Title
Philip Morris, Inc. vs. Court of Appeals
Case
G.R. No. 91332
Decision Date
Jul 16, 1993
Foreign cigarette manufacturers sued a local company for trademark infringement over the use of "MARK," claiming irreparable harm. The Supreme Court reinstated a preliminary injunction, upholding trademark protection under the Paris Convention despite petitioners not operating locally.

Case Summary (G.R. No. 205705)

Petitioner

  • Foreign registrants of Philippine trademark certificates: MARK VII (certificate dated April 26, 1973), MARK TEN (May 28, 1964), and LARK (March 25, 1964). They alleged that Fortune’s use of “MARK” on cigarettes infringed their registered marks and sought a preliminary (prohibitory) injunction to restrain manufacture, sale and advertising of respondent’s “MARK” cigarettes pending resolution of the main infringement action.

Respondent

  • Fortune Tobacco Corporation acknowledged petitioners’ certificates of registration but pleaded defenses including misjoinder and affirmative defenses that: (a) it had BIR authorization to manufacture and sell cigarettes under the name “MARK” (subject to Patent Office registration condition); (b) “MARK” is a common word not exclusively appropriable; and (c) its application for registration before the Patent Office was pending (and later abandoned and refiled as the record shows).

Factual Background

Factual Background

  • Petitioners filed Civil Case No. 47374 alleging infringement and sought a preliminary injunction to stop Fortune’s manufacture and sale of cigarettes marked “MARK.” Fortune had begun manufacture and sale in the Philippines and had filed an application for registration (Serial No. 44008 filed Feb. 13, 1981). Patent Office examiner communications (April 6, 1983 and other certifications) indicated that “MARK” might be confusingly similar to petitioners’ marks; at other times Fortune’s application was certified pending or had been abandoned and later refiled. The BIR issued temporary label/production authorizations with caveats that such authorization did not protect against infringement claims.

Procedural History

Procedural History — Trial Court

  • March 28, 1983 (Judge Reyes): Petition for preliminary injunction denied. Reasons: petitioners admitted not doing business in the Philippines and were suing on an “isolated transaction”; Fortune’s application was still pending before the Patent Office; BIR authorization qualified and did not confer immunity; the court emphasized that the right sought to be protected and the existence of irreparable injury were matters for the main case and that the issuance of an injunction would be premature given the dispute over the underlying rights.
  • April 5, 1984: Motion for reconsideration denied; Patent Office certification of pendency noted.
  • April 22, 1987 (Judge Galing): Second motion for preliminary injunction denied. Reasons: petitioners failed to prove actual use of their products in the Philippines and abandonment of Fortune’s application did not bar refiling; refiled application pending.

Procedural History — Court of Appeals

  • Court of Appeals initially set aside the trial court’s April 22, 1987 order and granted a preliminary injunction (May 5, 1989 decision); it found petitioners had shown a prima facie case, relying on Patent Office communications that characterized “MARK” as confusingly similar and ran afoul of Sec. 4(d) of RA 166. The CA directed issuance of the injunctive writ upon posting of bond.
  • Fortune’s motion for reconsideration denied (July 12, 1989 minute resolution). Fortune then moved to dissolve the writ and offered to post a counterbond, emphasizing massive tax payments, employment consequences, and government revenue loss.
  • CA resolutions (Sept. 14 and Nov. 29, 1989): the CA dissolved its earlier preliminary injunction insofar as Fortune offered to post a counterbond (P400,000) to answer for damages; the CA reasoned petitioners would not be irreparably injured because they were not actually manufacturing/selling in the Philippines and a counterbond would cover damages. The CA relied on Section 6, Rule 58 as authority to dissolve an injunction where continuance would cause great damage to defendant while plaintiff could be fully compensated.

Issues Presented on Certiorari

Issues Presented

Petitioners challenged the CA on three principal grounds:

  1. That the CA erred in requiring actual use of the registered trademarks in Philippine commerce as a precondition to showing irreparable injury.
  2. That the CA violated Section 6, Rule 58 in lifting the injunction.
  3. That the CA contradicted its own earlier finding that the trial court had abused discretion and then nonetheless allowed respondent to continue the allegedly infringing acts by dissolving the injunction on insufficient grounds.

Supreme Court Majority Reasoning and Disposition

Supreme Court Majority Reasoning — Threshold and Remedial Nature of Injunction

  • The Court emphasized that a preliminary injunction is an interlocutory remedy ancillary to the main action; its issuance requires that the plaintiff’s right be clear and free from doubt and that irreparable injury is impending such that only injunctive relief will avert it. Courts must exercise great caution in issuing injunctions; interlocutory orders are under the control of the trial court and are reviewable but not lightly overturned.
  • Because the petition sought relief only from interlocutory orders, the Supreme Court avoided prejudging the merits of the main infringement claim.

Supreme Court Majority Reasoning — Capacity to Sue vs. Right to Injunctive Relief

  • The Court recognized that under Section 21‑A of the Trademark Law a foreign registrant can sue for infringement in the Philippines irrespective of being licensed to do business locally (as a response to the Mentholatum problem), but this statutory capacity to sue does not eliminate the statutory substantive requirement that ownership and enforceable exclusivity in the Philippines generally rests on actual use in local commerce as set out in Sections 2 and 2‑A.
  • Thus, while petitioners had the capacity to bring suit, their entitlement to injunctive relief depends on demonstration of the right to be protected (i.e., evidence of actual use and an exclusive right in the Philippines), especially where the registrant is not engaged in local business and the adversary controverts the claim.

Supreme Court Majority Reasoning — Actual Use Requirement and Treaty

  • The Court held municipal trademark law’s actual‑use requirement (Sections 2 and 2‑A) remains controlling for acquisition and enforcement of trademark rights in the Philippines; international instruments such as the Paris Convention are incorporated but do not displace express domestic requirements. The doctrine of incorporation gives international law equal standing but not primacy over local legislative enactments in the municipal sphere.
  • The CA’s position that petitioners were not doing business in the Philippines and had not established actual local use (and that respondent’s Patent Office application was pending or refiled) supported the conclusion that petitioners’ right was controverted and not free from doubt. The possibility of irreparable damage cannot substitute for a clear, demonstrable right.

Supreme Court Majority Reasoning — Rule 58, Sec. 6 and Counterbond

  • The Court found the CA acted within its discretion under Section 6, Rule 58: an injunction may be dissolved if it appears that, although plaintiff is entitled to the injunction, its continuance would cause great damage to the defendant while the plaintiff can be fully compensated; in such case the court may accept a defendant’s bond conditioned to pay damages. The CA weighed economic consequences (tax revenue, employment) and petitioners’ admitted lack of local business activity, concluding the counterbond would adequately compensate petitioners for any damages from dissolution.
  • The majority emphasized that even if the CA erred, the proper remedy was appeal — interlocutory relief can be modified by appellate or trial courts; certiorari is not the proper remedy to review discretionary interlocutory actions unless there is grave abuse of discretion amounting to lack or excess of jurisdiction.

Supreme Court Holding

  • The petition for certiorari was dismissed. The CA resolutions of Sept. 14 and Nov. 29, 1989 (dissolving the injunction on posting of counterbond) were affirmed.

Dissenting Opinion (Justice Feliciano)

Dissent — Prima Facie Case, Presumptions from Principal Register, and Patent Office Findings

  • Justice Feliciano dissented. He emphasized that two of petitioners’ marks (“MARK TEN” and “LARK”) were registered on the basis of actual use in the Philippines and the third (“MARK VII”) was registered under Section 37 by virtue of foreign registration; certificates in the Principal Register give rise to a presumption (prima facie) of validity, ownership and exclusive right to use.
  • He stressed that Patent Office examiner communications had found “MARK” confusingly similar to petitioners’ marks and that an original CA decision granting a preliminary injunction had relied on such prima facie findings. For him, an established prima facie case existed to justify the injunction.

Dissent — Capacity to Sue, Paris Convention, and Irreparable Injury

  • The dissent emphasized that the Paris Convention and Section 21‑A supported the right of foreign registrants to obtain protection in the Philippines without local registration or business presence. He argued that non‑resident status does not preclude proof of local use (e.g., importation, duty‑free sales,
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