Case Summary (G.R. No. 63796-97)
Facts
La Chemise Lacoste, S.A., a French manufacturer and owner of internationally-known LACOSTE trademarks and the crocodile device, sold products in the Philippines through an independent distributor (Rustan). Hemandas & Co. secured registration No. SR‑2225 in the Supplemental Register (1975) for “CHEMISE LACOSTE & CROCODILE DEVICE” and later assigned rights to Gobindram Hemandas. La Chemise Lacoste filed Philippine trademark applications in 1980 and administrative actions (oppositions and petitions for cancellation) followed. After an NBI investigation based on La Chemise’s complaint of unfair competition, search warrants were issued and executed at Hemandas’s premises in 1983, resulting in seizure of goods alleged to bear petitioner’s marks. Hemandas moved to quash the warrants; the RTC granted the motion, ordered return of goods and found no probable cause, prompting La Chemise to seek certiorari and injunction in the Supreme Court.
Procedural History
- Patent Office proceedings: multiple inter partes cases and oppositions (e.g., IPC/Inter Partes Nos. 1658, 1689, 1786) concerning ownership and registration.
- RTC: initially issued Search Warrant Nos. 83‑128 and 83‑129 after ex parte hearing; later, on motion to quash, recalled the warrants and ordered return of seized items (April 22, 1983).
- Supreme Court: consolidated petitions (G.R. Nos. 63796‑97 and related petitions including G.R. No. 65659) sought review of the RTC order, resolution of capacity-to-sue issues, and validity of ministerial memoranda. The Court rendered judgment reversing the RTC order in favor of La Chemise and denying certain petitions filed by Hemandas for lack of merit.
Issues Presented
- Petitioner’s framing: (1) whether the RTC judge committed grave abuse of discretion (tantamount to lack of jurisdiction) by reversing his earlier finding of probable cause and quashing validly issued search warrants based on matters that are defenses for trial; and (2) whether issuance of warrants was premature given pending patent office proceedings and Hemandas’ supplemental registration.
- Respondent’s framing: (I) lack of capacity of the foreign petitioner to sue in Philippine courts; and (II) that the RTC judge did not commit grave abuse of discretion in quashing the warrants.
Capacity to Sue — Court’s Analysis and Ruling
The Court distinguished the present criminal unfair competition complaint from civil claims governed by the proviso of Section 21‑A of RA 166 (as in Leviton). La Chemise was a foreign corporation not doing business in the Philippines, selling through an independent distributor (Rustan), which under Omnibus Investment Code implementing rules does not render the foreign principal as doing business locally. Precedents (e.g., Western Equipment & Supply Co. v. Reyes, Eastern Board Navigation Ltd. v. Ysmael, General Garments Corp. v. Director of Patents) support the right of a foreign corporation not doing business in the Philippines to invoke trademark protection here. The Court therefore held La Chemise had capacity to initiate the complaint to the NBI and to pursue remedies. The Court also noted that, because criminal prosecution is in the name of the People, any arguable defect in private standing would not necessarily impede public prosecution; accordingly, Hemandas’ capacity argument failed.
Probable Cause for Search Warrants — Standards and Application
Under the Constitution then in force, issuance of a search warrant requires a judge’s determination of probable cause after examination under oath of the complainant and witnesses. Probable cause means facts and circumstances sufficient to induce a cautious person to act (People v. Sy Juco), further refined by Stonehill v. Diokno requiring competent proof of particular acts or omissions violating criminal law. The NBI presented sworn witnesses and exhibits (apparel bearing the LACOSTE mark allegedly manufactured by Hemandas). The RTC initially interrogated witnesses and found good and sufficient reasons to issue the warrants. The Court emphasized that search-warrant hearings are ex parte, expedited proceedings where deference to testimonies under oath is required. The subsequent reversal by the RTC on motion to quash amounted to an unwarranted “about face” because the grounds invoked by Hemandas in the motion were matters of defense (e.g., claim the mark was different, pending administrative registration) suitable for trial on the merits and not proper bases to quash a warrant. The Supreme Court found the recall and set‑aside of the warrants unsupported by sound justification and therefore amounted to grave abuse of discretion.
Legal Effect of Registration in the Supplemental Register
The Court explained that registration on the Supplemental Register (SR) does not carry the same evidentiary weight as a Principal Register registration. An SR certificate is not prima facie evidence of validity, ownership, or exclusive right to use the mark; it is indicative of use or appropriation but recognizes defects preventing Principal Register entry. Section 19‑A, RA 166 (as amended) and Rule 124 of Patent Office rules require that SR certificates be conspicuously different and do not afford the registrant the conclusive presumption of ownership Hemandas relied upon. Therefore Hemandas’ reliance on SR‑2225 did not negate probable cause nor justify return of seized goods.
Prejudicial Question Doctrine and Pending Patent Office Proceedings
The Court rejected Hemandas’ contention that criminal action was premature because of pending Patent Office proceedings. Rule 111, Sec. 5 of the Rules of Court confines the prejudicial‑question doctrine to civil cases whose resolution would be dispositive of criminal guilt or innocence; administrative proceedings before the Patent Office are not civil suits that would preclude criminal investigation or prosecution. The Court cited precedent holding that administrative matters generally do not bar criminal actions unless exceptional circumstances demonstrate they are determinative of the accused’s guilt or innocence. Here, the Patent Office proceedings were administrative and not dispositive of criminal liability; thus prematurity was not established.
Paris Convention, Ministerial Memoranda, and International Obligations
The Court underscored the Philippines’ treaty obligations under the Paris Convention to protect industrial property and repress unfair competition (citing Articles 1, 2, 6bis, 8, 10bis, 10ter, 17). It affirmed the validity and legal force of the Minister of Trade’s November 20, 1980 memorandum (and subsequent Ministerial guidance under Executive Order No. 913) instructing the Director of Patents to reject or cancel registrations of world‑famous marks not belonging to their original owners and to expedite related administrative actions. The Court treated the memorandum as a proper exercise of implementing authority under the Convention and domestic law, holding that international treaty obligations must be respected and implemented. The Intermediate Appellate Court’s ruling affirming La Chemise as owner of the disputed mark and upholding ministerial action was acknowledged and supported.
Court’s Holdings and Relief Granted
- The Supreme Court granted La Chemise Lacoste’s petition (G.R. Nos. 63796‑97), hold
Case Syllabus (G.R. No. 63796-97)
Case Citation, Court and Date
- Reported at 214 Phil. 332, First Division; decided May 21, 1984.
- Consolidated matters involving G.R. Nos. L-63796-97 (principal petition) and G.R. No. 65659 (related petition).
- Decision authored by Justice Gutierrez, Jr., with Justices Teehankee (Chairman), Melencio-Herrera, Plana, Relova, and De la Fuente concurring.
Parties and Their Capacities
- Petitioner: La Chemise Lacoste, S.A., a foreign corporation organized under the laws of France, not doing business in the Philippines, with products marketed in the Philippines since 1964 through an exclusive distributor, Rustan Commercial Corporation.
- Private respondent: Gobindram Hemandas (formerly Hemandas & Co.), a domestic entity which applied for and obtained registration of the mark "CHEMISE LACOSTE & CROCODILE DEVICE" on the Supplemental Register as Reg. No. SR-2225, later assigning rights to Gobindram Hemandas.
- Judicial respondent: Hon. Oscar C. Fernandez, Presiding Judge, Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila.
- Other respondents in related petitions: Hon. Roberto V. Ongpin (Minister of Trade and Industry) and Hon. Cesar San Diego (Director of Patents).
Factual Summary
- Petitioner is the actual owner of trademarks "LACOSTE", "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark of "LACOSTE" with a crocodile/alligator device used internationally and marketed in the Philippines since 1964.
- Hemandas & Co. obtained Reg. No. SR-2225 (Supplemental Register) in 1975 for "CHEMISE LACOSTE & CROCODILE DEVICE" for use on T-shirts, sportswear and other garments. An application to the Principal Register followed.
- The Patent Office, in allowing the later application, noted the existing supplemental registration and that the SR registration was being contested in IPC No. 1046, stating that registrant is presumed owner until cancellation.
- La Chemise Lacoste filed applications in 1980 for "Crocodile Device" (Serial No. 43242, approved for publication) and "Lacoste" (Serial No. 43241, opposed).
- Petitioner filed Inter Partes Case No. 1689 (petition for cancellation of SR-2225) before the Patent Office; related proceedings included IPC No. 1658 and others; multiple related cases reached this Court (e.g., Hemandas v. Hon. Roberto Ongpin, G.R. No. 65659).
- On March 21, 1983 La Chemise Lacoste filed a letter-complaint with the National Bureau of Investigation (NBI) alleging unfair competition by Hemandas; NBI investigated and applied for two search warrants covering premises of Lacoste Sports Center and Games and Garments owned/operated by Hemandas.
- The Regional Trial Court issued Search Warrant Nos. 83-128 and 83-129 under Article 189 of the Revised Penal Code after ex parte hearing and examination under oath of complainant and witnesses; NBI executed the warrants and seized various goods described therein.
- Hemandas moved to quash the search warrants, contending (inter alia) that his trademark was different, claiming prior registration on the Supplemental Register, and that criminal action was premature given pending Patent Office proceedings; the Trial Court granted the motion, set aside the warrants and ordered return of seized items in its order dated April 22, 1983.
Procedural History in This Court
- Petitioner sought certiorari with preliminary injunction before this Court to set aside the Trial Court’s order quashing the warrants and ordering return of seized items.
- This Court consolidated related petitions and reviewed the Trial Court’s reversal of its earlier finding of probable cause.
- Other petitions bearing on the same trademark disputes included: Hemandas & Co. v. Intermediate Appellate Court (G.R. No. 63504), Gobindram Hemandas v. La Chemise Lacoste S.A., et al. (G.R. No. 63928-29), and Hemandas v. Ongpin (G.R. No. 65659). Some were denied for lack of merit; others were considered in this decision.
Issues Presented to the Court
- Primary issues raised by petitioner:
- Whether the respondent judge committed grave abuse of discretion amounting to lack of jurisdiction by reversing his own finding of probable cause and ordering return of seized items based on matters proper to defense/trial.
- Whether the issuance of the search warrants was premature because: (a) petitioner’s trademark registrations were pending before the Patent Office with opposition; and (b) respondent claimed prior registration in the Supplemental Register.
- Primary issues raised by respondents:
- Whether La Chemise Lacoste, as a foreign corporation not doing business in the Philippines and not licensed locally, had capacity to sue.
- Whether the respondent judge committed grave abuse of discretion in quashing the warrants.
Arguments of the Petitioner (as presented in the source)
- The Trial Court reversed its own earlier determination of probable cause based on allegations that are matters of defense to be resolved at trial, and thus acted with grave abuse of discretion.
- The quashal was premature despite pending administrative proceedings at the Patent Office and despite private respondent’s supplemental registration.
Arguments of the Respondents (as presented in the source)
- Hemandas contended petitioner lacked capacity to sue before Philippine courts because it was a foreign corporation not doing business or licensed to do business in the Philippines; cited Leviton Industries v. Salvador.
- Alternatively, Hemandas argued that petitioner was doing business but unlicensed, invoking Mentholatum Co., Inc. v. Mangaliman.
- Hemandas argued the Trial Court did not commit grave abuse of discretion in quashing the warrants, relying on the Supplemental Register registration and allegations that petitioner withheld information.
Legal Standards and Governing Law Cited
- Constitution, Art. IV, Sec. 3: judicial requirement that issuance of search warrant be based on the judge’s determination of probable cause after examination under oath or affirmation of the complainant and his witnesses.
- Concept of probable cause: antecedent facts and circumstances sufficient to induce a cautious man to rely upon them (People v. Sy Juco); Stonehill v. Diokno: probable cause presupposes competent proof of particular acts or omissions violating criminal law; Central Bank v. Morfe: determination depends on situation and judge’s finding.
- Rules on capacity of foreign corporations:
- Section 21-A of Republic Act No. 166 (as discussed in Leviton) sets conditions for foreign corporations suing for infringement/unfair competition — must aver compliance with proviso conditions.
- Precedents recognizing foreign corporations not doing business in the Philippines may sue in certain trademark/unfair competition matters: Western Equipment and Supply Co. v. Reyes; East Board Navigation Ltd. v. Ysmael and Co., Inc.; General Garments Corp. v. Director of Patents; Puritan Sportswear Corp. example.
- Patent Office practice and law:
- Supplemental Register registration (Section 19-A of R.A. 166 as amended; Rule 124, Revised Rules of Practice Before the Phil. Pat. Off in Trademark Cases): registration on the Supplemental Register is not prima facie evidence of validity, ownership or exclusive right; certificates must be conspicuously different from Principal Register; such registration may be canceled and is not constructive notice like Principal Register entries.
- Doctrine of prejudicial question (Rule 111, Section 5 of the Rules of Court): suspension of a criminal action because of a pending prejudicial civil question applies only where a civil case determinatively decides an issue essential to the criminal case; administrative proceedings generally do not qualify.
- Paris Convention for the Protection of Industrial Property (selected provisions quoted and applied):
- Article 1: Union for protection of industrial property.
- Article 2: Nationals of member countries enjoy advantages of protection in other member countries, subject to conditions/formalities.
- Article 6bis: Obligation to refuse or cancel registration a