaint in the DOJ tolled the prescriptive period, meaning the period was suspended during the preliminary investigation. The Court cited the case of Brillantes v. Court of Appeals, affirming that the filing of a complaint for preliminary investigation interrupts the period of prescription of criminal responsibility. However, this did not automatically translate to a victory for Sanrio.

    Addressing the core issue of liability, the SC emphasized the importance of proving the retailer’s knowledge of the infringing nature of the goods. The court highlighted that under Section 217.3 of the IPC, a person must possess an article they know, or ought to know, is an infringing copy for the purpose of selling or distributing it. The key phrase here is “know, or ought to know,” which implies a level of awareness or reasonable suspicion. This element was missing in Sanrio’s case against Lim.

    The Court considered the evidence presented by Lim, which showed that he had indeed purchased the goods from manufacturers authorized by GGI. This evidence supported Lim’s claim that he reasonably believed the goods were genuine. The SC recognized that retailers cannot be expected to verify the authenticity of every product they sell, especially when dealing with reputable suppliers. The court affirmed the DOJ’s finding that Sanrio failed to prove Lim’s knowledge of the counterfeit nature of the goods, stating that it found no grave abuse of discretion in the DOJ’s dismissal of the complaint.

    The Intellectual Property Code (IPC) provides the legal framework for copyright protection in the Philippines. Section 217, in particular, addresses criminal penalties for copyright infringement. The relevant portions of this section are as follows:

    Section 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

    (a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (P50,000) to One hundred fifty thousand pesos (P150,000) for the first offense.

    (b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (P150,000) to Five hundred thousand pesos (P500,000) for the second offense.

    (c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from Five hundred thousand pesos (P500,000) to One million five hundred thousand pesos (P1,500,000) for the third and subsequent offenses.

    217.3. Any person who at the time when copyright subsists in a work has in his possession an article which he knows, or ought to know, to be an infringing copy of the work for the purpose of:

    (a) Selling, letting for hire, or by way of trade offering or exposing for sale, or hire, the article;

    This case highlights the importance of due diligence for retailers. While they are not expected to be experts in intellectual property, retailers should take reasonable steps to ensure the goods they sell are genuine. This may include verifying the authenticity of the goods with the copyright owner, obtaining warranties from suppliers, and being vigilant for signs of counterfeiting.

    The Supreme Court’s decision underscores the need for a balanced approach to copyright enforcement. While protecting intellectual property rights is crucial, it is equally important to avoid imposing undue burdens on legitimate businesses. Retailers who act in good faith and take reasonable precautions should not be held liable for copyright infringement unless they have actual or constructive knowledge that the goods they sell are counterfeit. The decision also reinforces the principle that factual findings of the DOJ in preliminary investigations will generally not be disturbed absent grave abuse of discretion.

    This ruling is particularly relevant in the context of the Philippines, where counterfeit goods remain a significant problem. It provides guidance for retailers on how to minimize their risk of liability for copyright infringement and clarifies the standard of proof required to establish such liability.

    The decision in Sanrio Company Limited v. Edgar C. Lim reflects the complexities of copyright law in a commercial context. It clarifies the responsibilities of retailers in ensuring the authenticity of the products they sell and reinforces the importance of proving knowledge of infringement. This decision provides valuable guidance for businesses navigating the challenges of intellectual property rights in the marketplace.

    FAQs

    What was the key issue in this case? The key issue was whether a retailer could be held liable for copyright infringement for selling counterfeit goods, even if they claimed to have purchased the goods from authorized manufacturers and reasonably believed they were genuine.
    What did the Supreme Court decide? The Supreme Court ruled that the retailer was not liable for copyright infringement because Sanrio failed to prove that the retailer knew or ought to have known that the goods were counterfeit. The Court emphasized the importance of proving the retailer’s knowledge of the infringing nature of the goods.
    What is Section 217.3 of the Intellectual Property Code? Section 217.3 of the IPC imposes criminal penalties on anyone who possesses an article they know, or ought to know, is an infringing copy of a copyrighted work, for the purpose of selling or distributing it. This section requires proof of knowledge or reasonable suspicion of infringement.
    What is the significance of “tolling” the prescriptive period? “Tolling” the prescriptive period means suspending the running of the time limit for filing a legal action. In this case, the filing of the complaint with the DOJ suspended the prescriptive period, preventing the claim from being time-barred.
    What is the role of due diligence for retailers in copyright cases? Retailers are expected to exercise due diligence by taking reasonable steps to ensure the goods they sell are genuine. This may include verifying authenticity with copyright owners, obtaining warranties from suppliers, and being vigilant for signs of counterfeiting.
    What evidence did the retailer present in his defense? The retailer presented receipts and other documents showing that he had purchased the goods from manufacturers authorized by Sanrio’s exclusive distributor. This evidence supported his claim that he reasonably believed the goods were genuine.
    What does grave abuse of discretion mean in the context of this case? Grave abuse of discretion refers to an act that is so arbitrary, capricious, whimsical, or despotic as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. The Court found no such abuse in the DOJ’s dismissal of the complaint.
    What are the practical implications of this ruling for retailers? This ruling provides guidance for retailers on how to minimize their risk of liability for copyright infringement. Retailers who act in good faith and take reasonable precautions should not be held liable unless they have actual or constructive knowledge that the goods they sell are counterfeit.

    This case underscores the importance of balancing intellectual property rights with the realities of commercial transactions. Retailers should remain vigilant and exercise due diligence, but they cannot be held to an impossible standard of verifying the authenticity of every product they sell. The key is to act reasonably and in good faith.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Sanrio Company Limited vs. Edgar C. Lim, G.R. No. 168662, February 19, 2008

  • Upholding Intellectual Property Rights: The Supreme Court’s Stance on Jurisdiction and Special Courts

    The Supreme Court ruled that Regional Trial Courts (RTCs), not Municipal Trial Courts, have the authority to handle cases involving violations of intellectual property rights. This decision ensures that cases of unfair competition, like the sale of counterfeit goods, are tried in the appropriate courts with specialized knowledge, reinforcing the protection of intellectual property rights holders.

    Protecting Brands: Can Lower Courts Decide on Trademark Violations?

    This case revolves around Bausch & Lomb, Inc., the maker of Ray-Ban sunglasses, filing a complaint against Andrea Tan, Clarita Llamas, Victor Espina, and Luisa Espina for selling counterfeit Ray-Ban sunglasses. The legal question at hand is whether the Regional Trial Court (RTC) or the Municipal Trial Court in Cities (MTCC) has jurisdiction over violations of intellectual property rights, specifically unfair competition under Article 189 of the Revised Penal Code. The initial court decision favored the accused, stating the lower court had jurisdiction, thus prompting Bausch & Lomb to seek recourse from the Court of Appeals.

    The petitioners argued that the Court of Appeals erred in giving due course to the petition for certiorari because the respondent failed to appeal or file a motion for reconsideration of the trial court’s order granting the motion to quash. They also contended that the RTC had no jurisdiction over the offense of unfair competition under Article 189 of the Revised Penal Code. The Supreme Court disagreed, emphasizing its power to promulgate rules concerning pleading, practice, and procedure in all courts, as granted by Section 5 (5) of the 1987 Constitution. This rule-making power is limited to ensure the rules provide a simplified and inexpensive procedure for the speedy disposition of cases, are uniform for all courts of the same grade, and do not diminish, increase, or modify substantive rights.

    Administrative Order (A.O.) No. 113-95 designated special intellectual property courts to promote the efficient administration of justice and ensure the speedy disposition of intellectual property cases. A.O. No. 104-96 transferred jurisdiction over such crimes from the MTC and MTCC to the RTC and gave the Supreme Court the authority to designate certain branches of the RTC to exclusively handle special cases. This transfer of jurisdiction did not affect the substantive rights of the petitioners; the administrative orders did not change the definition or scope of the crime of unfair competition with which petitioners were charged. Therefore, both administrative orders have the force and effect of law, having been validly issued by the Supreme Court.

    SEC. 23. Special Jurisdiction to try special cases. – The Supreme Court may designate certain branches of the Regional Trial Courts to handle exclusively criminal cases, juvenile and domestic relations cases, agrarian cases, urban land reform cases which do not fall under the jurisdiction of quasi-judicial bodies and agencies, and /or such other special cases as the Supreme Court may determine in the interest of a speedy and efficient administration of justice.

    The trial court should not have allowed the petitioners to collaterally attack the validity of A.O. Nos. 113-95 and 104-96 when resolving the pending incidents of the motion to transfer and motion to quash. There is a legal presumption of validity of these laws and rules, and unless a law or rule is annulled in a direct proceeding, the legal presumption of its validity stands. Thus, the trial court’s order was consequently null and void. Due to A.M. No. 03-03-03-SC, which consolidated the intellectual property courts and commercial SEC courts, the case was transferred to Branch 11, RTC, Cebu City, the designated special commercial court in Region VII.

    FAQs

    What was the key issue in this case? The central issue was determining which court, the Regional Trial Court (RTC) or the Municipal Trial Court in Cities (MTCC), had jurisdiction over cases involving violations of intellectual property rights, specifically unfair competition.
    What did the Supreme Court decide? The Supreme Court affirmed that the Regional Trial Courts (RTCs) have the exclusive and original jurisdiction to try and decide intellectual property cases, reinforcing the administrative orders that designated special courts for these matters.
    What is unfair competition under the Revised Penal Code? Unfair competition, as described in Article 189 of the Revised Penal Code, involves actions such as the fraudulent registration of trademarks, trade names, or service marks, fraudulent designation of origin, and false description, all intended to deceive the public.
    What is the significance of Administrative Order No. 113-95? Administrative Order No. 113-95 designated specific courts to handle intellectual property rights violations, ensuring that these cases would be managed efficiently and with the necessary expertise.
    Why was the case initially dismissed by the trial court? The trial court initially dismissed the case, asserting that it lacked jurisdiction and that the penalty for the alleged violation fell within the jurisdiction of the metropolitan and municipal trial courts.
    How did the Court of Appeals respond to the trial court’s decision? The Court of Appeals reversed the trial court’s decision, asserting that the case should be transferred to Branch 9 of the Regional Trial Court of Cebu City, designated to handle intellectual property cases.
    What role did Administrative Order No. 104-96 play in this case? Administrative Order No. 104-96 supported the transfer of jurisdiction over intellectual property cases from the MTC and MTCC to the RTC, clarifying which courts should handle such matters.
    What happened to the case after the Supreme Court’s decision? Following the Supreme Court’s affirmation, the case was transferred to Branch 11 of the RTC in Cebu City, which is designated as the special commercial court in Region VII, for trial and decision.

    In summary, this case clarifies the jurisdictional boundaries for intellectual property rights violations, affirming the competence of Regional Trial Courts to handle such cases. The Supreme Court’s decision emphasizes the importance of protecting intellectual property and ensuring that cases are heard in specialized courts capable of addressing the complexities involved.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: ANDREA TAN, ET AL. VS. BAUSCH & LOMB, INC., G.R. NO. 148420, December 15, 2005