G.R. No. 120496 - Five Star Bus Co., Inc. vs. Court of Appeals

Patent grant and subject matter
Letters Patent No. 12207 covering Cimetidine derivatives was issued by the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) on November 29, 1978 to Graham John Durant, John Collin Emmett, and Robin Gennellin.
The patent was subsequently assigned to Smith Kline & French Laboratories, Ltd. (petitioner).

Petition for compulsory license
Danlex Research Laboratories, Inc. (private respondent) filed on August 21, 1989 a petition under Section 34(1)(e) of Republic Act No. 165 (the Patent Law) for a compulsory license to manufacture, use, and sell Cimetidine, invoking its necessity for public health.
Petitioner opposed on grounds that (a) Danlex lacked cause of action and had not shown how it would work the patent, (b) petitioner’s supply was adequate, (c) no public safety need existed, and (d) Danlex was motivated by pecuniary gain.

BPTTT decision and appeal
After hearings, the BPTTT granted Danlex a compulsory license and fixed royalties at 2.5 percent of net sales in Philippine currency.
Petitioner filed a petition for review with the Court of Appeals, raising alleged violation of the Paris Convention, invalid exercise of police power, inadequate royalties amounting to expropriation, and lack of publication of the petition.

Court of Appeals and Supreme Court proceedings
On January 27, 1995, the Court of Appeals denied the petition and affirmed the BPTTT decision, finding the license lawful, royalties reasonable, and publication requirement complied with.
Petitioner’s motion for reconsideration was denied on July 25, 1995. Petitioner then filed on September 15, 1995 a petition for review on certiorari before the Supreme Court, assigning errors on validity of license, confusion of ownership, royalty adequacy, and publication compliance. Danlex filed a comment adopting the Court of Appeals’ reasoning.

Validity of compulsory license under the Patent Law and Paris Convention
Whether Section 34 R.A. 165’s grounds for compulsory license exceed or violate Article 5 A(2) of the Paris Convention.
Whether the grant constitutes a valid exercise of the State’s police power in light of alleged adequate supply by petitioner.

Reasonableness of royalty rate
Whether the 2.5 percent net sales royalty amounts to expropriation without just compensation.
Whether the royalty rate has factual basis beyond analogy to prior cases.

Compliance with publication requirement
Whether Danlex properly published notice of its petition for three consecutive weeks in a newspaper of general circulation.
Whether failure to offer formal evidence of publication deprives BPTTT of jurisdiction.

Potential confusion regarding patent ownership
Whether the compulsory license misleads the public into believing Danlex is the patentee.
Impact of such confusion on petitioner’s proprietary rights and reputation.