Zuneca Pharmaceutical vs. Natrapharm, Inc.

Factual Background

NATRAPHARM, INC. manufactured and sold citicoline under the registered trademark “ZYNAPSE,” registered with the Intellectual Property Office on September 24, 2007 under Certificate of Trademark Registration No. 4-2007-005596. NATRAPHARM obtained permits from the Bureau of Food and Drugs to register, list and sell its product. Petitioners marketed an imported carbamazepine product under the brand name “ZYNAPS,” which was not registered with the IPO but for which petitioners held a Certificate of Product Registration from the BFAD issued April 15, 2003 after an application filed October 2, 2001. The two marks were alleged to be pronounced identically and to be sold in the same drugstores. NATRAPHARM asserted that carbamazepine carries a risk of Stevens-Johnson Syndrome and that sale of the products under confusingly similar names posed a danger of medicine switching.

Cease-and-Desist and Initial Pleadings

On October 30, 2007, NATRAPHARM sent a cease-and-desist letter asserting exclusive rights in the registered mark “ZYNAPSE” and demanding that petitioners stop using “ZYNAPS.” Petitioners refused, relying on their prior use and the BFAD Certificate of Product Registration. NATRAPHARM filed suit for trademark infringement on November 29, 2007 and sought a temporary restraining order and a writ of preliminary injunction. It invoked Sections 122, 138 and 147.1 of R.A. No. 8293 as support for its exclusive rights as registrant.

Trial Court Interim Rulings

The Regional Trial Court, Branch 93, Quezon City, denied NATRAPHARM’s application for a temporary restraining order in an order dated December 21, 2007. The RTC later denied the application for a writ of preliminary injunction in an omnibus order dated March 12, 2008. The RTC concluded that petitioners’ prior actual use of “ZYNAPS” and their BFAD registration gave them protection under Section 159 of the Intellectual Property Code and that the registrant’s rights under the IPO registration could not be asserted to the detriment of a prior user in good faith.

Court of Appeals Proceedings and Early Rulings

NATRAPHARM sought certiorari with an application for TRO and preliminary injunction before the Court of Appeals. On June 17, 2008, the CA denied the application for TRO and preliminary injunction for lack of merit. The CA denied reconsideration in a July 31, 2008 resolution.

Court of Appeals April 18, 2011 Decision

In a reversal of its earlier interim rulings, the Court of Appeals, in a decision dated April 18, 2011, granted the petition for certiorari, set aside the RTC’s March 12, 2008 omnibus order and permanently enjoined petitioners from manufacturing, importing, distributing, selling, advertising or otherwise using in commerce the anti-convulsant drug carbamazepine under the brand name and mark “ZYNAPS,” or using any other name similar or confusingly similar to petitioner’s registered trademark “ZYNAPSE.” The CA’s fallo expressly extended the injunction to filing for permits, licenses or certifications with the Food and Drug Administration and other government agencies.

RTC Decision on the Merits

On December 2, 2011, the RTC rendered a decision on the merits in Civil Case No. Q-07-61561. The RTC found petitioners liable for trademark infringement and awarded judgment in favor of NATRAPHARM. The court awarded compensatory damages of P1,000,000, exemplary damages of P1,000,000, attorney’s fees of P200,000 and costs. The RTC permanently enjoined petitioners from using “Zynaps” or any confusingly similar variation to “Zynapse” and ordered disposal or destruction outside the channels of commerce of infringing goods, labels, plates, molds and other implements without compensation. The counterclaim of petitioners was dismissed.

Petition to the Supreme Court and Issues Presented

Petitioners filed a Rule 45 petition before the Supreme Court assailing the April 18, 2011 Decision and the July 21, 2011 Resolution of the Court of Appeals which granted permanent injunctive relief in favor of NATRAPHARM. The Supreme Court framed the issues as whether the subsequent decision on the merits rendered the questions in the petition moot and academic, and whether the Court of Appeals could properly order a permanent injunction in a certiorari proceeding that questioned the denial of an application for a preliminary injunction.

Parties' Contentions before the Supreme Court

NATRAPHARM moved to dismiss the Rule 45 petition on the ground that the RTC’s December 2, 2011 decision on the merits constituted a full adjudication of the trademark infringement claim and thus rendered the petition moot and academic because it concerned only an ancillary writ. Petitioners opposed the motion, contending that the RTC decision had not attained finality and that the petition therefore remained justiciable. On the substantive record, NATRAPHARM had maintained that its IPO registration conferred exclusive rights under Sections 122, 138 and 147.1 of R.A. No. 8293 and relied on prior jurisprudence recognizing injunctive relief for registered marks, while petitioners relied on Section 159 of the Intellectual Property Code to invoke protection as a prior user in good faith.

Supreme Court’s Analysis on the Nature of Injunctions and Mootness

The Supreme Court analyzed the distinct nature of preliminary and permanent injunctions under Rule 58. It observed that a preliminary injunction is interlocutory and is granted on initial and incomplete evidence to preserve the status quo pending trial, whereas a permanent injunction is a final remedy granted as part of the judgment on the merits following trial or hearing on the merits, as provided in Section 9, Rule 58. The Court reiterated that interlocutory orders, including preliminary writs, cannot survive the final adjudication of the main case; they are superseded by a decision on the merits. The Court cited auth