G.R. No. 118708 - Creser Precision Systems, Inc. vs. Court of Appeals

Case Summary (G.R. No. 118708)

Factual Background

Floro International Corp. was a domestic corporation engaged in manufacture and sale of military armaments and obtained Letters Patent No. UM-6938 for an aerial fuze on January 23, 1990. In November 1993 its president discovered that Creser Precision Systems, Inc. had submitted samples of an aerial fuze to the Armed Forces of the Philippines for testing and was claiming the device as its own and planning commercial manufacture without a license. On December 3, 1993 Floro sent Creser a letter asserting its patent rights and warning of court action if testing proceeded.

Complaint and Allegations

On December 8, 1993 Creser Precision Systems, Inc. filed a complaint for injunction and damages in the Regional Trial Court alleging that it was the first, true and actual inventor of an aerial fuze (PDR 77 CB4) developed as early as December 1981 under the AFP Self-Reliance Defense Posture Program, that it had been supplying the AFP since 1986, and that Floro’s fuze was identical except for cosmetic differences. Creser prayed for a temporary restraining order and a preliminary injunction enjoining Floro from manufacturing, marketing or selling aerial fuzes identical to Creser’s.

Trial Court Proceedings

The trial court issued a temporary restraining order on December 10, 1993 and, after hearings and submission of memoranda by both parties, granted a writ of preliminary injunction on December 29, 1993 upon payment of a bond in the amount of PHP 200,000. Floro International Corp. filed a motion for reconsideration contending that Creser had no cause of action for infringement because it lacked a patent and that the proper remedy was a petition for cancellation before the Bureau of Patents. The trial court denied reconsideration on May 11, 1994, reasoning that Creser had proven entitlement to injunctive relief, that Creser’s activities constituted the last actual peaceable uncontested status prior to the controversy, and that Floro would not suffer irreparable injury because its claim rested on a patent whose validity was being questioned.

Court of Appeals Proceedings

Aggrieved, Floro International Corp. filed a petition for certiorari, mandamus and prohibition before the Court of Appeals on June 27, 1994, asserting among other grounds that Creser had no cause of action under Section 42, R.A. 165, that the proper forum for contesting a patent was the Office of the Director of Patents, and that the trial court committed grave abuse of discretion in issuing the injunction and disrupting the status quo. The Court of Appeals reversed the trial court on November 9, 1994, dismissed Creser’s complaint for injunction and damages, and set aside the trial court orders. The Court of Appeals denied reconsideration on January 17, 1995.

Issues Presented to the Supreme Court

The principal legal questions presented were whether a person who has not been granted a patent and who is not an assignee, licensee, or successor-in-interest may maintain a civil action for infringement under Section 42, R.A. 165, and whether a plaintiff without a patent may obtain injunctive relief or declaratory relief to impugn a letter patent rather than seek cancellation under Section 28, R.A. 165. Supplementary issues included whether the trial court acted in grave abuse of discretion or exceeded jurisdiction in granting the preliminary injunction and whether such injunction improperly deprived the patent holder of property rights.

Petitioner's Contentions

Creser Precision Systems, Inc. contended that Section 42, R.A. 165 permitted anyone possessing any right, title or interest in and to the patented invention to bring an action for infringement and that the phrase included the first true and actual inventor even without a patent. Creser argued that, under analogous American patent doctrines, an inventor could seek declaratory and injunctive relief to protect invention rights and that such remedy was akin to a civil action for infringement.

Respondent's Contentions

Floro International Corp. maintained that only a patentee or successors-in-interest, assignees, or grantees possessed a cause of action for infringement under Section 42, R.A. 165, because the right to exclude and to maintain an infringement suit arises only from the grant of a patent. Floro argued that Creser’s remedy, if any, was a petition for cancellation of the patent before the Director of Patents under Section 28, R.A. 165, and not an action for infringement or an injunction in the courts.

Supreme Court Ruling

The Court affirmed the decision of the Court of Appeals. The Court held that Creser Precision Systems, Inc. had no cause of action for infringement because it had not been granted a patent and had not acquired rights as an assignee or licensee. The Court ruled that the phrase “anyone possessing any right, title or interest in and to the patented invention” in Section 42, R.A. 165 refers to patentees and their successors-in-interest, assignees or grantees, and does not confer on an unpatented inventor the right to sue for infringement. The Court further held that there can be no infringement of a patent until a patent exists, since rights to the invention arise only from the grant of a patent.

Legal Basis and Reasoning

The Court reasoned that American authorities established that inventors have no common-law monopoly and that a patent confers the exclusive right to exclude others, citing authorities such as Moore vs. Marsh, Peck vs. Collins, and relevant federal decisions referenced in the record. The Court emphasized that declaratory judgment or injunctive relief to challenge validity is available to the patent holder or successors-in-interest and is not a substitute for the statutory remedy afforded to others. The Court pointed to Section 28, R.A. 165, which permits a petit

Case Syllabus (G.R. No. 118708)

Parties and Procedural Posture

CRESER PRECISION SYSTEMS, INC., PETITIONER filed a petition for review on certiorari assailing the decision of the Court of Appeals dated November 9, 1994.
COURT OF APPEALS rendered the assailed decision in C.A.-G.R. SP. No. 34425 reversing the trial court and dismissing the complaint.
FLORO INTERNATIONAL CORP., RESPONDENT is a domestic corporation engaged in manufacture, production, distribution and sale of military armaments and related materiel and is the holder of Letters Patent No. UM-6938.
The trial court, Regional Trial Court of Quezon City, Branch 88, issued a temporary restraining order and later a writ of preliminary injunction in favor of the petitioner.
The respondent petitioned the Court of Appeals for certiorari, mandamus and prohibition, and the Court of Appeals set aside the trial court’s orders.
The Supreme Court reviewed the Court of Appeals decision and affirmed the same.

Key Factual Allegations

FLORO INTERNATIONAL CORP. was granted Letters Patent No. UM-6938 covering an aerial fuze on January 23, 1990, which was published in the Bureau of Patents Official Gazette.
CRESER PRECISION SYSTEMS, INC. claimed to have developed an aerial fuze designated PDR 77 CB4 as early as December 1981 and to have supplied the Armed Forces of the Philippines since about 1986.
In November 1993 private respondent discovered that petitioner submitted samples of its alleged fuze to the AFP for testing and that petitioner planned to bid and manufacture the same commercially without license.
FLORO INTERNATIONAL CORP. sent a demand letter on December 3, 1993, warning of possible court action and application for injunction if testing proceeded.
Petitioner filed a complaint for injunction and damages on December 8, 1993, and the trial court issued a temporary restraining order on December 10, 1993.
The trial court granted a writ of preliminary injunction on December 29, 1993 conditioned on a bond of PHP 200,000.00, and denied reconsideration on May 11, 1994.

Procedural History

Petitioner filed its complaint for injunction and damages before the Regional Trial Court on December 8, 1993, and obtained a TRO and subsequently a preliminary injunction.
FLORO INTERNATIONAL CORP. filed a motion for reconsideration which the trial court denied on May 11, 1994.
FLORO INTERNATIONAL CORP. filed a petition for certiorari, mandamus and prohibition in the Court of Appeals on June 27, 1994.
The Court of Appeals rendered judgment on November 9, 1994, reversing the trial court and dismissing the complaint, and denied a motion for reconsideration on January 17, 1995.
The present petition for review on certiorari followed to the Supreme Court, which affirmed the Court of Appeals decision.

Issues Presented

Whether a party who is not a patentee but claims to be the first, true and actual inventor may maintain an action for infringement and obtain injunctive relief under Section 42, R.A. 165.
Whether the trial court acted in grave abuse of discretion or exceeded jurisdiction in granting the preliminary injunction.
Whether the proper remedy for one who claims to be the true inventor but lacks letters patent is a civil action for infringement or a petition for cancellation of the patent before the patent office.
Whether issuance of the p