G.R. No. 188526 - Century Chinese Medicine Co. vs. People

Case Summary (G.R. No. 188526)

Factual Background

Ling Na Lau was the registered owner and sole distributor of the trademark TOP GEL T.G. & DEVICE OF A LEAF as shown by Certificate of Registration No. 4-2000-009881 issued August 24, 2003. Her representative, Ping Na Lau, requested NBI assistance on November 7, 2005 to investigate drugstores allegedly selling counterfeit papaya whitening soap bearing that trademark. NBI Agent Joseph G. Furing and investigator Junayd Esmael conducted test purchases on November 9 and 10, 2005 from several drugstores including petitioners’ establishments. The purchased samples were personally examined by Ping, who certified on November 18, 2005 that the soaps were counterfeit.

Application for and Issuance of Search Warrants

On November 21, 2005 Agent Furing applied for search warrants before the RTC, Branch 143, Makati City, charging violations of Sec. 168 and Sec. 155, both in relation to Sec. 170 of RA 8293. After conducting searching questions of Agent Furing and his witnesses, the trial court issued Search Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042, and 05-043 on November 23, 2005. A consolidated return of the warrants was filed on December 5, 2005.

Motion to Quash and Trial Court Ruling

Petitioners filed a consolidated Motion to Quash on December 8, 2005 arguing, among others, forum shopping, a competing ownership claim by Benjamin Yu, and the existence of a prejudicial question in Civil Case No. 05-54747 pending in RTC, Branch 93, Quezon City. The trial court granted the Motion to Quash on September 25, 2006 and ordered the seized items returned, holding that the search warrants were not supported by probable cause and that the matter involved rules on search and seizure in civil actions for infringement of intellectual property rights. The trial court relied on the existence of competing proceedings, including an IPO case and the civil case involving Yu, and concluded that there was no established right of respondent over the mark at the time of the warrant applications.

Proceedings in the Intellectual Property Office and Related Orders

Prior administrative proceedings at the IPO are central to the record. The IPO had issued a writ of preliminary injunction on October 20, 2005 against Benjamin Yu and others restraining use of the mark TOP GEL T.G. & DEVICE OF A LEAF and required public notice. Subsequently, the IPO approved a compromise agreement on March 21, 2006 in IPV Case No. 10-2005-00001 in which respondents acknowledged the exclusive right of Ling Na Lau over the trademark and undertook to cease use and distribution of confusingly similar marks, and to pay liquidated damages for breaches.

Court of Appeals Decision

The Court of Appeals reversed the RTC in a March 31, 2009 decision. The CA held that the warrants were issued in anticipation of criminal prosecutions under Sec. 155, Sec. 168, and Sec. 170 of RA 8293, and thus Rule 126 of the Rules of Criminal Procedure governed issuance. The CA found that petitioner-respondent had been issued Certificate No. 4-2000-009881 and therefore had the authority to seek NBI assistance; that the affidavits and test buys established probable cause; and that the alleged prejudicial question had been resolved because Civil Case No. 05-54747 had been previously dismissed and the IPO had earlier issued a preliminary injunction and later approved a compromise recognizing respondent’s rights.

Issues Presented on Review

The petition to the Supreme Court raised principally whether the Court of Appeals erred in reversing the RTC’s quashal on the ground that the RTC applied the rules on search and seizure in civil IP infringements instead of Rule 126, and whether the CA relied on an argument first raised by respondent in her appellate brief. Petitioners also contested the scope of seizure and maintained that the seized goods were genuine and legitimately distributed by Benjamin Yu.

Petitioners’ Contentions

Petitioners maintained that the seized TOP GEL products were not fruits of a crime, that they were legitimate distributors of products bearing a different registered mark (TOP GEL MCA and MCA DEVICE, Registration No. 4-1996-109957), and that the trial court erred in applying the criminal-search-warrant standard. Petitioners argued that a few samples would suffice for evidentiary purposes and that the wholesale confiscation was excessive. They further claimed that the CA based its ruling on arguments raised for the first time on appeal.

Respondent’s Position and Evidentiary Showing

Respondent asserted that she was the registered owner of TOP GEL T.G. & DEVICE OF A LEAF and produced the registration certificate, a certification of counterfeit by her authorized representative, and the NBI affidavits recounting test buys and personal observations. Respondent also relied on the IPO’s preliminary injunction and the subsequently approved compromise agreement recognizing her exclusive right as reinforcing her entitlement to seek criminal enforcement and NBI assistance.

Legal Standards on Search Warrants and Probable Cause

The Court reiterated that where criminal actions are anticipated, Rule 126 governs issuance of search warrants and requires that the judge personally examine under oath the complainant and witnesses and attach their sworn statements, and that probable cause must connect to one specific offense. The Court further stated the settled standards from precedent: probable cause requires facts that would lead a reasonably prudent person to believe that an offense was committed and that the things sought are in the place to be searched; the applicant and his witnesses must have personal knowledge of the facts supporting the application; and the determination of probable cause does not call for proof beyond a reasonable doubt but for probability as judged by a reasonably prudent man. The Court cited authorities including Sony Music Entertainment (Phils.), Inc. v. Espanol, People v. Aruta, Columbia Pictures, Inc. v. Court of Appeals, and Microsoft Corporation v. Maxicorp, Inc. for these propositions.

The Supreme Court’s Ruling and Disposition

The Supreme Court denied the petition for review and affirmed the Court of Appeals’ decision and resolution. The Court held that the CA correctly applied Rule 126 because the search warrants were applied for in anticipation of criminal actions for trademark infringement and unfair competition under RA 8293, and that the statutory requisites for issuance were satisfied by the NBI affidavits and the certification of counterfeit. The Court found no reversible error in the CA’s reliance on materials and arguments in the appellate record.

Court’s Reasoning on Probable Cause and Prejudicial Question

The Court found that the affidavits of NBI Agent Furing, Junayd Esmael, and Ping established facts within their personal knowledge showing the offering for sale of soaps bearing TOP GEL T.G. & DEVICE OF A LEAF at petitioners’ establishments and Ping’s expert certification that the samples were counterfeit. The Court rejected the RTC’s finding of a prejudicial question because Civil Case No. Q-05-54747 had been dismissed before the warrant applications and the IPO had issued a writ of preliminary injunction against Yu and later approved a compromise agreement in which respondents acknowledged the exclusive right of Ling Na Lau. The Court concluded that respondent’s status as registrant and the IPO orders supplied a lawful basis for enforcement and for the NBI to seek criminal warrants.

Scope of Seizure and Distinction from Summerville

The Court addressed petitioners’ complaint about wholesale confiscation and distingui

Case Syllabus (G.R. No. 188526)

Parties and Posture

CENTURY CHINESE MEDICINE CO., MING SENG CHINESE DRUGSTORE, XIANG JIAN CHINESE DRUG STORE, TEK SAN CHINESE DRUG STORE, SIM SIM CHINESE DRUG STORE, BAN SHIONG TAY CHINESE DRUG STORE AND/OR WILCENDO TAN MENDEZ, SHUANG YING CHINESE DRUGSTORE, AND BACLARAN CHINESE DRUG STORE were the petitioners who sought review by the Supreme Court of the Court of Appeals' ruling reversing the quashal of search warrants.
PEOPLE OF THE PHILIPPINES and LING NA LAU were the respondents below, with Ling Na Lau claiming ownership of the trademark at issue.
The petition sought reversal of the Court of Appeals Decision dated March 31, 2009 and its Resolution dated July 2, 2009 which set aside the RTC's Order quashing Search Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042 and 05-043.

Key Facts

Ling Na Lau was the registered owner and sole distributor of the trademarked product TOP GEL T.G. & DEVICE OF A LEAF, as shown by Certificate of Registration No. 4-2000-009881 issued August 24, 2003.
Ping Na Lau, respondent's representative, wrote to the NBI on November 7, 2005 requesting investigation of several drugstores for selling counterfeit papaya whitening soaps bearing respondent's trademarks.
NBI Agent Joseph G. Furing conducted test purchases on November 9 and 10, 2005 and filed an affidavit stating he bought items bearing the TOP-GEL, T.G. & DEVICE OF A LEAF mark from the petitioners and observed commercial quantities on display.
The purchased samples were examined by Ping Na Lau, who issued a certification dated November 18, 2005 declaring the soaps from the subject drugstores counterfeit.
Agent Furing applied for search warrants on November 21, 2005 for violations of Section 155 and Section 168, both in relation to Section 170 of RA 8293, and the RTC granted the warrants on November 23, 2005.
Petitioners filed a collective Motion to Quash on December 8, 2005 alleging among other things a prejudicial question in Civil Case No. 05-54747 filed by Benjamin Yu and ownership claims of TOP-GEL MCA under Registration No. 4-1996-109957.
The IPO had earlier issued a writ of preliminary injunction on October 20, 2005 against Benjamin Yu and others, and later approved a compromise agreement on March 8, 2006 acknowledging respondent's exclusive rights to the TOP GEL T.G. & DEVICE OF A LEAF mark.

Procedural History

The RTC, Branch 143, Makati City, issued an Order dated September 25, 2006 quashing the eight search warrants for lack of probable cause and citing a prejudicial question and competing claims.
The RTC denied respondent's motion for reconsideration in an Order dated March 7, 2007.
The Court of Appeals reversed the RTC in a Decision dated March 31, 2009 and denied petitioners' motion for reconsideration in a Resolution dated July 2, 2009.
Petitioners filed the present petition for review on certiorari before the Supreme Court, which rendered the final disposition.

Issues Presented

Whether the Court of Appeals erred in reversing the RTC's quashal of the search warrants.
Whether the Rules on Search and Seizure in Civil Actions for Infringement of Intel