Title
La Chemise Lacoste, S.A. vs. Ferdez
Case
G.R. No. 63796-97
Decision Date
May 21, 1984
La Chemise Lacoste, a French corporation, contested the quashing of search warrants against Hemandas for selling counterfeit Lacoste products. The Supreme Court ruled in favor of Lacoste, reinstating the warrants, affirming its right to sue, and upholding trademark protection under the Paris Convention.
unfair competition
trademark
international commitments
A

Case Summary (G.R. No. 63796-97)

Factual Background

La Chemise Lacoste, S.A. manufactures apparel marketed internationally under the trademarks "LACOSTE", "CHEMISE LACOSTE", the "CROCODILE DEVICE", and a composite mark of the word LACOSTE with a crocodile representation, and its products entered the Philippine market beginning in 1964 through an exclusive local distributor, Rustan Commercial Corporation. In 1975 Hemandas & Co. obtained registration on the Supplemental Register as Reg. No. SR-2225 for the mark "CHEMISE LACOSTE & CROCODILE DEVICE" for garments and later applied for principal registration; the Patent Office allowed the principal application on March 3, 1977 while noting that SR-2225 was contested in a petition for cancellation. Hemandas & Co. assigned its rights in that supplemental registration to Gobindram Hemandas.

Criminal Complaint, Search Warrants, and Seizure

On March 21, 1983 petitioner filed a complaint with the NBI alleging acts of unfair competition by Hemandas and sought criminal intervention. The NBI investigated and procured two search warrants from the respondent regional trial court under Article 189, Revised Penal Code. The warrants were executed and various clothing articles bearing the contested marks were seized from premises operated by Hemandas.

Motion to Quash and Return of Seized Items

Respondent Hemandas moved to quash the search warrants on grounds that his trademark differed from petitioner’s and that any criminal or civil action would be premature in view of pending administrative proceedings at the Patent Office. The regional trial court granted the motion, concluded there was no probable cause to justify the warrants, recalled and set aside the warrants, and ordered the return of seized items to Hemandas.

Procedural Posture Before the Supreme Court

Petitioner then filed a petition for certiorari with preliminary injunction in this Court seeking to annul the regional trial court’s order quashing the search warrants and ordering the return of seized evidence. The petitions considered by this Court include consolidated matters involving registration and opposition proceedings before the Patent Office and collateral challenges to ministerial memoranda implementing the Paris Convention obligations.

Issues Presented to the Court

The principal legal questions presented were whether the respondent judge committed grave abuse of discretion amounting to lack of jurisdiction by reversing his prior finding of probable cause and quashing the warrants, and whether the petitioning foreign corporation had the capacity to invoke Philippine criminal processes despite not being licensed to do business in the Philippines. Ancillary issues included the effect of a supplemental registration (Reg. No. SR-2225), the applicability of the doctrine of prejudicial question where Patent Office proceedings were pending, and the validity and effect of ministerial memoranda implementing Article 6bis of the Paris Convention.

Parties' Contentions

Petitioner maintained that the respondent judge erred in reexamining and reversing the factual finding of probable cause previously reached upon sworn testimony and exhibits presented ex parte in support of the search warrants, and that return of the seized items would fatally impair any subsequent criminal prosecution. Petitioner further asserted ownership of the internationally recognized trademarks and relied on treaty obligations under the Paris Convention and ministerial directives to the Patent Office. Respondent Hemandas argued that petitioner lacked capacity to sue in Philippine courts because it was a foreign corporation not licensed to do business here, that his registration in the Supplemental Register vested him with rights, and that the pending Patent Office proceedings rendered any criminal action premature.

Capacity to Sue and Treaty Obligations

The Court rejected Hemandas' reliance on Leviton Industries v. Salvador and Mentholatum Co., Inc. v. Mangaliman as distinguishing authorities and reaffirmed the long-standing rule that a foreign corporation not doing business in the Philippines need not be licensed to seek protection for trademarks and to invoke judicial or administrative remedies for infringement or unfair competition. The Court emphasized the Philippines' treaty obligations under the Paris Convention (notably Articles 1, 2, 6bis, 8, 10bis, 10ter, and 17) and the domestic duty to accord nationals of Union countries effective protection against unfair competition. The Court found that petitioner marketed its goods in the Philippines through an independent distributor and thus was not doing business in the Philippines within the meaning of applicable rules, including the Board of Investments’ definitions under P.D. No. 1789.

Standard for Issuance of Search Warrants and Probable Cause

The Court recalled constitutional and jurisprudential standards for issuance of search warrants, citing the constitutional requirement that a judge determine probable cause after examining the complainant and witnesses under oath (cited as Constitution, Art. IV, Sec. 3 in the record) and the formulations in prior cases such as People v. Sy Juco and Stonehill v. Diokno. It held that the respondent judge properly complied with these requirements when he initially heard the NBI’s ex parte applications, interrogated witnesses, received sworn statements and exhibits, and found good and sufficient reasons to issue the warrants.

Improper Quashal and Nature of Defenses

The Court determined that the grounds advanced in the motion to quash primarily raised matters of defense and ownership that should be litigated at trial rather than on a motion to quash a search warrant. The Court criticized the respondent court’s reversal of its own finding of probable cause absent compelling justification. It observed that an application for a search warrant is ex parte and time-sensitive, and that great reliance must be placed on the sworn testimony presented at that juncture. The Court concluded that the allegation of suppression of vital facts by petitioner did not justify the return of seized items.

Legal Effect of Supplemental Registration

The Court examined the legal character of a certificate of registration in the Supplemental Register and held that such registration does not carry the prima facie evidentiary weight of a Principal Register certificate. Citing Section 19-A, R.A. 166, Rule 124 of Patent Office practice, and authoritative commentary, the Court explained that supplemental registration serves as notice of use but reflects defects preventing entry in the Principal Register. The Court thus found Hemandas’ reliance on SR-2225 to support immunity from criminal prosecution to be untenable.

Prejudicial Question Doctrine and Administrative Proceedings

The Court rejected Hemandas’ argument that criminal proceedings were premature because of pending administrative matters before the Patent Office. It held that the doctrine of prejudicial question applies where a civil action is determinative of the criminal matter, and that the Patent Office proceedings were administrative and not civil actions determinative juris et de jure of the accused’s guilt or innocence. Consequently, the pending inter partes administrative proceedings did not bar the issuance or execution of search warrants nor the criminal investigation under Article 189, Revised Penal Code.

Ministerial Memoranda and Implementation of the Paris Convention

The Court upheld the legal force of ministerial memoranda implementing the Paris Convention and the Minister of Trade’s directive to the Director of Patents to reject or cancel registrations of world-famous trademarks when presented by persons other than original owners. The Court cited the Intermediate Appellate Court’s decision in La Chemise Lacoste S.A. v. Ram Sadhwani as affirming the Minister’s authority and the Director’s actions, and it viewed the memoranda as instruments of compliance with international obligations rather than ephemeral policy pronouncements.

Supreme Court Ruling and Disposition

The Supreme Court concluded that the respondent regional trial court committed grave abuse of discretion in quashing the search warrants and ordering the return of seized items. Accordingly, in G.R. Nos. L-63796-97 the Court granted the petition, reversed and set aside the respondent court’s order dated April 22, 1983, and made permanent the Court’s te

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